The World Is Endinghttp://www.fool.com/investing/mutual-funds/2006/06/09/the-world-is-ending.aspx Robert Aronen
June 9, 2006
I am sitting here with a mouthful of crow. I had to be such a smarty-pants and say gas prices won't go down, there was no price fixing at the pump, the oil boom wasn't over, and the oil sands were going to explode. My personally bullish headlines marked the end of the positive trend for my portfolio, and I have felt a lot more pain than joy over the past month.
What's going on?
The yield curve is inverted again. What does this mean? I don't know, but an inverted yield curve has occurred before each of the past four recessions. If the Fed raises rates again, it will be even more inverted. How can we possibly survive?
Another nightmare scenario is that Japan will end ZIRP (zero interest rate policy). ZIRP allows big-money investment banks and hedge funds to borrow money over in Japan with no interest and invest it in the U.S. to receive a return. As long as the yen does not appreciate against the dollar (something the Bank of Japan does not want), there is big and easy money to be made. Word on the street is that untold billions or maybe trillions -- huge sums -- have flowed into U.S. equities because of ZIRP. Japan ends ZIRP, U.S. investments collapse.
The housing bubble has burst. Inventories are exploding, buyers won't buy, speculators refuse to speculate, and Pulte (NYSE: PHM ) , Centex (NYSE: CTX ) , Beazer Homes (NYSE: BZH ) , and many more builders have reduced sales forecasts. Beyond that, soaring home values led to hundreds of billions in consumer spending because of cash-out refinancing. No soaring home values, no cash out. Retail is dead.
Worse yet, at least for me, inventories of oil and natural gas are near record highs. The Americans and Iranians seem willing to talk to each other, Abu Musab al-Zarqawi is dead, and the "fear premium" on oil is finally falling. DaimlerChrysler (NYSE: DCX ) looks like it will export the SMART to the U.S., adding 20,000 more fuel-sipping, micro-cars to the highways. The result: stocks like Apache (NYSE: APA ) , Chesapeake (NYSE: CHK ) , and TODCO (NYSE: THE