Everyone who has followed me knows  I’m always right on the market.   I’m not putting up links but you can go back through the archives and verify all you want.

If you have a mutual fund that allows you to switch from stocks to secured investments like Treasury’s, put the order in now. The smart money is starting to pull out now and the stocks will start dropping and keep falling as long as the switching continues….

Here is the reason….

Mitch McConnell…. “It’s pretty clear to me that the sequester is going to go into effect…Read my lips: I’m not interested in an 11th-hour negotiation.”

The most liberal estimate shows that when the sequester goes into effect the GDP will lose  .5% over the course of the year.  This first Quarter will be positive which means the next three quarters will be in negative territory.

The exact same thing occurred in 1937.   It is usually lumped in by history as a continuation of the Great Depression but two quarters of 1936 looked like our two quarters just after the election this time…  As 1937 opened, just as 2013 opened, prospects were rosy that the worst was behind us. Unemployment had dropped from 25% to 14% with manufacturing  output rising to its 1929 levels, and then, …. with budget cutbacks  to reign in spending, very similar to sequestration today, unemployment shot back up to 19%…. If the same trend holds, our unemployment should rise to 9% again before it stabilizes and then fall slowly, ever so slowly, back to 7% it is today, quite possibly as late as 2016.

Manufacturing then cut back 37% returning work output to 1934 levels.

Finally on April 2,  1938  Roosevelt sent a new large-scale spending program to Congress, and received $3.75 billion which was split among PWA, WPA, and various relief agencies.   Other appropriations raised the total to $5 billion in the spring of 1938, after which the economy recovered.

Unemployment never recovered its 1936 level until the US went into WWII….

The Stock Market which had climbed back to its 1929 high as of  February of 1937,  lost 50% of its value by February 1938…..

Put bluntly, with sequestration, there is zero chance stocks will rise, and a 99% chance they will fall.  Doesn’t it make sense to sell out now, and put that money into the safe keeping of Treasury Bonds?

The Republicans seem jubilent they are causing it this collapse.  I guess afterwards there will be no question in any reporters or any American’s mind, that Democrats and  Keynes were always right, and Republicans and Milton Friedman were always dead wrong.

If you don’t do what I said,  and get out now,  don’t come crying to me… You were warned!

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