Greenspan Speaks!

Today, before Congress, God, and everybody, our old buddy Alan Greenspan will be speaking about subprime lending, the debt crisis and the resulting recession. And more specifically, about his role in it. Greenspan, the Federal Reserve Chairman under Bush, Clinton, and then Bush II, is largely responsible for much of the mess we are in....of this, there is NO doubt. 

Years ago, back in the early 1980's, Greenspan spoke and wrote often about the dangers of high debt levels, easy money, and of our fiat currency. He was also a big fan of placing the U.S. back on the gold standard. But something changed when he came FED Chairman...like looking at Bizzarro and Superman...a total and complete change in belief systems took place.

Make no mistake about it, Alan Greenspan will go down as the one of the major reasons the U.S. experienced its largest economic slowdown since the 1930's.

Yesterday the U.S. stock market was down over 6%, and is now very oversold and probably due for a short term bounce. That will be all that we'll see...a bounce....assuming we even get that. The talking heads continue to tell us why "the stock market is so cheap here" and why "this selling has gotten much worse than it should have"...yet the market continues to go lower. What they are missing is that the  recession will reduce corporate earnings by as much as 30-50% over the next couple to three years. This is why I continue to believe that the Dow will drop to 6000 - 7000 before this is all over.

But even then, investor confidence is so shaken that the majority of those leaving the market may not come back for many years. I saw a poll yesterday that really surprised me. 98% of investors polled said that they will change their financial advisor because of the poor job they have done through this market meltdown. When develeraging begins...it simply continues until the process is over.  This apparently applies to stock brokers too.    

In the meantime, gold and silver continues to trade at remarkably cheap levels. While that does not mean that it can't go lower still, I will be a buyer all the way. Dollar cost averaging in pm's makes a lot of sense to me, and the miners are trading at obscene levels. Talk about buying low and selling high...

Kip