Dow 4000 by the end of the year
That's from one of my favorite pessimists, James Howard Kunstler:
Oil's remorseless up-ratcheting past $60 is as much a symptom of a weak dollar as a strained global energy allocation system, and the dollar is weakening because the way of life it represents is becoming more and more unreal. The harsh truth is that we've reached the limit of our ability to expand our suburban sprawl economy and there is no alternative US economy in the background ready to take its place. The world can't fail to notice this weakness. The inability to generate even fake wealth, in the form of ever more WalMarts, will take its toll on the consensus that the American Dream has enduring value.And a couple of choice paragraphs from last week's Kunstler:
The stock market contraction ought to reflect this reality -- apart from desperate attempts by US government proxies to levitate share prices -- and it is hard to imagine a rally in the face of $60 oil. I'm inclined to predict a gruesome journey down for the Dow Jones into the 4000 range by the end of the year. Until now the dollars created by the Federal Reserve's supernaturally loose credit policy have sought shelter in the "hard assets" of houses? A meltdown of the stock markets will translate into vanishing leverage in all other areas of finance, especially in real estate (as well as a swath of destruction through hedge funds, retirement accounts and, eventually, the entire creaking superstructure of the hallucinated mortgage industry). A few Americans are actually going to get the message that this is not a good time to buy an overpriced raised ranch house. A lot of real estate geniuses are going witness their own ruin with wonder and nausea.
It was Amercia's hope that by turning Iraqis and other Middle Eastern people into democrats, they would magically become much friendlier and that our military presence would be happily tolerated -- and that eventually all the Middle East would become so democratic, friendly, and stable that our presence there would be regarded as a Godsend. Whoops, wrong God. For starters.
The world may no longer have a swing producer of oil, but this period can probably be viewed as a swing period of history. By that I mean a period when we hoped that there was a quick and easy way to keep the oil flowing westward and found out that it wasn't so. The time is now coming when the American public won't tolerate a dozen US casualties a week, nevermind fifty Iraqis. But Americans won't tolerate $5 a gallon gasoline, either. We'll now see how the public will reconcile these intolerances.