Hi Elmat, I am mentally prepared for a 'bottoming process' lasting not just simply a moment, as in jiffy days, but an agonizingly long age of quarters making up years (until 2004 mid-year, at least, if we are lucky), with plenty more of 400-500 point up days on Mondays, and 50-200 down days the rest of the week. This is how irrational euphoria is typically ground down into unfounded fear.
Folks used to say the stock market is a great predictor of the economy, 6-12 months ahead. Well, the stock market is seeing the horror that waits in our future, not the terror that we have already left behind.
The bankrupt companies and laid-off individuals will now join Argentina, Brazil, Euroland credit crunch, and WAT-WOT-whatnot to work on and grind away at the banking system. The resultant rise in interest rate, and the weak salaries market (jobs paying less generous compensation) will burst the housing bubble, and scare the daylight out of still courageous consumers, changing them into savers, finally, hopefully fast, else we run into the demographic wall that ACF Mike talked about (7 years is not a long time away).
Once we have bottomed, the process of ‘reality conditioning’ and ‘savings re-education’ will commence, when stocks do not do better than bonds, and savings account outperform the market.
Folks also used to say the US economy is like a great big aircraft carrier or oil tanker, difficult to change the momentum (speed, direction). This bit of folksy wisdom may turn out to be spot-on as well, especially given that the US economy is a locomotive for the ROW economies, and when it weakens, so goes the rest, eventually cycling back to the US economy again, in a feedback process that appears to be working.
Places like Thailand and Argentina, places of lesser momentum, go down quickly and recover 'fast', because the economies are small, the stock markets are tiny, and the counter-balancing world is huge. Places like Thailand and Argentina bottom in about a year, reacting quickly to withdraw of international capital, and then stay down for about 3 years, before showing signs of any vitality.
Chugs, Jay |
