Archive for March 6th, 2008
It Isn’t A Small Bear After-all
Mark Faber was on Bloomberg and brought up the great point that bear markets roll over and that at first some people say it was just one sector, and then it becomes just two, and five and so on. To further support my decade long bear market theory–that we are half way into right now–if we take the tech bubble to mean only the start of the bear market, we then roll into housing, banking, retail, telcom, and on and on. Once we grasp the idea of the market being down 50% from its highs in Euro’s, we are not shocked when we see headlines like;
“California and Florida continued to represent a disproportionate share of the country’s new foreclosures. The two states accounted for 30 percent of mortgages starting the foreclosure process, the association said. “In states like California, Florida, Nevada and Arizona, overbuilding of new homes created a surplus that will take some time to work through,” Duncan said. That glut has pushed down house prices, he said.” – AP
And when the Fed comes out and say equity in Americans homes is at its lowest since 1945, you realize that we are in the thick of a very cyclical bear market that was hidden by a concentration of wealth and structured finance (aka the shadow banking system). We went through this cycle in the 1930’s, the 1970’s, there are parallels to both eras now, as we have deflation and inflation being the gorillas in the room. The playbook is that it’s typically taken the U.S. 10 years or so, took Japan 15, so with any luck we will keep our streak which means another two years or so before we are looking at an economy that is fully functional and flushed out.
