Investors everywhere bewildered as world markets continue in

..Nothing so gives the illusion of intelligence as personal association with large sums of money. John Kenneth Galbraith, Canadian economist

With so much wealth erased during the past two weeks as a result of the collapse of equity markets around the world, investors everywhere are asking “where do we go from here?” In the wake of Black Monday on Oct. 19, which saw the New York Stock Exchange tumble more than 500 points, most experts believe that the market bottom is still a long way off.

“Technically, it’s a bear market,” William G. Mills, technical analyst with Merrill Lynch Canada Inc., explained to The Northern Miner. “With the dji (Dow Jones Industrial Index) breaking 2,500 pts and 2,250 pts, that was a Dow theory sell signal,” Mills said.

A classic panic (which many analysts are now saying looks more like the crash of 1962 rather than 1929) the markets are taking what brave investors remain, on an electrifying rollercoaster ride. Just one day after the tse staged a valiant rally on Oct 21, the wave of sell orders grew once again, resulting in a 3-day losing streak which trimmed another 400 pts off the composite index (see the tse market story on page 7). “The markets will stay wild,” Mills feels. “We could see some big rallies, but I think it will come off and make new lows.”

Elaine Garzarelli, a research analyst with Shearson Lehman Brothers, is being hailed as the newest bear guru in the U.S. Garzarelli correctly called the massive downturn on Oct 12. Her forecast was based on analysis of 13 economic and monetary indicators which turned extremely bearish in early October, she says. Although calling for another big decline in the short term, “I see a rally of 30%- 50% over the next four months,” Garzarelli said in The Wall Street Journal.

One of the more unusual happenings on the market has been the selloff of gold equities — despite strengthening gold bullion prices. Gold, which has been stable at $475(US), is responding to lower rates and the general negative psychology inherent in the financial community. “When a disaster is going on you liquidate anything that is liquid,” Robert Sibthorpe, director natural resources group, Yorkton Securities, told The Northern Miner.

Metal prices, both precious and base, will be affected by which way the economy swings during the next year. The bearish sentiment believes a U.S. dollar crisis — elements of which were seen this week with the dollar trading to a 7-year low in Germany — will spur the Federal Reserve Board in Washington to raise interest rates in its support. Such a rise in early October, triggered the Black Monday sell-off. The deflationary scenario would see economic growth stagnate and a recession develop.

An inflationary scenario is based on the belief that the Federal Reserve Board will maintain low interest rates, despite the dollar’s weakness, and loosen the money supply inorder to increase liquidity within the U.S. economy thereby inflating its way out of potential problems. Such a scenario would expect to see gold and base metal prices remain strong and trending higher.

At presstime, a note of confidence for the inflation forecast comes from the U.S. Conference Board which monitors its index of consumer confidence. The latest survey, following the Oct 19 crash, saw only a marginal decline in consumer confidence, which counters what most analysts were predicting. Also, 73% of American’s surveyed by the board believe the market collapse will not affect the economy