World View: That '1929 Feeling' May Be Back on Wall Street

This morning's key headlines from GenerationalDynamics.com
  • Terrorist bombings in Egypt may affect Saturday's revolutionary celebrations
  • That '1929 feeling' may be back on Wall Street
  • 'Geneva II' Syria peace conference is more political play-acting

Terrorist bombings in Egypt may affect Saturday's revolutionary celebrations

Egypt's terrorist bombings had previously been taking place far away from Cairo in the Sinai or in northern Egypt, but as of Friday morning they have now come to the most well protected part of central Cairo. A large terrorist blast exploded at the police building in central Cairo, killing four people and injuring 76 others. Hours later, one person was killed by a bombing in Giza. Late Friday morning, a third explosion at a Giza police station near the pyramids caused no casualties. However, in the afternoon, a bombing at a Giza movie theatre left one person dead.

The spate of terrorist bombings has infuriated the public who are widely blaming the Muslim Brotherhood for the bombings and praising army general Abdel al-Fattah al-Sisi for declaring MB to be a terrorist organization.

The Muslim Brotherhood says it had nothing to do with the bombings, while al-Qaeda-linked Sinai terrorist group Ansar Jerusalem (Ansar Bayt al Maqdis or Champions of Jerusalem) is claiming credit. This group has claimed credit for several major terrorist bombings in the past.

Saturday is the third anniversary of the start of the 2011 Egyptian Revolution that led to the ousting of Hosni Mubarak. Many political groups had planned big public celebrations Saturday, but some of them are being pulled back, giving as a reason fear of violent clashes with the Muslim Brotherhood. Al-Ahram (Cairo) and BBC

That '1929 feeling' may be back on Wall Street

This week is the first time in a long time that I've thought that the market has the "1929 feeling." Those feelings only became stronger on Friday with the dramatic 2% plunge in Wall Street stocks. Financial pundits gave these reasons for the plunge:

  • There has been a flight from so-called "emerging markets" in the past week that turned into a full-scale rout on Friday, with Turkey, Argentina, and Ukraine being hit the hardest. This flight affected both stock markets and foreign currency markets as investors bought "safe-haven" assets, such as U.S. Treasuries, the yen, and gold.
  • At the global financial conference at Davos this week, there was widespread anxiety of a "hard landing" in China, meaning that China's growth may be on the verge of falling much more sharply than previously thought. In addition, there are fears of war between China and Japan.
  • The amount of money sloshing around the banking system is going to decrease as the Federal Reserve "tapers" its bond-buying program. It has been injecting $85 billion per month of new money into the banking system, but the amount will be lowered to $75 billion next month.

These are all likely to be long-term trends, and the sense of gloom that I'm detecting suggests that some change might be about to happen.

However, this could all fall apart in the next few days. Perhaps Wall Street will recover from the big losses this week and start growing again. We know that a crash is coming, but it's impossible to predict the timing. All we can do is guess and depend on our "feelings," which can be wrong.

By the way, according to Friday's Wall Street Journal, the S&P 500 Price/Earnings index (stock valuations) on Friday morning, January 24, was 18.20, which is lower than the 18.72 of last month but still astronomically high. It was only as recently as 1982 that the P/E index was 6, and it's about due to return to that level, as it does periodically, every 30 years or so. This would push the Dow Jones Industrial Average from its current 15,900 down to the 3,000-4,000 level or lower, which is what Generational Dynamics is predicting.

So if that "1929 feeling" is going to turn into a 1929 crash at this time, then there are some things to look for in the next two months. The main thing to look for would be a gradual net fall combined with a couple of wild fluctuations – say, a 6% fall, then an 8% rise. In fact, if you take into account what's been happening in emerging markets, then it may be fair to say that this is already happening. This would set what might be called the "panic mood," by which people would be anxious to avoid the next 6% fall, and that would trigger a much bigger fall and a spiral downward. Reuters and AFP

'Geneva II' Syria peace conference is more political play-acting

A new Syria peace conference is going on in Geneva, Switzerland, and it certainly qualifies as a bizarre bit of political theatre. It's called "Geneva II" because there was an earlier Syrian peace conference in Geneva in June, 2012, now called "Geneva I." There was a communique issued after Geneva I, and it called for an end to the Syrian civil war by the resignation of president Bashar al-Assad and instituting a new transitional government with members from the former al-Assad government, as well as members from the opposition.

Well, now it's time for Geneva II, and here are the realities:

  • Bashar al-Assad will most certainly not agree to step down. He's winning on the battlefield, and his opponents are in disarray. Thus, he will absolutely, positively not agree to the terms of the Geneva I communique.
  • The opposition, represented by the Syrian National Council (SNC), will not agree to anything unless al-Assad agrees to the terms of the Geneva I communique and agrees to step down. Anything else would be viewed as total capitulation by the SNC. Even if the SNC did agree to some kind of truce with al-Assad, which is impossible, the agreement would not apply to the other opposition groups, Jabhat al-Nusra and ISIS.

So on Thursday, the two sides were in separate rooms, but they were supposed to meet with one another in the same room on Friday. That was canceled because of the above disagreement. Then UN and Arab League Special Envoy to Syria Lakhdar Brahimi stepped into the picture. He played "shuttle diplomacy," moving back and forth between the two rooms, and finally was able to announce that the two sides would meet in the same room on Saturday – and this was described as a "major breakthrough"!

Even if the civil war did end on whatever terms imaginable, there would still be a resumption of peaceful protests. Remember, that's how the war started – the genocidal monster al-Assad responded to the peaceful protests by flattening civilian neighborhoods and torturing children. When the peaceful protests begin again, what will al-Assad do next? Irish Times

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