The Slow Motion Train Wreck

by JDH on August 6, 2011

Is it just me, or do you also get the feeling that we are watching a slow motion train wreck in progress? Even the cheerleaders in the Main Stream Media seem to be acknowledging that we are having problems, like this story explaining why a head and shoulders formation is bad news. And yes, if you look at a chart of the Dow, it doesn’t look like good news (click chart to enlarge):

What does this mean?

It means we’re all screwed, obviously, but that’s no surprise to any of us. This is indeed a slow motion train wreck that started many years ago, and became apparent in 2008, and despite the bounce in the market since then, it’s now obvious to all that all is not good in the world.

The S&P 500 started the year around the 1257 level, so with Friday’s close just under 1200 it’s obvious that, on average, stocks have been a losing investment so far this year.

Where do we go from here?

Presumably we get a bounce, because that’s what generally happens after a sharp sell off. It would appear that there is support around the 1,180 level (from last November’s lows), so with the market this oversold I would expect a bounce next week.

And then, inevitably, the slide will continue, because that’s what happens in a slow motion train wreck. One step forward, two steps back, and next thing you know we are more than seven months into the year with no profits to show for it.

I’m glad I’ve held a significant cash position this year, and I’m glad the rest was largely in precious metals stocks, which with gold at record highs have fared better than most.

Unfortunately the train wreck is not just confined to the stock market. Just look at today’s headlines:

For the first time in history, Standard & Poor’s has downgraded the U.S. government’s credit rating. Obviously the only surprise here is why it took so long; it should have been downgraded years ago. In the short term it may not mean anything, since there’s no other country out there that is in such great shape that we will see a significant immediate flight from the U.S. dollar. Instead, we will see the continued slow motion train wreck, as other countries continue their gradual replacement of U.S. dollar reserves with gold, silver, and other stuff that can’t be printed.

(Fortunately the man in charge, Treasury Secretary Little Timmy Geithner, assured as all back in April that there was no chance U.S. debt would be downgraded. Wrong again, Timmy).

Society seems to be a train wreck as well.

There’s the story of Myrtle Rose, a 75 year old amateur pilot, who flew into restricted airspace, almost got shot down by F-16s, but thought nothing of it.

She normally uses her computer to check for any airspace restrictions, but it wasn’t working properly.

“I hadn’t flown in over a week,” she said. “It was a beautiful afternoon.” After some guests departed her home, she “just climbed in the airplane and left.”

To make matters worse, “I didn’t have my radio on. I was just flying around,” she said.

That’s what we need. Some 75 nut case who doesn’t bother to check her computer, and doesn’t bother to turn on her radio, she was just up there flying around.

Fortunately Starbucks is fighting back, blocking electrical outlets so people won’t be able to spend all day using their free electricity. I’ve never been in a Starbucks, so this won’t impact on my life.

Sadly, some stories are more serious, with news that 31 American troops were killed in Afghanistan, fighting a “war” for no apparent reason.

How do you avoid a train wreck? Stay out of the way.

I plan to hold my cash reserves, hold my precious metals, and perhaps investigate building a chicken coop out back; that may be the best use of my money (with a nod to all of your suggestions from last week’s If I had a million dollars, where would I invest it? question).

Thanks for reading; I’ll try to be more cheery next week…..

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