Toshio Matsuda, Commentator & Intl Economist

Straight from the Shoulder

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On Sept. 11, I had my wife’ birthday party at Waialae Country Club in Honolulu Hawaii. More than 70 guests came to cerebrate Mariko( born on Aug. 9, 1950 ) for her 39th birthday. I make it rule to make a lecture before the party.

Everybody and I remember my lecture in the same room on Aug. 9, 2001
when I said, “ within about 30 days, the U.S. will be upside down in chaos and it will go in for a war ”. August in 2001 was just after the collapse of IT bubble and the U.S. economy was sinking down with the fear of recession. It was quite similar environment in economy where we are now.

Needless to say, my prediction came true on Sept. 11, 2001, 33 days after my lecture.

Below is the summery of my lecture last night.

The New York stock market has soundly slipped into a “bear information bubble.” If the truth were known, from the summer of 2007 it has been predicted that the U.S. housing bubble triggered by the subprime loan fiasco, along with the accompanying slide in home prices in the wake of the collapse of that bubble. There has been a forecast of a global economic slump following the Beijing Olympics. Likewise, it has been said that inflation would accelerate with the sharp rise in the price of crude oil since last year, with consumption falling off.

Recently, though, the price of crude has dropped by some 30%. But the market concluded that the single most adverse factor for stock prices had vanished from view and there has been a swift reversal in thinking on bearish indicators. The claim being made now, in fact, is that the decline in the price of crude is responsible for the global economic slowdown.

Let me say, therefore, that it is anything but normal action to recycle negative information already factored into the economic equation. What’s more, regardless of what others may say, the fall in crude prices is most certainly good news in the face of soaring inflation and commodity prices, and by extension, for consumption as well.

Take a look at the facts. Isn’t it true that while the economies of the United States, Europe, Asia and Japan were tanking, the price of crude continued to chart steep rises? There is simply no viable argument against the conclusion that jumps in the price of crude have comprised the single greatest cause of hitting the world economy on head. With the evil culprit of crude oil prices having gone into a tailspin, there could not possibly be any better news for the world economy. Yet, despite that, the market is promoting the case of cheaper crude as a harmful development. Not only is this misleading, it represents a blatant attempt to manipulate stock prices.

At this juncture, a basic rule of thumb important to keep in mind is: “Price manipulation grows rampant in the midst of environments in which all market negatives have been exhausted.”

Why, then, are efforts being made to surrogate good news with bearish claims? Simply stated, this is proof that while price manipulation is being marshaled to lower stock prices, the market is actually in a “buy” mode. The New York stock market, which continues to head south, is in reality a bull market.

The time is right for upright investors to tip their hats to the villains, scoff at the fear mongers and go into a buy mode.