Where's nowhere near a bottom yet. This makes a whole lot of sense to me:
Stocks to fall AT LEAST another 40%! Here's why …
Why U.S. Stocks Could Fall
AT LEAST Another 40%
by Claus Vogt
Every major fundamental indicator relied upon by stock market analysts is unanimously pointing to a stock price plunge of at least another 40% from current levels. That would take …
* The S&P 500 down to the 500 level …
* The Dow Jones Industrials to below 5000, and …
* The Nasdaq to the low 900s.
Don’t be surprised. To understand why, you need only step back from the trees and see the obvious chain of cause and effect:
You know that the major factor behind the current business cycle was — and is — a worldwide housing bubble and bust.
You also know that the bubble was driven by the speculative surge in mortgages and equity loans.
What you may not know is that, according to former Fed Chairman Alan Greenspan, that bubble accounted for 50% to 70% of GDP growth in recent years.
So it should come as no surprise that as soon as the mortgages and equity loans dried up, consumption and GDP growth began to take a huge hit.
Worse, the real estate bubble distorted the entire structure of the U.S. economy:
* It created grossly misplaced investments — second homes nobody really needed, massive numbers of people drawn into the real estate business as brokers and lenders, plus a whole new industry built around mortgage-backed securities.
* It created broad instability — too much consumption, too little savings, too many imports of goods from China and elsewhere — not to mention a huge current account deficit.
* It fostered unsound risk-taking by the financial sector — from Bear Stearns to Lehman Brothers, from Washington Mutual to Citibank, from Merrill Lynch to the hedge fund industry. And …
* The end result was one of the largest, most unstable and most risky economic environments of modern times.
But now, with the bursting of the bubble,
The U.S. faces the monumental task of bringing this highly distorted economy back into alignment and putting the country back on a sound footing.
Investments that are not viable must be abandoned or aborted. A new equilibrium must be found. New price levels for stocks and all assets must be reached.
The two words commonly associated with this natural process? Recession and depression!
But you ask: Why so severe? And why must stocks fall so far?
For the simplest answer, consider the rule of thumb that has almost always held true concerning speculative bubbles: The bigger the bubble, the greater the distortions; and the greater the distortions, the graver the inevitable correction.
This rule alone leads me to expect a long, severe decline in the economy and the stock market; and this basic reasoning, in itself, supports my forecast for a 40%-or-more plus additional plunge in the broad stock market averages. But let’s also take a look at the rest of my supporting arguments …
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