By Michael Lombardi

Some old-time market watchers are still calling for Great Depression II. One research report I read earlier this week by a well-known economist says we are in a depression.

I’m in the enviable position of being one of the few analysts who called the severity of this recession back in the beginning of 2007, before the word “recession” was even on the lips of the majority of economists.

Back on November 15, 2006, on these pages I wrote, “The risks to the U.S. economy in 2007 are greater than I’ve seen in years.” On January 31, 2010, I wrote, “The hard facts about the real estate market in the U.S. are truly scary. How can the U.S. economy escape the hard landing in U.S. home prices? As we’ll soon find out, it simply can’t!”

A week later I said, “1932, 1933…who remembers those years? The depression of the 1930s was the biggest bust of modern history. 2005, 2006, 2007…welcome to the biggest boom of the same period. When will it all end? Soon, my dear reader. Soon.”

But I’ve always predicted a severe recession, never a depression. And here’s why I continue to believe that:

Ten thousand American banks failed during the Great Depression. Many depositors lost their money. By the time this recession is over, 1,000 banks in the U.S. will have failed. The FDIC covers the money depositors have in banks to the tune of $250,000 per depositor per institution. There was no FDIC insurance in 1932.

The stock market had been rising for the majority of the 1920s until the crash of 1929. If we look at the chart of the S&P 500 stock index (which is not as easy to manipulate as the Dow Jones Industrials, with stocks being cherry-picked in and out of the Dow Jones), the S&P 500 stock index has been down for over a decade.

In the 1920s, you could have bought stocks with 90% margin (only 10% of your money). For years now, you’ve needed at least 50% up front to buy a stock and stocks have to be preapproved for…

By Mitchell Clark

There’s absolutely no reason why the price of gold can’t hit $1,500 in the next six months. It might do so much sooner.

Successful speculation in commodities has been and always will be a volatile endeavor, but there’s no other capital market that experiences the bandwagon effect to the same degree. Forget fundamentals; the spot price of gold will likely hit $1,500, because it can. With a current spot price of around $1,250, gold only has to appreciate another 20% before achieving this milestone. I think it can easily do so and, along the way, make a lot of money for gold investors.

As we’ve considered before, the gains to be had from gold mining investments are mostly about incremental returns. Gold stocks have been going up for a while now and many are currently trading at their 52-week highs. From my perspective, even the most exciting Chinese stocks can’t compete with gold. The market is just that hot for the commodity.

When China and Australia report manufacturing and GDP numbers that beat consensus estimates, you know that this Asian region is doing well — much better than over here. Australia is doing great right now because of China. The country can’t find enough skilled workers, the housing market is on fire, and it is selling all of its gold and other resource production to China. With a small population base, that’s the makings of a booming economy.

Even when domestic capital markets fret about China’s economic growth, the Asian country’s economy is still growing at an almost double-digit pace. And, along with India, this is a powerhouse region that just happens to have a strong affinity for jewelry.

This is the biggest selling feature for the argument of a rising gold price. The fact is that, with these two economies growing at breakneck speed, the physical demand for gold (in manufacturing and jewelry) is getting stronger. All you have to do is look up the latest financial results of some jewelry chains in China. The first quarter was weak, but the second quarter saw a huge pick-up in sales,…

By George Leong

On the charts, the DOW and S&P 500 are managing to hold above key support levels at 10,000 and 1,040, respectively, but not before closing below these key technical levels in the recent sessions.

The bears appear to be in control, while the bulls are trying to hang on and minimize the losses. The blue-chip DOW closed below 10,000 on August 26 for the first time since July 6, when the index fell to 9,686.48. In the previous decline, the DOW held below 10,000 for five straight days from June 29 to July 6, prior to rebounding. The DOW has broken below 10,000 in five of the last six sessions to August 31. In our view, the breaks are worrisome and could point to a more sustained move below 10,000.

With four months remaining in the year, stock markets are negative and under selling pressure. Stock markets have closed lower in 17 of the last 25 sessions to August 30. The bias is negative, as stocks search for a bottom. Until we see it reach one, the downside risk remains high. The overall bias at this time is down, as reflected by the current level of the indices below key moving averages and chart tops. The key will be the ability of markets to hold as we move forward. I continue to be cautious due to a fragile technical picture.

The near-term technical picture has turned more bearish with weakening Relative Strength as of August 31.

Markets continue to be on fragile ground and this should not be a surprise given that the key stock indices were unable to break or hold above some topping resistance on the charts. The failure to break higher was a red flag and a signal of further potential downside weakness to come. All four of the key stock indices are negative this year and are fighting to find some support. The Relative Strength is weak.

On the charts, the stock indices are trading at a crux, below the key 50-day moving average (MA) and 200-day MA, along with the…

By Inya Ivkovic

Just because the crash of 2008 did not usher exactly the kind of depression experienced after the market crash of 1929 does not necessarily mean that we may not be heading that way anyway. How come? In essence, a depression is nothing more than a prolonged recession. How do you know you are in a depression? Simply, when economic growth remains minimal, when interest rates hit rock bottom, and when consumer spending all but disappears along with the credit supply. It is also quite depressing to know U.S. banks have about $1.3 trillion in cash, but are super reluctant to lend to the private sector, entrapped by a liquidity conundrum of their own making.

What causes a depression? Typically, a depression happens after one or more asset bubble explodes, while the credit supply implodes and dries out. In contrast, most recessions are the result of heightened inflationary pressures and overstocked manufacturing inventories. So, what do you think: are we repressed in a recession or depressed in a depression?

Consider one more argument that it may be the latter. Central banks all over the world, not just in the U.S., have dumped trillions of dollars into the global economy. With that much money in the global financial systems, world economic output should be tremendous. Yet it is not, far from it, which only proves that this is not just another recession and that it resembles more and more a bona fide depression.

All that is growing these days are the unemployment lines. True, there are no soup kitchens for the poor yet, but I suspect there wouldn’t be any just yet, as long as the government is mailing the checks each week for 99 weeks to the currently estimated over 10 million unemployed Americans. Whichever way you look at it, there is nothing simple or ordinary about this economic downturn.

How do things look in a depression? Things change. People change. How they perceive debt changes. How they behave in malls changes. Depressions leave much deeper scars than recessions. They leave people traumatized and take years to…