The biggest stock market crash to world has ever seen is coming. We are just in the infancy of economic contraction after decades of expansion. The world is speculating as to the near-term end of the defaulting sub-prime mortgages effects and the near-term end of the credit crunch. But, it takes years to overcome massive real estate over capacity and over building, both residential and commercial. Bad credit policy caused the problem. The government is pushing for bad credit policy to cure the problem. Every bubble has always been caused by excessively low Interest rates. The market still has to recover from non-credible mortgage underwriting occurring with a decade of price appreciation. The massive write-offs and Fed Bail-out cannot remove the vacant residential and commercial real-estate. Time and much lower prices will clear the oversupply. Pension funds, insurance companies, mortgage companies will have to mark to market as the Baby Boomers increasingly start receiving their benefits. This is the worst bubble the modern world has ever witnessed. Oil prices remain high. Iran is working on a Neutron bomb. People actually listen to CNBC for advice. Most people who are actively trading have not experienced a real Bear rally. Inflation is affecting gas and food. Massive deflation is coming for everything else. Money has been going out of banks as credit for years. This is inflation. Now that it is time to send the money back into the banks and pay the debt, the cycle has stopped. The government provided some temporary structural support as a bail-out. But, this cannot be maintained without China bailing out our government at the same pace. The curve has turned for China and they have decreased their buying of our debt. The government can temporarily stimulate the economy by replacing the drop in spending from consumers. But the deficit spending must only be short term. In truth, government spending will not alter longer term economic conditions. Spending must be offset by taxes. The US economy is now in a long term recessionary trend. In economic terms, we see diminishing GDP, less household income, higher unemployment rate, decreased consumer spending, less disposable income. Our government cannot mathematically describe or model economic activity during extended periods of decline and can only use the tools they have used for growth to fight the decline. What a mess.
You are so right. I'm in San francisco real estate and loans, and we have not even seen the mess thats going to happen in commercial real estate. I think there are going to be a lot of very unhappy people when the real numbers start to come out. That's why I'm buying FAZ at these levels and going long. It's just a matter of time.