Is an accident imminent and when?

Posted by Costas Stopas

1) Is an accident imminent and when?

Recently, many have wondered if an impending crash would plunge the economy into recession. The answer isn’t particularly easy, since most of the time in the past crashes and recessions weren’t expected, and were noticed when or after the fact…

Looking back, there isn’t a year in which someone didn’t predict a crash or recession in the global economy. From time to time some are justified and highlighted as prophets.

Rarely has the same person been acquitted twice in a row, or acquitted for foreseeing both the accident and subsequent recovery.

The general rule is that market crashes are usually unannounced and usually happen when no one (or even the vast majority) expects them.

In addition, the Greek stock market is not a good indicator that someone could calculate based on the behaviors that are developing in it that a crash is imminent…

The Greek stock market is a small, regional, shallow market where the majority of stocks are easily manipulated by major shareholders.

Companies that meet the basic standards of corporate governance and have sufficient dispersal of no more than 15-20 companies and 15-20 companies that are not a buyout…

The Greek market is basically a heterogeneous market like the Moon and the planets of our solar system are heterogeneous bodies rather than self-luminous bodies…

There is not a single time in the existence of the Greek stock exchange that the external markets corrected and moved in the opposite direction for so long…

This is because the liquidity that drives the markets up and down flows through the system of connected vessels of the international markets. Of course, it does not flow at the same time and with the same intensity in all markets.

In addition to the system of communication containers, the international market system also resembles a pyramid of glass, with the largest at the top of the pyramid and the smallest at the base.

The liquid flows into the largest part at the top and when it is full one part flows into the second row of cups, the third and so on…

The smaller cups on the base fill last and usually when the upper cups begin to empty.

Stock market crashes are usually associated with downturns in the economy because they are interrelated. A recession causes a decrease in demand, and thus a decrease in the profits of listed companies, and thus a decrease in stocks. A crash causes a negative effect on wealth and this reduces demand… i.e. a person with a portfolio of 100,000 shares yielding 20% ​​this year is spending with a different mindset than if the portfolio of 100 shares fell to 50… .

In addition, the likelihood of a recession increases due to:

a) We are going through a period of rising interest rates. When this happens recessions are common…

b) We are going through a period when stock prices are higher internationally than they have been over the past decade. The S&P in 2009 was at 700 points and at the beginning of 2022 it was at 4,800 points. The average price is close to 2700 – 2800. Now, after a year of correction, it is again close to 4000 units. This supports the scenario that the correction started in early 2022 and is continuing. What is happening in the Amman Stock Exchange can be explained by the example of the pyramid of glasses that we mentioned…

c) Private and public debt in the global economy have reached historically high levels. This together with inflation creates an explosive mix, as it increases the cost of service… This is a dangerous situation because it makes the severity and duration of the next downturn in the economy and correction in the markets stronger than the previous ones…

d) If we look at the past twenty or thirty years, we will see that at least once in every decade we have a major recession and crash. In the last decade we had nothing and what happened due to the pandemic in 2020 cannot be calculated because it lasted very little because central banks and governments intervened massively by releasing debt. Prior to 1990, we had more than one recession per decade because interest rates were at higher levels. If this happens again because these also follow circular trajectories in the long term, then in the coming years we will see more frequent and deeper recessions.

We can’t predict the exact timing of a recession, let alone a crash, but we can form an estimate of whether the chances have increased or decreased…

In a period with the characteristics that we described above, it is like walking around with a lit cigarette in a space in which several balloons inflated with some flammable gas are moving … and the smallest explosion of them can blow up a building in the air.

2) The next breakdown …

Dear Mr. Stupa,

My name is Vourlos Panagiotis, I am a young entrepreneur in the clothing retail sector. I have been working in this industry for about 5 years.

I follow your column via Capital.gr and can say that I agree with your views on the impending crash.

I wanted to ask you if this will happen in the near future (by 2023) according to your expectations?

Should we prepare for the worst-case scenarios within the Greek region or should things go smoothly?

I only ask you because I feel through your articles that you have the right perspective for the upcoming situations.

welcome.

B. Panagiotis.

Answer: Dear Panagiotis, as a clothing entrepreneur you are more than qualified to answer.

One of the most reliable indicators that former Federal Reserve Chairman Alan Greenspan used to gauge the state of the economy and make interest rate policy decisions was the state of the men’s underwear market…

Lingerie is something that is worn inside and few can see its condition. Whether it’s brand new, old, expensive or cheap baskets…

Undergarments, then, according to the former head of the largest central bank, have high use value and little display value in contrast to the shirts, suits or shoes one wears.

This means that when incomes start to shrink and a recession looms, the first thing someone cuts back on spending on clothing is underwear.

When designer lingerie remains on the shelves and companies start selling and promotions, it means that there is an increased chance of a recession on the way.

When the shelves of expensive lingerie are emptied and prices are rising, it means that things are going well and what we have to worry about is inflation and the possibility of higher interest rates…

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