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During the bear
market of the 1970s, day after day economists, news readers, and pundits proclaimed that inventories
continued to increase, that interest rates, deficits, corporate
expenditures, and every other measure of business activity -- just
as J. P. Morgan himself stated -- were going up and down. But the
long-term trend was down, just as it is today. |
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There had been no
stock market crash to precipitate this languishing yet down-trending
market boredom and difficult climate of the 1970s. |
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However, in 1971 the US disconnected
its dollar from the gold standard, any standard,
or anything other than its promise of backing the dollar by the "Full Faith & Credit" of the
United States government. Concomitant with the government's announcement of the
elimination of
the gold standard, it devalued the dollar 10%. Did the government expect
to enhance its "Full Faith & Creditworthiness" by that devaluation? |
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The world failed to fully perceive the
potential for dollar decay. However,
investors and business realized that as great as the United States
of America had been and remained to a declining degree, its
government and its next governments were not to be trusted. With no
gold standard nor any genuine basis for the dollar's valuation, what
could or would a dollar be worth? This uncertainty led to the 1970s'
bear market that ended in August, 1982. |
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Today's bear market
has no major media-reported, headline macro cause such as a one-day
stock crash. Today's bear market causes are not similar to those
that caused the 1929 crash and ensuing depression. |
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One precipitating
cause of today's bear market started to become visible in 2006. It
gathered momentum in 2007. It had been incubating since 1977. It has
resulted in the near-total lock-up of credit markets and its attendant
lack of trust and confidence in the banking system. This lack of
trust is infecting businesses, their managements, and the underlying
worthiness of the concept of what a contract is and represents. Without free-flowing credit,
counter-party confidence, and trust in a legal system that upholds
contracts,
business activity stalls and can come to a halt. This is becoming
more apparent. |
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Another cause of
today's bear market was the perceived electability of Obama as US president.
This was first perceived in late 2007. |
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As the first quarter
of 2008 passed day by day, the somewhat more likely election of BO
swung the business climate toward realities of conducting business
in a socialistic climate. |
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As the Spring and
Summer of 2008 plodded along, the un-electability of McCain and the
apparent win of BO the socialist, told savvy and experienced business
managers and
investors that with increased taxes and a neo-communistic BO
administration, investing in plant and equipment and in businesses
via stock ownership would be less profitable. Potential tax
and government attitudes would be detrimental to investment and
the operation of businesses. This outlook gave impetus to the stock
market's downtrend. |
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As Fall 2008
became reality and, in particular, the first Monday of October --
the month of often-notorious market activities -- arrived, realities
hit stock markets and the decline took a downward direction not to
be reversed except for brief, always-sold-into rallies. |
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By the fourth
quarter, 2008, there were two potent negative realities: Credit
lock-up & BO socialism with tax increases. |
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America-haters --
those anti-capitalistic whiners over capitalism's unfairness toward
those who cannot achieve or work hard -- started using damaging legislation in 1977 when
they succeeded in getting passed the Community Reinvestment Act.
Later Congressional actions, court rulings, and grass roots
extortion forced banks to open backroom vaults of
cash known as Fannie Mae, Freddie Mac, and global derivative
markets. These vaults were opened to nearly any
unworthy takers of sub-prime mortgages and nearly any lying takers
of Alt-A mortgages. This abundant and too-easy credit established
the framework for today's credit problems. |
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The single
best safeguard protecting US capitalism, stock markets, and
businesses is the global credit lock-up with its resultant credit crisis. Today's
crisis will make it difficult for the BO administration's socialists
to increase taxes and dismantle what they label as that evil capitalism. |
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Some few BO advisors
understand that capitalism is the only viable economic engine.
Socialism only works when it is supported, nourished, sustained by
capitalism. Socialism needs
license to steal from an underlying, producing capitalist economy. |
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BO will be unable to
dismantle capitalism as a one-term president. |
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The bear market of
the 1970s ended within two years of Reagan becoming president. The
bear market of the 1930s ended about two years after Eisenhower
became president. |
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The
bear market of the 2000s may come to an end when the US elects a
president willing to cut taxes and allow individuals to develop
businesses. |