Submitted by IWB, on October 10th, 2012

The Case For A 40% Drop In The Markets

Michael Belkin, author of the Belkin Report, declared the U.S. to be in recession, or very close to starting one, pointing to stock market highs on Sept. 14 – the day after Bernanke announced QE3 – as the harbinger of the downturn. Belkin said that his research of the past 110 years found that economic expansions last about 45 months; taking out the last three expansions which he said were fueled by Fed policies, that number is about 37 months. Somewhat ominously, he noted that the current expansion has lasted 40 months.

“It’s usually two to three months from the market’s peak to the start of the recession,” said Belkin, who added that on average recessions over the past 110 years have lasted 15 months and seen a 31% decline in the Dow Jones Industrial Average.

Belkin was unimpressed by the argument that Fed will keep the stock market pushing higher.

“The Fed does not control company earnings or the stock market,” he said.

Belkin said for long-only investors, staying out of stocks for the next 12 to 15 months was a recommended course – “just avoid risk,” he said. But at the same time, he did recommend some investment strategies.

Overweighting consumer staples, health care, utilities and maybe financials could be a good approach, said Belkin, while he suggested avoiding technology, industrials and materials and consumer discretionary stocks.

But even with his strong views – predicting greatly lower profits, sustained job losses and a stock market drop in the next year of up to 40% Belkin also sounded a note of caution.

Prepare For The Alarmingly High Threat of Recession 2013

The IMF presently seesalarmingly high risks of a steeper slowdown, with bleak one-in-six odds that growth will dip below 2%. 

A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component. The answer depends on whether European and U.S. policy makers deal proactively with their major short term economic challenges, the report said.

Five Renowned Economists: The Problems Are Close To Being Unmanageable Now.

September 2012:  Five renowned economists published an editorial in the Wall Street Journal. They said:

“The problems are close to being unmanageable now. If we stay on the current path, they will wind up being completely unmanageable, culminating in an unwelcome explosion and crisis.

The fixes are blindingly obvious. Economic theory, empirical studies and historical experience teach that the solutions are the lowest possible tax rates on the broadest base, sufficient to fund the necessary functions of government on balance over the business cycle; sound monetary policy; trade liberalization; spending control and entitlement reform; and regulatory, litigation and education reform. The need is clear. Why wait for disaster? The future is now.”

They understand the problems and the solutions to our current economic problems. Must we wait for another financial and economic crash and more violence and bloodshed before we can intelligently act in our own best interest? We have been warned.

DAVID TICE WARNS: THIS IS LIKE 2008 RIGHT BEFORE THE MARKET CRASHED

David Tice, president of Tice Capital and the former manager of the Prudent Bear Fund, is extremely bearish. And hes the first to admit that its been tough being a bear.

I own a VIX position that I have had my head handed to with that, he told Melissa Lee  tonight on CNBCs Fast Money. It has been hard to be a bear.

However, Tice isnt about to turn bullish anytime soon.  If anything, hes becoming increasingly bearish.

People though I was crazy when I was bearish back in 97, 98, 99.  I saw that a bubble was developing and we ended up crashing 00 to 02.

I tend to be very, very early, he said.  This really seems like it seemed in early 08.  Remember, in September 08 after Lehman went down, it wasnt until October and November until the market started crashing.

In other words, I believe Spain, Europe, Chinathe market will pick up on this.

Tice expects the volatility to spike, sending the VIX to 70 or 80.  For now, he likes gold.