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Correction predictions

Some analysts say a temporary slide in stock prices on March 6 is a harbinger of things to come

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Correction predictions
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When the Dow Jones Industrial Average was down more than 200 points, on March 6, analysts immediately said it was the long-awaited correction. The tipping point seemed to be the Institute for Supply Management's nonmanufacturing index, released the day before. Its price index, which measures inflation, jumped significantly.

A separate report, released the same day, had manufacturing, which has fueled the recovery, declining in January for the first time in three months. Data from outside the United States also weighed down the markets. China cut its growth goal to 7.5 percent from an 8 percent target, and Brazil, which had been a growth powerhouse, said last year's GDP growth was a meager 2.7 percent.

So the market, as expected, went down. What was not expected is that it didn't stay down. By Friday, the S&P was actually up for the week. The plunge became the correction that didn't actually correct anything.

So is a real correction still coming? Almost certainly. Free-marketers say artificial stimulus from the government, financed by unsustainable debt, fueled the recovery. They say the economy is like a soufflé with a lot of hot air baked in: A loud noise before it cools will cause the whole thing to fall flat.

Mainstream Wall Street analysts say much the same thing. Adam Parker, U.S. Equity Strategist at Morgan Stanley, says "risk aversion" will make a comeback. Any sign of trouble will likely motivate investors to take their profits and dump their stocks, and the longer it takes, the harder the fall will be. He expects the S&P to drop by 15 percent from current levels sometime before year-end.

Stanford saga

When we last saw flamboyant international financier Sir Allen Stanford (Extreme prejudice, April 11, 2009), federal prosecutors were charging him with running a "massive Ponzi scheme." Prosecutors said he misappropriated billions of investors' money and falsified the Stanford International Bank's records to hide the fraud.

After the charges became public, Stanford, 61, went missing. A nationwide manhunt caught up with him in Fredericksburg, Va., with his girlfriend, former employee Andrea Stoelker, described by London tabloids as a "pretty brunette" in her early 30s.

He spent most of the next three years in prison awaiting trial. But even there Stanford made headlines. A cellmate beat him severely and Stanford spent eight months in a prison hospital. His attorneys argued that he was brain damaged and incompetent to stand trial due to memory loss.

But that argument failed, and the Stanford soap opera came to a season finale on March 6 when he was convicted on 13 of the 14 felony charges against him. He could get 200 years in prison, but his sentence will likely be 20 years or less. Even this finale is a cliffhanger: Stanford intends to appeal.

Many of his victims are evangelical Christians who met Stanford financial advisors through church connections. They will likely see little of the more than $7 billion Stanford swindled. Prosecutors hope to return about $300 million found in overseas accounts, but much of the rest was apparently squandered by Stanford on bad investments and a profligate playboy lifestyle. -Warren Cole Smith

Warren Cole Smith

Warren is the host of WORLD Radio’s Listening In. He previously served as WORLD’s vice president and associate publisher. He currently serves as president of MinistryWatch and has written or co-written several books, including Restoring All Things: God's Audacious Plan To Change the World Through Everyday People. Warren resides in Charlotte, N.C.



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