Financial Apocalypse by Bert Dohmen Dohmen Capital


By Bert Dohmen
Monday, July 25th, 2011


By Bert Dohmen, 

On July 18, had this headline:  “Goldman Sachs slashes Economic Forecasts.” 

Over two months ago, the headline of Bert Dohmen’s WELLINGTON LETTER was:  “RETURN OF THE DOUBLE-DIP.” That referred to a double-dip recession. Bert Dohmen has called the start of every recession in the last 33 years, often to the exact month. So, perhaps he is worth listening to. 

Goldman wrote on July 18:  The main reason for the downgrade is that the high-frequency information on overall economic activity has continued to fall substantially short of our expectations…We have no hard information about final sales in Q3 yet, but Friday’s preliminary consumer sentiment index for July from the University of Michigan fell to the lowest level since March 2009 (!) and is now back in territory normally associated with recession… 

Although the media stories suggest that the big story for the stock market is the debt ceiling debate in Washington, and the scare stories of debt default, inability to make social security payments, etc. that’s actually a convenient smoke screen for the big sellers of stocks, the very large trading operations.  

The majority of analysts now say that the stock market just has a “soft patch,” which is temporary and provides another great opportunity for buying stocks. The “soft patch theory” was also used by these people in 2008 just before the meltdown, and we saw the “soft patch” theory used again the past five months to explain the renewed economic weakness. 

But the stock market has been under “distribution” since mid-February. Distribution is when the big, smart money sells to the unsophisticated, myopic participants in the markets. The evidence is that every decline in the market since that time has occurred on rising volume, while the market rallies have occurred on declining volume. The financial sector has been declining since its peak in mid-February. You can’t have a bull market without the financial stocks participating. 

The Washington debt ceiling scare is like a Kabuki theatre. All the participants on both sides get a lot of free TV time. That brings more financial contributions. A debt default is impossible. There is more than enough money coming into the government every day to pay interest on the debt, social security, benefits for veterans, etc. Furthermore, Congress has many alternatives to get out of this. 

So don’t fall for the story that the stock market is weak because of the debt ceiling. There are much more serious problems, like European sovereign debt, China’s imploding credit bubble, etc. Of course, once they announce some type of agreement in Washington, the market will have that one last pop to the upside.  It may be your last opportunity to find the exit.

Financial Apocalypse
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