PART THREE WILL WILL BE POSTED AT 12:30 AM E.S.T IF I AM STILL AWAKE - PART ONE IS HERE: http://activerain.com/blogsview/2441310/market-crash-black-monday-8-8-11-preview-to-possible-outcomes-part-one
As explained earlier, we had a rough end of the week last week all stock exchanges. The only people who didn't feel beaten silly were those invested in gold as even silver prices go hit. However, to summarize, on Thursday, the Dow 30 dropped 513 points and recovered a mere 61 on Friday. The NASDAQ dropped 136.68 points on Thursday and continued its fall on Friday dropping 23.98 points. Basically, the NASDAQ was off 5.97% in two days.
Today, Israeli opened an hour late, dropped approximately 7%, and closed.
Now, it is 10:45 and the Asian Markets look like this:
Japan - Nikkei Index – 9,178.03 (down 121.85) (-1.31%)
China - Shanghai Index – 2565.38 (down 61.04) (-2.32%)
Hong Kong Hang Seng – 20,178.36 (down 767.78) (-3.67%)
Crude Oil - $84.48 (down $2.40 per barrel – 2.76%)
Dow Futures - 11,177 – (down 225) (-1.97%)
S&P 500 Futures – 1172.30 (down 25.50) (-2.12%)
Gold – 1,695.10 (Up $30.70 - +1.85%)
Silver - $40.06 (Up $1.74 - +4.54%)
My Apologies for the terrible alignment. However, to summarize, you are looking good in gold and great in silver. We are all going to benefit from the drop in crude oil, down to $84 per barrel, when it had been as high as the high $90s only a few weeks ago.
Otherwise, we have an extremely weak economy with further weakness projected. We have very high unemployment which is worse than the 9.1 or 9.2% published by the government, as they show fewer and fewer people each period as looking for work. As such, there are fewer people employed, and more people who have given up even trying to find work.
Stocks are going lower to a point where pensions will not be funded.
Winners in this market are:
1) Those who have invested in gold and silver or those with the guts to do so soon. Paper money will become worthless
2) People who own farmland and/or mixed commercial & residential real estate. The farmland will be priceless when the cost of food rises rapidly due to the loss of value of the dollar and the explosion in global inflation. Those with mixed commercial and residential real estate will be able to increase rents to try to keep up with the rate of inflation. If they have a fixed rate loan, they'll be able to jack their rents (if they are fortunate enough to keep space occupied), while their mortgages dwindle in significance.
3) People in foreclosure or pre-foreclosure able to come to a deal with their bank to re-fi or HAMP or otherwise negotiate a new, 40 year fixed rate loan at 2% on the balance of their loan. Even better are those who get the bank to agree to put the arrears into a lump sum payment due at the end of 40 years. In that case, inflation should be hitting double-digits within a few years. Once it does, mortgage and taxes of $3,000 per month (for example) won't mean too much when gas is $20 per gallon, a loaf of bread is $12 and a gallon of milk is $16.
Losers in this market are:
Pretty much anyone who has worked hard to pay live within their means and work hard for a company that now has decided to lay off tens of thousands of workers. You will lose your unemployment in 2013, just around the same time that you savings run out, which will coincide with the time when the government decides they can no longer afford to care for people losing their houses.
It's getting ugly out there. My suggestions, keep 30% of your money in gold & silver (and cash when you need it for day-to-day use). Keep 30% of your money in farmland or commercial real estate. If you already have it, great. If not, shop for foreclosed properties near to home. Obviously, if you live by the city, stick with commercial real estate. If you live in a more rural area, buy the farmland. Finally, keep the last 30% in the highest of all hi-grade corporate bonds, such as Exxon-Mobil, Microsoft, etc. My suggestion would be to invest in companies that have recently borrowed because rates were at historic lows, even though they didn't need the money.
What do you do with the last 10% of your money? Yes, I know that I only accounted for 90%. Well, I'm figuring you've lost that 10% between the last week and when you'll be able to liquidate your holdings this week.
A lot of what I am saying is tongue-in-cheek. However, things are going to get very ugly.
Finally, don't believe anything anyone has to say who has a vested interest in the outcome of what you do, or in what they are saying. For example, don't believe stock brokers who come on the market and say the market is probably at a bottom. Don't believe Realtors saying "Now is a Great Time to Buy" unless they (we - I am one) can prove it. (Sorry, I am one, but when the NAR has the gall to have their national advertising campaign tell people it's a great time to buy during the worst decade in history to buy, learn your lesson. Believe in yourself and your own research.
Read "The Great Depression" and other books about hard times. Remember the 1970s if your old enough and ask about them if you aren't. Then, picture life twice as hard as in the 70s, and, I hope, not quite as hard as during the Great Depression. Also, don't let personal possessions become the things that make you happy in life, as they will be more scarce. Love is free. A good night's sleep is free (and also known as the poor man's gold). The beach, a long walk, and other free days should become attractive to you.
Plan in advance. Last and not least, consider buying a year's worth of canned/stored food. I might sound like a lunatic, but if you know you can eat for a year, you've got one major aspect of your life covered, no matter how bad things get. And, these kits generally cost about $1,000 ($3 to 4 per day) and taste great. They last for 20+ years. So, if the economy turns around and everything goes great, start using your stored food here and there.
In summary - As Earlier Today, the advice I give is as follows, when asked by customers and clients:
Sellers - "Things are getting very ugly. Do you know what the house could sell for next year? I know this isn't the offer you wanted, but how would you feel if there weren't any other offers for six months" -
Buyers - "Rarely in history will you get a chance to buy a property for a monthly cost so much less than it would otherwise cost to rent. Mortgage rates are at historic lows and I don't know if they could actually go any lower. If you plan on staying in the house for more than half a decade, I can't guarantee you'll sell for more, but I can guarantee that you'll be saving a lot of money each month compared to renting."
I tell both groups what I just mentioned because it is the 100% truth in most of our area.
What do you tell your buyers and sellers? What's your plan if the economy truly collapses? Are you prepared?
AS I CLOSE THIS BLOG, GOLD HAS JUST HIT $1,700 PER OUNCE - SCARY!
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