MarketWatch Pundit Calls a Meltdown

I hope you get it by now. I am not a market bull. And neither is Paul Farrell. Bernanke won't turn off the liquidity tap. Meanwhile Geithner, Paulson & friends continue to prop up the crap financial institutions like Citigroup, Bank of America, AIG, Fannie Mae and Freddie. America is super obese because of its addiction to leverage and debt, and speculators are punting up the stock market when the economy is hardly showing a recovery.

Good luck to all of you currently in the stock market. I hope, for your sake, that I am wrong.

Wall Street's 2012 meltdown sweepstakes

It's coming in 2012: Another, bigger meltdown of Wall Street's "too-greedy-to-fail" banks. No, this is not another fanatical warning about that Dec. 21, 2012 end-of-days prediction based on the Mayan calendar, though you may well ask "Who will survive?"

Here is what's happening: History is repeating itself. Wall Street's soul-sickness is setting up a new meltdown. Dead ahead. Be prepared.

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Unfortunately America's collective brain was addicted to the adrenaline rush of gambling in a risky bull. The euphoria is intoxicating. We were caught up in a game of musical chairs, squeezing out every last dollar of return, blind to the catastrophe ahead until caught by surprise. Unfortunately, Wall Street lacked a moral compass and stole trillions from American taxpayers. Today, the only lesson Wall Street has learned is "greed is good." Now the beginning of the end has become a moral tragedy that is setting the stage for an implosion of Wall Street, capitalism and our economy circa 2012.

Everyone's still listening, still in a trance

Yes, another meltdown is coming; it's inevitable. This time, I've decided to do more periodic updates -- a watch list of alerts, warnings and predictions. Just like the updates done for over a decade, except this time we're more aware that few in power will listen, not Wall Street, not Washington, not Corporate America. But you must.

Yet Another Top Analyst Calls a Bubble

Nouriel Roubini and SocGen are bearish on the stock markets. Now, another top analyst, Meredith Whitney, famous for her right call on the collapse of Citigroup and other banks, now says that the market rally is not backed by fundamentals.

Bank analyst Whitney bearish on U.S. market
Mon Nov 16, 2009 3:47pm EST

NEW YORK, Nov 16 (Reuters) - Bank analyst Meredith Whitney said on Monday she does not believe the U.S. equities rally is based on fundamentals, and she is as bearish as she has been this year in the stock market.

In an interview with CNBC television, Whitney said there is "no way" the banking sector is well capitalized and it is time to reduce weighting in large-cap banks.

Whitney also said she sees a double-dip U.S. recession.

The main U.S. stock indexes pared some of their gains during the interview.

Whitney wrote a particularly pessimistic, but accurate, report on Citigroup, on Oct. 31, 2007, which got her attention from many Wall Street analysts and the news media. She has since followed this report with similar reports and predictions, which have tended to leave the companies involved with lower stock prices as the market has taken her opinion seriously. One of her claims is that goodwill is built-in to a lot of companies' share prices, and that as the market moves into dark times, this goodwill will dissipate.

In 2007, Whitney was listed as the second best stock picker in the capital markets industry on Forbes.com's list of "The Best Analysts: Stock Pickers", as well as being named "one of NY Post's 50 Most Powerful Women in NYC.

Whitney's extremely bearish view on banks landed her on the cover of the August 18, 2008 issue of Fortune Magazine. Even before the problems in September that befell Merrill Lynch and Lehman Brothers, she is quoted as saying, "It feels like I'm at the epicenter of the biggest financial crisis in history, however even a broken clock is right twice a day" In October 2008 Whitney, was ranked as one of Fortune 500’s “50 Most Powerful Women in Business.” In 2008 she won CNBC's "Power Player of the Year" over Jamie Dimon, Ben Bernanke, and Hank Paulson.

The Subprime Debacle and the Singapore Fallout

As the above chart reveals, the STI has been extremely volatile over the last couple of months. The index has rocked back and forth as events surrounding the US subprime squeeze unfolded. The US indexes fell and so did markets around the region, including Singapore.

What are the implications of this recent volatility?

A. Some think that the market is entering an extremely volatile phase. The prices of some stocks are violently fluctuating up and down, sometimes losing 50% in a day and gaining a similar amount back in another day. So because of this extreme volatility, one school of thought argues that it is better to stay on the sideline in cash or in a conservative position, until the market regains its composure and there is a better risk/reward situation available.

Because there is uncertainty surrounding whether the subprime fallout will have further implications on other sectors of the US economy, there is still a chance that the volatility in markets will continue as events continue to unfold. For such investors who would rather refrain from taking the risk, it is better to stay out of the market.

B. Another group of investors has simply been stopped out by the recent steep fall in stock prices. Margin calls have forced these investors to liquidate their positions at prices much lower than a couple of months ago.

C. A group of investors have found buying opportunities. They think that the damage has been confined to the subprime sector of the credit market and that the Federal Reserve has taken adequate actions to prevent the ripples from spreading throughout the economy. For these investors, the overall US economy is strong, and Asian economies are still in a position to deliver significant growth in the future.

For these investors, the sharp drop in prices in some stocks has presented a buying opportunity as they believe that the dip is only temporary and that prices will resume once the subprime issue passes and strong corporate earnings push stock prices to their previous highs and beyond.

I personally fall into category C, which category do you fall into?