Auch wenn die Panik noch nicht losgebrochen ist, sie ist zum Greifen nahe - und unvermeidlich.... leider.


PANIC

By James Cook

"Panics are, by definition, irrational, the irrational reaction to the appearance of a crisis in the business cycle. For instead of trying to develop sound and rational ways to deal with the depression which looms ahead, people simply try to escape the future, by running."

Harry D. Schultz

More than ever before America is vulnerable to a financial panic. It’s been over seventy years since we’ve experienced a full-fledged panic. Prior to that panics were fairly common. They periodically leveled speculative excess, loose financial practices and monetary zeal. The absence of panic in the post-war period may be credited to the monetary authorities who have managed to intervene successfully in every potential crisis and paper over the rough spots. So rather than have a number of small panics we’ve been building up to a larger and more lethal type of panic.

For one thing, an excessively high percentage of our money is invested in stocks. It used to be that a lot of our national wealth was kept in banks. But now the public has massively shifted to keeping their money in mutual funds and stocks. By definition there’s far more risk. Eventually too many earning disappointments do erode the public’s confidence in equities. Unfortunately, not all that many stock owners can get out at once. A flood of selling at the same time collapses prices. A panic starts when too many investors head for the exits and stock prices implode. The fanatical belief in the high valuations of the new era is finally shattered.

Another cherished belief today is that averaging down or buying on dips will inevitably pay off. Those who practice this universally accepted dogma refuse to believe that stocks will continue to sink. They commit even more of their precious funds. That’s why losses will be so devastating to America’s financial health. Once this viewpoint reverses investors will uniformly throw in the towel as their losses mount. The way stock buyers have crowded aboard the"ship of hope" insures that it will capsize. Their unbridled optimism promises to wipe out the wealth of America. Such behavioral extremes are what makes a panic inevitable.

According to Wall Street economic lore, the all-important consumer is still spending. But that’s not completely true. The growth rate of consumer spending is off sharply and gives every indication of falling farther. Last week earnings warnings from two big retailers provide evidence of a consumer pullback. Neiman Marcus showed a 5 ½% decline over June sales a year ago. That’s the kind of steep drop that will wreak havoc in the service sector. If those worsening retail figures spread, the Dow will imitate the NASDAQ’s fall from grace. Once bad news piles up and stock market losses begin to snowball, the crisis gets underway. Only a few investors can get out whole before a panic wipes out the now terrified herd of former optimists and true believers.

Heavy losses in the stock market promise to set off a series of additional panics. There can soon be a panic to get out of the dollar as the U.S. economy sinks in tandem with stocks. A panic may await in the bond market as interest rates are forced up and defaults expand. A panic threatens in real estate as liquidity freezes up and prices collapse. A panic is possible in derivatives as mismatched hedges, counterparty failures and overleveraged naked positions augment the general crisis.

How do you protect yourself in the panic that we expect? Harry D. Schultz provides the answer."The standard hedge that has been used throughout history against disaster is gold….Gold is the backdrop against which monetary disaster is measured. It is the world’s unchanging monetary yardstick. It is the standard of value that stays constant and against which other things fluctuate. Hence by buying gold in some form you are in effect freezing your assets at a given value and allowing all other things around you to fluctuate economically, knowing that ultimately no matter how far out of line they have become, things will be remeasured against gold, sooner or later."



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