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

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

This morning’s key headlines from

  • 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 awayfrom Cairo in the Sinai or in northern Egypt, but as of Fridaymorning they have now come to the most well protected part of centralCairo. A large terrorist blast exploded at the police building incentral Cairo, killing four people and injuring 76 others. Hourslater, one person was killed by a bombing in Giza. Late Fridaymorning, a third explosion at a Giza police station near the pyramidscaused no casualties. However, in the afternoon, a bombing at a Giza movietheatre left one person dead.

The spate of terrorist bombings has infuriated the public who arewidely blaming the Muslim Brotherhood for the bombings and praisingarmy general Abdel al-Fattah al-Sisi for declaring MB to be aterrorist 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 hasclaimed credit for several major terrorist bombings in the past.

Saturday is the third anniversary of the start of the 2011 EgyptianRevolution that led to the ousting of Hosni Mubarak. Many politicalgroups had planned big public celebrations Saturday, but some ofthem are being pulled back, giving as a reason fear of violent clasheswith 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 themarket has the “1929 feeling.” Those feelings only became stronger onFriday with the dramatic 2% plunge in Wall Street stocks. Financialpundits 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 ofgloom that I’m detecting suggests that some change might beabout to happen.

However, this could all fall apart in the next few days. Perhaps WallStreet will recover from the big losses this week and start growingagain. We know that a crash is coming, but it’s impossible topredict the timing. All we can do is guess and depend onour “feelings,” which can be wrong.

By the way, according to Friday’s Wall Street Journal, the S&P 500 Price/Earnings index (stockvaluations) on Friday morning, January 24, was 18.20, which is lowerthan the 18.72 of last month but still astronomically high. It wasonly as recently as 1982 that the P/E index was 6, and it’s about dueto return to that level, as it does periodically, every 30 years orso. This would push the Dow Jones Industrial Average from its current15,900 down to the 3,000-4,000 level or lower, which is whatGenerational Dynamics is predicting.

So if that “1929 feeling” is going to turn into a 1929 crash at thistime, 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 witha couple of wild fluctuations – say, a 6% fall, then an 8% rise. Infact, if you take into account what’s been happening in emergingmarkets, then it may be fair to say that this is already happening.This would set what might be called the “panic mood,” by which peoplewould be anxious to avoid the next 6% fall, and that would trigger amuch 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 Syrianpeace conference in Geneva in June, 2012, now called “Geneva I.”There was a communique issued after Geneva I, and it called foran end to the Syrian civil war by the resignation of presidentBashar al-Assad and instituting a new transitional governmentwith members from the former al-Assad government, as wellas 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 weresupposed to meet with one another in the same room on Friday. That was canceled because of the above disagreement. Then UN andArab League Special Envoy to Syria Lakhdar Brahimi stepped into thepicture. He played “shuttle diplomacy,” moving back and forth betweenthe two rooms, and finally was able to announce that the two sideswould meet in the same room on Saturday – and this was described as a

Even if the civil war did end on whatever terms imaginable, therewould still be a resumption of peaceful protests. Remember, that’show the war started – the genocidal monster al-Assad responded to thepeaceful protests by flattening civilian neighborhoods and torturingchildren. When the peaceful protests begin again, what will al-Assaddo next? Irish Times

Permanent web link to this article

Receive daily World View columns by e-mail


Please let us know if you're having issues with commenting.