David Tice, [Manager of "The Prudent Bear" Fund], says the Standard & Poor's 500 Index may tumble 40 percent during the next 12-24 months as the credit crisis undermines the economy, bankrupts households and companies and whacks profits. The drop would be worse than the 37 percent plunge in the index from 2000 through 2002.
Tice predicts U.S. equities will enter a bear market that may exceed the 15-year slump from 1965 to 1980. Moreover, he says if the Fed and Wall Street don't break their addiction to easy credit, the economy will eventually crash in a depression -- a condition marked by reduced purchasing power, unemployment and corporate failures.
The U.S. can't continue to inflate bubbles in stocks, real estate and other assets without crippling the financial system, Tice says.
``We've become a country of drunken sailors'' he says, snapping his fingers as he makes his point. ``If you spend, spend, spend, there are going to be consequences to that -- you can't borrow your way to prosperity.''
Even so, the turmoil has been good for Prudent Bear... Prudent Bear, which has $1.1 billion in assets, has returned 11 percent from June 30, 2007, to May 20, beating the 6 percent decline in the S&P 500.
AMR Corp.'s American Airlines, the world's largest carrier, said it will cut ``thousands'' of jobs as it slashes U.S. capacity and retires as many as 85 jets to blunt surging fuel prices and slowing demand.
AMR plunged the most since 2003 in New York trading, slicing its market value in half since the start of this year to $1.53 billion. The carrier also added a $15 fee to check one bag, the first in the U.S. with such a charge.
Chopping domestic seating by 12 percent ``is the right and necessary thing for American to do with oil at $130,'' said Doug Runte, managing director at RBS Greenwich Capital in Greenwich, Connecticut. The move will help American boost fares, he added.
High gas prices have driven a Warren County farmer and his sons to hitch a tractor rake to a pair of mules to gather hay from their fields. T.R. Raymond bought Dolly and Molly at the Dixon mule sale last year. Son Danny Raymond trained them and also modified the tractor rake so the mules could pull it.
T.R. Raymond says the mules are slower than a petroleum-powered tractor, but there are benefits.
"This fuel's so high, you can't afford it," he said. "We can feed these mules cheaper than we can buy fuel. That's the truth."
And Danny Raymond says he just likes using the mules around the farm.
"We've been using them quite a bit," he said.
Brother Robert Raymond added, "It's the way of the future."
(h/t, Caleb Stegall)
Again, we should recall Wendell Berry's question to a group of graduating college seniors last year:
"What more than you have so far learned will you need to know in order to live at home? (I don’t mean “home” as a house for sale.) If you decide, or if you are required by circumstances, to live all your life in one place, what will you need to know about it and about yourself? At present our economy and society are founded on the assumption that energy will always be unlimited and cheap; but what will you have to learn to live in a world in which energy is limited and expensive? What will you have to know – and know how to do – when your community can no longer be supplied by cheap transportation? Will you be satisfied to live in a world owned or controlled by a few great corporations? If not, would you consider the alternative: self-employment in a small local enterprise owned by you, offering honest goods or services to your neighbors and responsible stewardship to your community?
Even to ask such questions, let alone answer them, you will have to refuse certain assumptions that the proponents of STEM and the predestinarians of the global economy wish you to take for granted."
Our globalization free market predestinarians assume that the market always and forever giveth; what of the prospect that it taketh away?