The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Smiling Bob who wrote (158156)	10/17/2008 4:01:26 PM
From: Perspective	Read Replies (2) of 306849

<But how much lower can we possibly go? Worst case scenario is we drift for months or qtrs. > Gotta be careful with statements like that. That is not the "worst case scenario". I see a market where corporate interest rates - the yardstick for stock PEs - have doubled. The credit bubble has died. Even in the absence of a recession, stock prices should fall 50% in response to the interest rate increases. However, we face in the coming months the feedback from the financial economy into the real economy. Never before have the valuation metrics for stocks changed so rapidly, with both interest rates and earnings turning on a dime. I'm not saying we go down from here - we'll probably be marginally higher a few months out - but I expect a 1930-2 style bleed from here on out. And I would most certainly not say that we've already seen the "worst case" scenario. Look at Shanghai for an example of what can happen. `BC

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