So What Is iCapital Talking About Now?

It still makes me laugh so much when I read back what I write before on iCapital.
It was not long that OUR so-called local expert lambasted Warren Buffett for being a lousy economist! ( see past postings Tan Teng Boo Declares Warren Buffett to be a lousy Economist! and Is iCapital Views Consistent? Is Warren Buffett a Lousy Ecomist? )

And today, this same very person wrote the following: Reports slammed for anticipating a repeat of the Great Depression

Since when did Star Biz got comical investment articles?

I kid you NOT.

• IT is increasingly common nowadays to hear and read that the world economy is heading for Great Depression 2. Whether this will actually happen depends on a wide variety of factors.
  
  Right now, whether it will happen, is not even the right question to ask. iCapital talked about how the asymmetrical reporting in the mass media has contributed greatly to widespread fear and panic. With markets continuing to fall, are we depressing ourselves into a depression?
  
  An important question that has not been raised is, despite all the predictions about Great Depression 2, do we know what the 1930 Great Depression was like? Since we all seem to be talking or writing about it like Depression experts, we should first take a look at some pertinent facts.
  
  We should get a better sense and perspective of what is happening currently and realise that we should stop putting fear and panic into ourselves as the consequences will be so painful that we will regret it.
  
  The quick and widespread loss of confidence will be seen by historians of the US-led financial crisis as one of the most important factors that dragged a manageable problem into one that went entirely out of proportions. And historians will wonder why this happened.
  
  
  
  Chart 1 shows the unemployment rate in the US from 1929 to 1943. Currently, the US unemployment rate is 6.5%. If we are seeing Great Depression 2, there is certainly a long way to go for the unemployment rate to shoot up.
  
  Should that happen, there would be every reason to fear and every reason to sell every asset you own. Having gold would be the safest. Imagine the unemployment rate surging to 25% and staying at an elevated level for a long time.
  
  At 25%, the US economy will see 38 million Americans out of job, compared with 10 million currently. The whole country will be thrown into complete confusion and dismay; the world economy will come tottering down and life for millions will never be the same again.
  
  Obama will most certainly not win a re-election. Imagine seeing many of your friends and some of your family members out of jobs, and everyone begging for jobs? Do we really want to see Great Depression 2?
  
  In the 1930 Depression, due to global protectionism and a foolish retreat from globalisation, world trade collapsed, greatly aggravating the ongoing recession then and turning it into a global depression.
  
  Chart 2 shows what world merchandise trade will be like now if it collapses like in the 1930 Depression. In this Great Depression 2, world trade as we know it now will collapse and disappear.
  
  Many economies will suffer pain they have never suffered before. A collapse in world trade on the scale of the 1930 Depression will guarantee every country will be in severe contraction. It will guarantee global deflation which would then make the vicious cycle of downward spiral even more painful and longer. Crude palm oil may even sell at RM150 per tonne. Ponder on this and then ask, do we want Great Depression 2?
  
  Chart 3 shows the 90% collapse in the Dow Jones Industrial Average from 1929 to 1933. So far, the NYSE has “only” fallen 47%. If there were to be a repeat of the 1930 Depression, the NYSE would have another massive 80% to plunge. Wow! If the NYSE dives another 80%, would the markets of Kuala Lumpur, Singapore, Hong Kong, Japan, London, Frankfurt, Mumbai, Sydney, etc. not all collapse totally?
  
  In such a calamitous situation, how much would your properties be worth? Would your property prices not collapse too? No one will rent your properties.
  
  So, do you really want to experience Great Depression 2? Are we all, cheered on by the mass media, depressing ourselves into a depression? Is that what we all want?

Ha ha!

• An important question that has not been raised is, despite all the predictions about Great Depression 2, do we know what the 1930 Great Depression was like?

Wait.. how about yourself? Why treat your readers like ignorant? How about yourself? Do you really know what the 1930 Great Depression was like?

Hey, obviously I do not for I am simply ain't that old!

• We should get a better sense and perspective of what is happening currently and realise that we should stop putting fear and panic into ourselves as the consequences will be so painful that we will regret it.

I wonder why do folks like to use these two words, fear and panic, like tissue paper?

Was there not a reason to fear?

What exactly are we not seeing now?

Is this not a global crisis?

And what do we get from a global crisis? Take a look at the shipping industry. Ships have grinded to a halt. Why? What's the implications on the global economy?

Shouldn't one address these issues?

What about the banks?

How many too big to fall has fallen?

Or what Iceland?

What about Russia?

What about the plunging markets in the Arab nations?

Are we not in a global crisis?

Or should one discount it and call everyone as been in a state of panic and fearful?

I do not know but I for one think that the problem is serious enough.

• Chart 1 shows the unemployment rate in the US from 1929 to 1943. Currently, the US unemployment rate is 6.5%. If we are seeing Great Depression 2, there is certainly a long way to go for the unemployment rate to shoot up.

Comparing unemployment rate back in 1929 with now?

Them folks at FinancialSense would beg to differ greatly on your unemployment figures! Do have a read, Lies, Damned Lies, and Statistics: Unemployment Worse Than Reported

• Should that happen, there would be every reason to fear and every reason to sell every asset you own.

Huh? Huh? Huh?

I am sorry but what are they talking about?

Let's see do you know that as late as Aug 2008, they wrote the following.

• [Updated on 16/08/2008 07:57:00]
  
  If one listens to all the doom and gloom forecasts, it would seem that there is no end to the end of the world. The facts point to a welcomed slowdown, not a frightening apocalypse. What do all these mean for the NYSE ? The NYSE should be rising soon, in anticipation of stronger US economic growth rate. Last week, i Capital said that it sees the fall in the NYSE from Jul 2007 as a correction in a long bull market. i Capital retains its bullish short-term outlook of the NYSE at a range of 1,190 to 1,500. i Capital also retains its long-held bullish longer-term target of the NYSE at 1,900 - 2,000.

Tell you what.. if one had listen to what you were saying and your bullish targets, one would have been sitting on unreal losses!

This much I do know.