The Market Will Crash- the Sky is Falling

The sky is falling, along with Apple (Nasdaq: AAPL). With JP Morgan's (NYSE: JPM) two, no wait make that three billion dollar loss (and counting) there will rightfully be increased fear raging through the markets, as to whether the unnecessary risks they took may lead to bigger losses, and what other banks have similar exposure.
Meanwhile over in Europe recalcitrant and fiscally irresponsible nations are dragging down the Euro. The run on the banks in Greece has already begun, as citizens anticipate them leaving the monetary union, and don’t want to be stuck with the Greek Drachma. How long will Germany and the Netherlands, Europe’s paymasters, continue to shell out their hard earned money to keep Greece in the Euro, a culture rife with fraud, where paying taxes is considered a "chumpy" activity, whose people don’t wish to work, but want all the benefits and hand outs of living in a modern society?

Video: Stock market faces too many headwinds
Meanwhile, in America, states are dealing with crippling budgetary deficits. California for one, has a 7 billion Wider dollar budgetary gap than previously expected.
The infrastructure of the nation is falling apart. In Los Angeles, where I live, the roads are in need of a major work. True story- my friend was driving down Olympic Blvd (one of our most traveled corridors,) hits a pothole, flat tire. He stops, puts on his spare, continues down the road, and thirty seconds later runs over another rough patch of road, flat tire number two, decides on the spot, “it’s time to move.”
Where is the money to pay for all the government programs (some good, most wasteful) going to come from? Parking tickets? Raise taxes? Look, nobody likes their money being wasted, raise taxes too high and people get tempted to move, Eduardo Saverin of Facebook style.
More and more American jobs are being exported overseas, as barriers to conducting business across continents decreases, money follows suit, osmotically trying to balance itself throughout the world. (which isn’t a bad thing or humanity)
The Republicans and John Boehner are already talking tough on the budget. Not that they shouldn’t, we clearly need across the board cuts, and few people want to see inefficient government spending displacing private industry, but this will create more uncertainty for the markets. Last year financial markets fell 20% when we came within a few hours of defaulting on debt payments. 
Plus, let’s not forget the possibility of Israel attacking Iran which would send oil prices skyrocketing, at just the wrong time.
And what will come to the rescue? The Fed? Their policy instruments are limited, and like a knife, become dulled with use. The government? They have already implemented Keynsian fiscal policy with the stimulus in a response to the credit crisis.
As the middle class dissolves, the demand for everyday products diminishes, and in what is a vicious cycle, production falls, and layoffs follow, reinforcing the cycle until the prices of commodities get low enough to spur economic activity.
These confluences of events will leave the market in a free fall. How much? 20%? At minimum.
warning, drop steeper than it appears
So am I predicting that we’ll go back to the time of massive soup lines, and black and white photography? (sorry, we don't accept color here) No. What I’m saying is for too long we have averted the perils of overspending, and eventually, the bill becomes due.
How have we managed to avoid paying the piper, as the Greeks are in the process of doing with their 20% + unemployment and run on banks? Because the US has been the world’s post WWII superpower, leading to the dollar being the world’s reserve currency, we can weather the blow more than any other nation on earth, as even as you print more money, demand still exists for your currency. However, you can only eat into that reputation, into that credit, for so long.
So what should you do with your money in the meantime? Go cash? Yes. Load up on cash and have powder to strike when prices go down. Either that or invest in defensive stocks like Walmart, which will continue to provide low prices to an impoverished nation, or Proctor + Gamble, who make everyday products we have a difficult time getting away from, and those companies which continue to innovate and make life simpler and more fun for society, like Apple or Google, or robotic stock plays like IRobot.
Some of you might be scratching your heads, saying, “Apple and Google aren’t defensive stocks, Google’s cash cow is advertising and their revenues will go down with the economy, and Apple caters to the high end market.”
All true, but I am only predicting an economic winter, not a nuclear holocaust, and the only way our economy and standard of living will continue to rise in the long run is via innovation, so if I have to have my money somewhere, I’d rather bet accordingly.
Look for stocks to be hit hard over the short run, but in the Warren Buffet long run, stocks will still be the best investment. Thank God for our visionaries and scientists who help mask our political incompetence. 

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