Robert Prechter Says, “We Are On Schedule for a Very, Very Long Bear Market.”

MoneyBob NEW YORK (AP) — The Dow Jones industrials plunged below 10,000 Tuesday after traders dumped stocks on worries about the global economy and tensions between North and South Korea. The Dow fell about 190 points in late morning trading. It has fallen 1,346 points, or more than 12 percent, from its recent high of 11,205, reached April 26. The Dow and broader stock indexes all fell about 2 percent. Investors also exited the euro and commodities including oil and again sought safety in Treasury securities. Look out below!

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Nouriel Roubini Says You Should Preserve Capital

CNN Money

CNN Money

8 really, really scary predictions

Dow 4,000. Food shortages. A bubble in Treasury notes. Fortune spoke to eight of the market’s sharpest thinkers and what they had to say about the future is frightening.

Known as Dr. Doom, the NYU economics professor saw the mortgage-related meltdown coming.

We are in the middle of a very severe recession that’s going to continue through all of 2009 – the worst U.S. recession in the past 50 years. It’s the bursting of a huge leveraged-up credit bubble. There’s no going back, and there is no bottom to it. It was excessive in everything from subprime to prime, from credit cards to student loans, from corporate bonds to muni bonds. You name it. And it’s all reversing right now in a very, very massive way. At this point it’s not just a U.S. recession. All of the advanced economies are at the beginning of a hard landing. And emerging markets, beginning with China, are in a severe slowdown. So we’re having a global recession and it’s becoming worse.

Things are going to be awful for everyday people. U.S. GDP growth is going to be negative through the end of 2009. And the recovery in 2010 and 2011, if there is one, is going to be so weak – with a growth rate of 1% to 1.5% – that it’s going to feel like a recession. I see the unemployment rate peaking at around 9% by 2010. The value of homes has already fallen 25%. In my view, home prices are going to fall by another 15% before bottoming out in 2010.

For the next 12 months I would stay away from risky assets. I would stay away from the stock market. I would stay away from commodities. I would stay away from credit, both high-yield and high-grade. I would stay in cash or cashlike instruments such as short-term or longer-term government bonds. It’s better to stay in things with low returns rather than to lose 50% of your wealth. You should preserve capital. It’ll be hard and challenging enough. I wish I could be more cheerful, but I was right a year ago, and I think I’ll be right this year too.

Treasury Three-Month Bill Yields Fall Most Since 2001


Sept. 1 (Bloomberg – Min Zeng) — Treasury three-month bill yields fell in August by the most in almost six years as subprime mortgage losses weakened credit markets, encouraging investors to take refuge in the shortest-term government debt.

Investors bought bills this week as the commercial paper market extended its biggest slump in at least seven years. President George W. Bush yesterday announced a plan to contain mortgage defaults, and Federal Reserve Chairman Ben S. Bernanke said he would “act as needed” to contain the housing recession.

The yield on the three-month Treasury bill fell 84 basis points, or 0.84 percentage point, to 4.11 percent in August, according to Bloomberg data. It was the biggest monthly drop since September 2001, when the terrorist attacks increased demand for government debt.

Commercial paper outstanding has fallen $244.1 billion, or 11 percent, in the past three weeks, suggesting the Fed’s reduction in the discount rate on Aug. 17 hasn’t enticed buyers back into the market.

There’s that fear of commercial paper that’s driving people into the bills market,” said Nasri Toutoungi, who oversees $23 billion of bonds in Hartford, Connecticut, at Hartford Investment Management Co.

An $18 billion auction of two-year notes on Aug. 29 drew the most demand since 1992. The government sold $53 billion of notes and bonds in four auctions last month including the $13 billion of five-year notes on Aug. 30.

Two-year note yields fell 39 basis points last month, the most since September 2003, to 4.13 percent. Benchmark 10-year note yields decreased 21 basis points to 4.53 percent after touching a five-month low of 4.48 percent on Aug. 29.

Home prices fell by a record amount in the second quarter as sales fell and mortgage lenders made it tougher to get a loan. Home values dropped 3.2 percent in the three months through June from the same period a year before, according to an Aug. 28 report by S&P/Case-Shiller.

The New York-based Conference Board reported the same day that its index of confidence fell in August the most since just after Hurricane Katrina two years ago.