Book Review: "Meltdown"

Meltdown: A Free Market Look at Why the Stock Market Crashed, The Economy Tanked, and The Government Bailouts Will Make Things Worse.  

It's not often I run across a book which so eloquently and definitively documents what so many of us in the investment/capitalist world seem to know so well.  The reality is the last presidential administration and the current one, combined with congress, are both responsible for allowing our country's capitalistic roots and monetary polices to get out of control.  In Meltdown Thomas E. Woods does an excellent job explaining monetary policy and why government run programs destroy economies rather than help them.   

 I was particularly delighted to find another writer finally taking issue with the disaster Ben Bernanke is creating with the federal reserve by printing so much money and monetizing so much debt.  Citing Bernanke's 2002 speech "Deflation: Making Sure 'It' Doesn't Happen Here" Woods methodically describes the fallacies associated with this Keynesian type economic theory and why it not only does not work, but if left unchecked can and will ultimately destroy the US Dollar (or any fiat money system).   Woods even goes so far as to suggest doing away with the Federal Reserve completely.  Even proposing to allow a free market approach to currency as well by allowing commodity backed currencies to enter the market.  A very fascinating argument which alone makes the read worthwhile.  

One of the unique aspects of Meltdown is the central discussion of Austrian School of Economics as a competing theory of economic thought.  Woods argues, and I agree, that the Austrian school is the only theory of economics which accounts for economic cycles.  Following the Austrian School of economics a Government may minimize the affects of economic recession and even depression by simply allowing the free markets to run their course and work.  Woods does an excellent job of documenting several economic recessions in US history where the free markets were allowed to work and the affects of the recessions were so minimal economic historians have hardly mentioned them as a blip in the economic scale.  

Anybody who is interested in the financial markets (such as what we teach at TradeSmart University) would do well to read this book.  It provides a clear and distinct explanation of the causes and effects of the current crisis.  I was most delighted to find at the end of the book Woods laid out a plan for helping the US emerge victorious from this crisis that was almost identical to my own ideas which I recently laid out for a friend.  As such I would love to see every member of congress forced to read this book.  Alas I have little reason to believe they will take my suggestion, but you certainly may. 

My most pleasant delight in this book came from the referral to an excellent website of which I was previously unaware, chocked full of fantastic information related to economics and specifically Austrian School Economics.  The Ludwig von Mises Institute is a fantastic resource for anyone who cares to understand more about how free market economies work and how governments can and should act in relationship to true economic freedom.  I'm delighted to share this resource with all of our students and blog readers.  

ARE YOU PREPARED FOR THE COMING ECONOMIC CRASH?  REGISTER NOW TO PARTICIPATE IN TRADESMART UNIVERSITY'S FOUNDATIONS OF STOCKS AND OPTIONS ONLINE SEMINAR FOR FREE!  

Will The Current Jobless Numbers Do the Market In?

The numbers are in, and they don't look good.  The official unemployment rate released last  Thursday says the United States is now sporting 9.5% unemployment.  Unfortunately that number doesn't really tell the whole story.  The same report from the Department of Labor says when factoring in the number of people who are displaced from a career but still managing to find a part time job the real unemployment numbers are actually closer to twice that at 16.5%.   Translated that means if you look around out of every 10 people you see on the street, at least 1-2 of them is jobless.  In the words of The Ladies Man... "uh yea, about that...." 

The market didn't like the news one bit with the DOW selling off 223 points.  A shocker for some, but very predictable for us and our students who have been watching this market turn developing.  This little bit of news is just one more piece of the story confirming our prediction that the overall weakness in the economy mixed with lousy government policies is about to send the markets hurtling down yet again.  We just posted a video discussion of the technical reasons why the market is preparing to sell off and today's closing price may just be the impetus needed to break this lackluster sideways movement out of it's box and get it moving again... albeit down. 

This chart shows the recent head and shoulders pattern forming on the DOW.  A break and close below our line at 8261 would signal the likely completion of the pattern and would likely trigger at least some portion of a major sell off.  

Beyond technical issues alone the fundamental data which is now being released is a nail in the coffin of this current economy.  Countries around the world are scrambling to figure out if the Dollar will hold it's value and all eyes are on the upcoming G8 summit where China will be pressing hard to sure up their investment in US Dollars with some sort of non-fiat guarantee.  

The coming uncertainty will certainly mean the loss of millions in personal retirement accounts across the country.  However the coming crash also presents some incredible money making opportunities for the educated stock investor.  During the last major swing down in October 2008 we made over 400% on our trades and many of our students did the same.  

This market uncertainty and volatility is exactly why we offer the classes we do at Trade Smart University.  It is our desire to help all of our students learn to trade the market with confidence no matter what the market conditions, and no matter how high or how low the market moves.  That's why we have decided to extend the limited time offer we set up for our Foundations of Stocks and Options class for the rest of the year. 

If you want to make sure you are prepared for the coming stock market implosion sign up to take our Foundations of Stocks and Options class for free!  The class meets twice a week for four weeks starting July 13th and will give you the perspective you need to understand where the market is moving and how you should move your money accordingly.