COMMENT, USA, Australia – Let’s start with the USA economy.

US sliding into a chasm

The debate on whether the US economy is in recession or not seems to be over.

The bear is among us.

For months people have been standing up that the US economy is not as bad as first believed. The US recession was predicted by 2thinknow in December 2007, using our innovation models.

Before Christmas, many were sitting on the fence. I called this recession, in this journal, in straightforward terms before Goldman Sachs, or UN made their announcements.

Of course many on Wall Street probably held off so they could sell their shares before this inevitable slide. I don’t have much respect for investment bankers. Most are not the best human beings, and would detonate their suburb for a profit.

I still remember the brokers after 9/11 shorting stocks or gambling commodities on Wall Street, near the blast zone. Humanity should matter more than a stock profit.

So 2thinknow innovation models for predicting change waves have been a success in this instance as well. The models succeed because they are based on trend analysis, not on a complex raft of financial models. Trends once identified are rarely wrong.

And thanks to the unmitigated economic disaster of the current White House (yes, they are those you must thank for this US recession) then the recession will appear to ease, clear up, then deepen.

The US recession is due to ignoring basics such as manufacturing inside the USA. And silly subsidies that create market distortions. This US government has been ‘bamboozled’ by economic wizardry, and has forgot common sense like controlling food supply and foreign ownership.

The Bush-Cheney administration has been less than ethical in the view of many, dangerous in the view of a few, short-term in anyone’s view and in the end, economically disastrous judged on hard figures. The worst economic administration since the 1920s.

Australia, a people with their head in the sand

Many Australians love a ‘punt’ or a gamble. They tend to be overly optimistic, as a nation. Thinking they can ‘beat the odds’. Whether horse-racing, elections or stock-markets ‘irrational optimism’ means that

2thinknow innovation models on 2nd October 2007 predicted the Australian November election result within a 1% margin.

But more importantly, earlier than any the myriad of positive voices, 5 months ago, 2thinknow called the current Australian stock market slide.

In fact, further than that, I was able to pick the ‘top’ of the market. In November. Then it has slid ever since.

Very few economic predictors in the media were able to do so. I do not know of a single one voice. If you successfully did make the same prediction, post a link to the article in the comments below.

In fact, in Australia, ‘blue chip’ bank and insurance stocks have been punished the most. If you had sold Australian stocks when I stated was the probable best time, you would be up to 20% better off than selling now.

Reality is, personally I would still sell, unless I was a long-termist.

Whilst I can’t provide financial advice, my belief, based on innovation trend models, is that the floor of 5300 on the All Ordinaries Australian index will bottom out. The ‘real’ floor for the Index is 4500, as I predicted in early January.

My earlier predictions of an April – September ‘economic shock’ event still stand. This shock may be offshore/global, but is likely to impact and reinfore the downward stock-market trend.

Once again, on behalf of 2thinknow, my predictions were ahead of any major analyst group or journalists that I’m aware of. Correct me if you know otherwise.

Where’s Australia going?

It’s irrational optimism to think that the falling Australian Stock market will rise again. That’s irrational optimism.

Banking stocks are falling. This will worsen, as banks use this opportunity to do more ‘dirty work’ like the ABC Learning takeover.

The bellwether hope of the remaining optimists, resource stocks will fall in the next 2-3 years, as China overheats. This is based on 2thinknow Nascent Trend Analysis, something that is a new technique pioneered by myself.

The fact is the US market has been surviving on a last gasp of Bill Clinton’s administration, and over-enthusiastic consumer confidence. Borrowing for consumption is not wise.

When the US situation worsens, and because the Bush administration have failed by following economic free marketeers, China and Australia will stall. Chinese consumption is not ready to overtake US enthusiasm for consumption yet.

In Melbourne, some friends with investments have been saying since October I have been wrong to predict a fall in the stock market. These people forget that stock prices are tied to fundamentals. And that fundamentals are subject to at least 12 to 24 months lag time in most cases.

In Sydney, a close friend thought I was crazy in October to predict the slide. But the trend is there, and that trend is now clearly all ‘downward’, excepting a few ‘winners’.

The Bottom Line for US & Australia

It’s all about China. and resources. And that, with economic shock events, and a fundamental change that is very long term shift away from consumerist society at the nascent stage, means the stock market will fall.

My suggestion is that you those of you who elected John Howard and George Bush in 2004 are to blame. Dual conservative leaders who preferred the ‘gas pedal’ to the brake pedal on the world economy. Blair, also formed the gang of 3.

If they had allowed a ‘pause’ in the economy to prevent overheating, if they had regulated instead of de-regulated, if they had thought about aggregate supply and capacity… we wouldn’t have the coming recession. The mistakes are myriad.

Their Iraq War, their false ideas on oil economics, and too much reliance on free marketeer theorists from right-wing think tanks has created an economic rut.

Blame Howard, Bush, Blair and their advisors. You need to brake into a corner, notdrive on through.

But for now get a spade, and dig in. The bear is loose.

The next event will be a big shock in April, or shortly thereafter, most likely.