Financial Crisis Update

  How To Prepare For The Coming Stock Market Crash 

Thu 30 March 2000
USA: Wired News

Stock Market Warning

Emerging markets guru Mark Mobius of the Templeton Fund warned on Wednesday that a recent bout of volatility in Internet stock prices could herald the onset of a global crash in this high-flying sector. "I think we're nearing the time, that's my guess. And it will be big.... Some stocks will be 90 percent or 50 percent down," Mobius, who heads U.S.-based Templeton Emerging Markets Group, told reporters. The chief strategist's warning came one day after Goldman Sachs' Abby Joseph Cohen shook markets by lowering the equity weight in the firm's portfolio to 65 percent from 70 percent out of concern for lofty stocks valuation. Mobius, who manages $12 billion of funds and whose comments often move emerging markets, said growing investor uneasiness over sky-high Internet valuations could rapidly translate into an avalanche of panic selling. "If you look closely, it's beginning. Look at the number of Internet stocks that have come off their highs, look at the number of Internet stocks that are below their issue price," he said. Mobius said many Internet firms had vulnerable financial balance sheets that put them at risk of either going bankrupt or becoming an easy prey for "old economy" companies, eager to buy into their technological cutting edge. "We always like to say the most expensive words in the world are 'This Time It's Different,'" joked Mobius, who cautioned against the rosy view that "new economy" stocks could forever yield greater and greater rewards. He also warned against an industry trend where fund managers feel pressured to pile into Internet stocks to boost return. Full Story.

Mon 13 March 2000
Japan: Nando Times

Japan's economy plunges back into recession

Japan's economy plunged back into recession at the end of last year, the government said Monday, fanning doubts about whether the country can recover from its worst economic slump in decades. Gross domestic product, the total value of Japan's goods and services, fell 1.4 percent in the October-December quarter compared to the July-September period, the Economic Planning Agency said. It was the second consecutive quarter of GDP decline, meaning the economy was officially back in recession after a few fitful quarters of anemic growth fueled by a massive government spending binge. GDP shrank 1 percent in the July-September quarter. Full Story.

Tue 7 March 2000
USA: Washington Times

Cost of oil threatens era of confidence in economy

The U.S. economy weathered a doubling of oil prices last year without missing a beat, but the latest round of increases poses a risk of economic damage, economists say. Sky-high gas prices could shake the confidence that has been fueling consumer spending and economic growth. And they raise a potent threat of inflation that almost certainly will drive up interest rates, economists say. "The last three major recessions were caused by oil prices. Four in a row is not infeasible" said David Wyss, chief economist with Standard & Poor's DRI in Boston. Today's gasoline price increases — expected to climb to as high as $2 per gallon by summer — are eerily similar to the ones that occurred in 1990 as the Federal Reserve drove up interest rates to slow the economy, hitting it with a "double whammy" that plunged it into recession, Mr. Wyss said. Full Story.

Fri 17 Feb 2000
USA: CNN

Greenspan warns on rates

Warning that the threat of inflation continues to hover over the booming economy, Federal Reserve Chairman Alan Greenspan suggested Thursday that the central bank will raise U.S. interest rates again. The Fed chief, in prepared remarks, spoke about mounting imbalances in the economy and the risks of rising inflation. "Profoundly beneficial forces driving the American economy to competitive excellence are also engendering a set of imbalances that, unless contained, threaten our continuing prosperity," Greenspan said. Full Story.

Fri 14 Jan 2000
USA: CNN

Greenspan, "the economy, speculative bubble"

Greenspan suggests strong growth needs to be kept in check to avoid recession; talks of 'speculative' bubble. Strongly suggesting that an interest-rate hike is near, Federal Reserve Chairman Alan Greenspan said Thursday. Economists read the Fed chairman's remarks as further evidence that a rate hike is coming. Greenspan nonetheless expressed caution that the economy could be viewed 10 years from now as "just one of the many speculative bubbles that have dotted human history." He also expressed concern about the current valuations on high-flying Internet stocks, which he characterized as "outsized" and "unsettling." He suggested that unforeseen events could bring an end to the most affluent of times America has ever seen. "These extraordinary achievements continue to be bedeviled by concerns that the so-called New Economy is spurring imbalances that at some point will abruptly adjust, bringing the economic expansion, its euphoria, and wealth creation to a grinding halt." Full Story.

Fri 15 Oct 1999
USA: CNN

Greenspan warns of a sell-off

Stock markets remain under heavy pressure amid a combination of rising wholesale inflation and a warning from Federal Reserve Chairman Alan Greenspan that a sharp stock market sell-off is possible. Wall Street's worst fears -- that rising inflation could bring higher interest rates and that the market could face a severe correction -- both were fueled Friday, after Greenspan late Thursday told banks to stash reserves in case they have to face a big market downturn. Full Story.

Tue 6 July 1999
USA: Australian Financial Review

Wall Street will crash

Japan's Eisuke Sakakibara - known as Mr Yen - is about to retire from his job as the country's main international negotiator. But why? He told an acquaintance that he decided not to press for another year in the post because he expected that Wall Street would crash during that time, and he did not want to be around to try to deal with the consequences for Japan.
The US is vulnerable, he says, to the possibility that the internet-led stockmarket bubble will burst with awful consequences. It would not only drag down the US economy, he fears, but jeopardise the entire system of global capitalism. It is quite extraordinary, of course, that the vice-minister for international affairs at Japan's Ministry of Finance should utter such thoughts aloud. Full Story.

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