Now that Lehman and Merrill Lynch have toppled, I'm recycling a diary of mine from last January, quoting some prominent economic cassandras, to see how close they were. Gerald Celente hit it pretty well, but four months too soon (forecasting pre-June rather than September), perhaps not considering the Wile E. Coyote double-take hiatus.
Tue Jan 22, 2008 at 06:30:39 PM PDT
These are just a few quotes without comment, of some very dire economic forecasts that bunched up in the past few days (except for this first one, from a month ago). I'm not vouching for them; merely noting their similar direness, and stroking my chin in a "could-be" sort of way.
2007-12-21
Gerald Celente, Editor and Publisher, The Trends Journal, Rhinebeck, New York: (Interviewed by Linda Moulton Howe, Earthfiles.com.)
"Economic 9/11, we believe is going to hit the United States in 2008. And just as the World Trade Centers toppled from the top down, we're going to see the crash happen from the top down as well. This talk about the sub-prime market. Yes, that's a problem, but nothing compared to when the big firms start failing, when banks go bust, brokerages go out of business. In 2008, we're going to see some major, giant firms fall and get hit by an economic 9/11. We don't know what the fuse will look like, but we know that the bomb is set already. And when it's lit, we believe it's going to happen before June of 2008."
http://www.earthfiles.com [now archived for subscribers only]
Jim Cramer interviewed on Hardball, 2008-01-18:
CRAMER: No! No. But there is an element--there is something that I would urge all the candidates to think about, and our treasury secretary...
MATTHEWS: Right.
CRAMER: ... which is that there are a group of insurance companies that insure all these bad mortgages. And, Chris, they`re--I think they`re all about to go belly up.
MATTHEWS: Yes.
CRAMER: And that will cause the Dow Jones to decline 2,000 points. They have got to be shut down and the insurance given to new resolution trust. This is going to happen in maybe two, three weeks, Chris. It`s going to be on the front of every paper. And no one in Washington is even willing to admit it.
MATTHEWS: So, what are--who are you including in these mortgage companies that are going to go belly up? Give me a description.
CRAMER: This is MBIA and Ambac on big--these are the ones. Remember, Merrill wrote down a lot of stuff the other day, and Citigroup?
MATTHEWS: Yes.
CRAMER: All these companies are relying on insurance to save them. The insurers don`t have enough money. There`s also personal mortgage insurance. PMI is a company there that does it, MGIC. Chris, I am telling you these companies do not have the capital to make good. And, when they do fall--I believe it is when--if the government doesn`t have a plan in action, you will not be able to open the stock market when they collapse.
MATTHEWS: You`re talking about a 2,000-point drop in the Dow...
CRAMER: Absolutely.
MATTHEWS: ... if the government acts.
CRAMER: No, if the government doesn`t see this problem. No one is even talking about it.
No...
MATTHEWS: OK.
CRAMER: I mean, other than the New York State`s superintendent of insurance, because he`s worried about...
MATTHEWS: OK.
CRAMER: ... muni bondholders, I have not heard a single politician mention the fact that these major insurers, who have insured $450 billion of mortgages, are all about to go under
http://www.msnbc.msn.com/...
Mort Zuckerman, The McLaughlin Group
2008-01-18
MR. ZUCKERMAN: I don't think it's an exaggeration. I think it's an understatement. You've heard me say here, I think we are facing the worst financial crunch and crisis since the Great Depression. You have the entire banking system now that is virtually frozen, and not just the subprime mortgage thing. There are other things called credit default swaps where they're going to lose as much money, $250 billion. The banks are frozen. They're not making loans because they have such huge debts that they have to take onto their balance sheets.
And nobody knows how to deal with that, because you had a dramatic -- you have two bubbles that have burst at the same time -- the housing bubble, which has collapsed in this country, the first time since the Great Depression that housing values have gone down for a year since the Depression. And it's going to go down even more next year.
The credit crunch -- you've just exploded the whole credit system in this country. We were way overleveraged. The banking system was overleveraged. People didn't even know about it. The bankers didn't know about it. They didn't assess the risk. Now that risk is piling in, and everybody's going to pay the price.
http://www.mclaughlin.com
2008-01-21
James Howard Kunstler, The Clusterfuck Nation Chronicle:
Fullblown Panic
A whole closet full of "other shoes" is now waiting to be dropped. Surely the biggest clodhoppers in the closet belong to the hedge funds, representing trillions and trillions of dollar-denominated "positions" which, however hallucinatory, had previously yielded enough real "money" year-by-year to keep all the realtors and Humvee dealers in the Hamptons goose-stepping to Goldman Sachs's drumbeat. These "positions" can't help now from moving into counterparty crisis territory, especially as the bond insurers such as MBIA and Ambac go up in a vapor, and if that happens the damage could be so colossal globally that Stephen Hawking might have to be brought in to run the Federal Reserve.
For lots more of the same from JHK, I get my weekly dose of economic goosebumps at http://jameshowardkunstler.typepad.com/
Otherwise go to http://www.kunstler.com/ for archives, etc.