lol Gremlin, I agree completely. I still don’t think that’s the root, but one of them. It seems to be a perfect storm (i.e., trade deficits, US not creating jack, China/Japan buying treasuries, Interest rates too low for too long). There has been writing on the wall for this in a long time. I mean, there was a CFA bubble, no? CFA applicants are derivative of a flourishing wall street, that was flourishing on leverage, etc. It’s funny and sad that only now people are saying “what happened” , and “we should have saw this coming.” Rule #1 will always prevail - no matter what happens, psychology trumps economics. Dow 8,000 or lower.
cfa_gremlin Wrote: ------------------------------------------------------- > “But any basis to drive it down to 8,000 - do you > think our economy is hit that hard and needs > further adjustment, or just have an overwhelming > negative sentiment?” > > I’m betting on credit expansion falling way below > expectations after this bailout bill is complete. > This bailout bill, from the vague details that > have come out, does not address what I believe is > the root problem of this credit crunch. The root > problem is an over-leveraged exhausted household > balance sheet. I believe a good part of that pessimism is already “priced in” in the market. > > My argument is that the current “fire-sale” prices > are not “fire-sale”, instead they are a product of > a financial system that is deleveraging and needs > to de-leverage, and in my opinion, the level of > leverage in the financial system is going to be > nowhere near the levels seen in the past 5yrs. > The ending result will be less balance sheet; > hence, less buyers. Many companies believed that > debt expansion is perpetual so they expanded > operations. Just look at the retail chain stores > and restaurants that have created a continuous > stream of shopping malls along America’s highways. > Many of these companies are will go belly-up as > America’s ever expanding service bubble economy > comes to an end. The stock market will eventually > follow the credit markets, just as enough suckers > are enticed to get in after pundits on CNBC > declare a bottom.