The mortgage/real estate crash is only a part of the credit crisis caused by excess liquidity.
Credit markets are merely returning back to normal. Normalization will hurt and it will hurt a lot. And it will hurt for a long time. Hope you are in cash.
The mortgage crisis we have now will look like a kid's game of tiddlywinks in the spring of '08 when a huge - and I do mean huge - number of funny money mortgages reset. The homeowners cannot sell to get out from under these mortgages thanks to current conditions. They are deer in the headlights of a speeding Mack truck.
Derivatives magnify risk thanks to leverage. Those dependent on credit are going to be worth zero. I see hedge funds belly-upping. It's started to happen now as redemptions are driving huge amounts of selling by hedge funds.
The Wall St. scamsters sold these things to everyone, so the contagion will be world wide.
The normalization of credit markets is good, healthy, and necessary, but it will hurt a lot and has only just begun. Trillions of dollars of loans that cannot be repaid have to be processed. And, naturally, as excess liquidity disappears, the stock market will tank even more because excess liquidity has been driving economic growth for far too long. The growth will disappear, and we will be in a substantial recession.
Things - stocks - will be cheap. There will be opportunities of a lifetime b/c even the damage caused by credit normalization will end. Q in the mid 30s is still way overpriced in the hellish environment I think we'll see and not because of things specific to it, but because of the general crummy trend. I am thrilled to see it has lots of cash and know folks will not stop using cell phones, so it will be one of the companies which will coming roaring back in a year or two, or however long it takes for the credit normalization to take place.
I am looking to buy Q in the teens along with other quality companies which will be dirt cheap as this cycle unfolds. The opportunities of a lifetime are unfolding before you.
Cash is King! Viva King Cash!
PS: Did I mention the Chinese, who have over a trillion of our dollars in reserves? What they do will be critical. If they dump the dollar, we are doubly screwed. If they use their reserves to fund acquisitions of cheapened shares and natural resources, the more likely scenario, they will be setting the stage for becoming the preeminent world power in a few decades.
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