Weezguy’s Prediction of the Economy came true    Very Important! …. and why it’s not over yet. Why everyone should read this cuz it affects everyone

About 1 year ago (when everything seemed peachy), I wrote an entry about the upcoming collapse in the American economy, and of course everyone ignored it (chart below). Well 1 year later, “nah nah nah nah I told you so, I told you so”.  Click here for last year’s entry:  http://www.xanga.com/home.aspx?user=weezguy&nextdate=11%2f22%2f2007+23%3a59%3a59.999

Was I right? November 2007 indicators showed market was showing signs of a major shift (see my Nov 22, 2007 entry)

Again, this is a chart of the Stock Market’s S&P500 index (today). At point 1 (November 2007), was where the first chart left off that showed a possible collapse of the market.  I said, if the blue squiggly line crosses the red line at point 4 (towards the bottom) something bad commeth. Once the price closed below the GREEN line, it was confirmed that we were entering a recession. Well guess what happened? Look all those people who were slower than deer in headlights? They got slaughtered. The blue squiggly line is STILL below the red line, and the stock index is STILL below the Green line. Last week, the stock market bounced almost PERFECTLY near the 38% support level at point 2. Nothing goes straight up or down, so it’s possible the market can bounce for several weeks up before it heads down more to point 3? Would you consider buying stocks longer term? Not unless I see it break the green line or at least that blue diagonal line.

So what does this mean? We are no where NEAR an economic recovery. That’s right folks, are you still kissing your boss’ behind? Well you better kiss so hard, you can eat his corn, cuz we are nowhere near an economic recovery. House mortgages (the cause of this mess) is still on the way down. Do you think it’s hard to get a job NOW?  Unemployment is still historically very low at 6%.  The chart shows that in the early 1980s, unemployement was DOUBLE what it is now, and in the Great Depression it hit 25%. If this collapse continues, it will be a lot worse.

Causes of this? Instead of taking responsibility, people sure love to BLAME others. They’ll blame, Oil, China, Bush, regulation, gas guzzling SUVs, fat lazy Americans etc etc. But the major cause (in my opinion) is the housing bubble, and the stupid buyers and banks who thought they can afford it. Back in 2005 I was telling people, Buy Low, Sell High. Well 2005 prices were high and you should be SELLING your investment properties, but everyone was saying “I want to buy, I want to buy”.  Get this, if housing prices fall another 33%? you’ll only be back to 1997 levels, so theoretically it can still get worse.

Well to summarize, when the economy slowed, people couldn’t afford their mortgages, and the more mortgages failed, the more homes had to be sold, which caused a chain reaction. All banks, and credit insurers (hello AIG) started losing tons of money, and today these banks are afraid to give any loans. Which means if you want to buy a car? Sorry Charlie. Buy a home? Sorry Charlene. Chain reaction means, Chevrolet, Ford, can’t sell any cars. Can’t sell any cars? Well the company lays off thousands of people. Laid off people can’t pay their mortages, or buy stuff at Macy’s, Tiffany’s, Banana Repbulic, Joe’s Crab Shack etc. Guess that means Macy’s, Tiffany’s etc. etc. will lay off people too.  Pretty soon, they won’t be able to pay off their credit cards etc. etc.  So what will people have to do? They’ll start having to SAVE money like crazy. Today’s average American spends everything they make; as shown:

 Today’s average American has NO savings (dangerous when people will be laid off soon).

The last big recession in America was in the 1970s.  So many people never experienced a recession, so they have NO idea what to expect. Back then people saved money and didn’t waste it. Today Manhattan condo prices are sky high, but in the 1970s nobody wanted to live there.  Pan handlers were all over the street, people were getting mugged in the subways, and business were closing down.  Drug dealers were everywhere. Did you guys know that NYC (the city itself) almost went bankrupt in the 70s? And of course back then, you can buy property really cheap (cuz nobody wanted to live there).

Government, is trying desperately to save the economy using OUR tax dollars. Of course nobody wants to use our tax dollars, but if Congress does NOT bailout the banking system, it will be a LOT worse. 

Moral of Story?  Don’t listen to “experts”, Don’t listen to Mommy and Daddy, Don’t listen to the Government.  Listen to WEEZGUY!!. I was right about the Internet Bubble in 2000, I was right about the Housing Collapse in 2005, but pray to god that I’m not right about this recession.  I HOPE I’m wrong. We’ll see, we will find out in 5 years.