It may be shocking to hear me say that the Dow Jones Industrial Average is headed for 7,000 ... because even after this past week's carnage, the Dow is still sitting comfortably above 10,500!
But, yes, I firmly believe that we are going to see the broad U.S. stock market fall another 35% from here ... AT LEAST!
Just look at what's happened in the past few days ...
• The Federal Reserve warned of "significant downside risks to the economic outlook" and the International Monetary Fund said "the global economy is in a dangerous new phase."In response, we have already seen the U.S. stock market start falling out of bed.
• The global data took a nasty turn for the worse, with a key Chinese manufacturing index slumping for three months in a row for the first time since 2009 ... while activity in Europe fell to a two-year low.
• And the cost of default insurance on European banks, many U.S. banks, and even entire sovereign COUNTRIES, exploded! The market now expects a Greek default to be a near certainty ... and even the cost of insuring German bonds hit a record amid fears it will be forced to shoulder the burden of bailing out all its high-risk neighbors.
The major averages are now flirting with multi-month lows, while several leading financial, transportation, and materials companies are heading straight to their previous lows of 2009!
And Here's the Critical Difference
Between the Last Crash and This One ...
As usual, bureaucrats are frantically running around Washington D.C. right now, scrambling for the 5,672nd "solution" to the sovereign debt crisis.
The phones are ringing off the hook in Frankfurt ... in London ... in Zurich ... and all over Asia ... as bankers try desperately to stem the flood of sell orders swamping their offices.
The members of the Federal Reserve board and its district banks are ripping their hair out, trying to figure out why yet ANOTHER one of their attempts to restart the U.S. economy has fallen flat on its face.
In short, unlike the last crisis, there is nothing more policymakers can do this time around.
So in my book, the future is pre-ordained. The course of market and economic history has already been charted. We're heading back into recession, and the Dow Jones Industrial Average has a date with 7,000.
Remember, last time around the Dow plunged as low as 6,470. The S&P 500 slumped to 667. And the Nasdaq Composite sank to 1266.
So to me, the question isn't: "How could the Dow possibly plunge to 7,000?" It's: "How could the Dow NOT fall that far?" If anything, 7,000 could be a generous target!
http://www.moneyandmarkets.com/
Mike Larson has been amazingly accurate!
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