Trefoil, would you be so kind as to discourse briefly upon the concept of a skewed poll being a contrary indicator?
Allegedly, the folks who post here are supposed to be "elite", or something. That being the case, you would think that if someone asks them if an event as rare as this were to happen, that you'd get a resounding "No". Instead, you get a resounding "Yes". Now, it's true that the people who vote are going to be biased towards the pro crowd in something like this, which I'm sure is what you're getting at. You have to open the thread, and bother to vote. So, obviously you'd have to discount the results to some extent. Quite obviously I don't believe that two-thirds of the members think we're going to crash. But the question is extreme, and you would expect that the answers would at least reject that extreme. So to me, this somewhat cancels the bias. Or, as I said, it could be that people don't actually realize just how rare and unusual a crash is.
Thank you, Trefoil. The pessimistic vote may be the result of posters recognizing that events are unfolding uncannily like 1929-32. "Crash" is a misnomer. Events unfold in a leisurely fashion. Each one being evident in retrospect. Excessive speculation in a concentrated market. Excessive use of leverage. Disbelief in the possibility of a decline. Official assurances of calm. Declining liquidity. The only thing different so far is that institutions, not individuals, are making the runs on the banks.
Hey, Jack, you were born in 1933. Bet you sold apples on the street corners and ate watery soup on the bread lines. Weigh in here and straighten this argument out!
Well, yes. But there's panics, and there's crashes. Two different things. Panics are almost a regular thing on Wall Street, and in many of them you could have said precisely the same thing. Since I started having actual skin in this game in 1985, we've had the crash of '87 - the real thing - the mini-crash of 1989, the Saddam-induced panic of 1990, the Mexican crisis of 1996, followed by the Thais and the rest of Asia in late 1997, the Russian default that led to the LTCM crisis in 1998, and finally the dot-com meltdown, the only true bear market in all of this, starting in 2000 and only finally ending in 2003. In all of that there was one real crash, and one actual bear market. So, just based on probability, this is neither: rather, it's an ordinary, run-of-the-mill panic. I do think we're on our way to a really big bear market, but IMO that's a few years away. Time enough to worry about that.
Yes I do think there will be a crash. The average schmuck on the street who has an IRA or a pension plan, will lose everything, ensuring they have to work until they die.
We may see a panic capitulation that stabs to new lows. If that is what is meant by "crash" then its a maybe...a sort of mini black monday event...but that much of an overreaction in one panic selloff will be curbed by intermarket speculation in today's market. But we may see a muted version if someone's still in deep with a stack of modeled trash and spreads don't pull together enough to give commercial lenders wiggle room. we may hit a feedback loop. But no true crash has ever occurred without a speculative bubble as an intro... (earnings grew almost in step with prices over the entire bull move from the 03 lows. We are not on a speculative cliff. Volatility decreased during the move. it was a slow plodding equity/commodity bull cycle.) For comparison: A little historical persp. 2000...obviously we remember the internet bubble 1985...Japanese real estate (at its height, the value of the city of Tokyo actually exceeded the total real estate value of the entire U.S.A. - no joke) 1929...dow had run 666% from '21 to '29...by comparison, that would be dow=48,000 if same increase from 10/02 lows 1720...south seas bubble/mississippi company...(john law/banknote printing)..Miss Co shares went from 500 to 10,000 in 11 months!...then back to 500 in 11 more, kicking off a 60 yr deflationary depression in western europe. 1630...Tulip mania...birth of options trading...at its height, one bulb=$40,000+...a year later, nearly worthless. We may be heading for a lingering corrective move...certainly economic slowdown well underway. Consumer spending in US was key driver financing infrastructural growth in China..which was key driver fueling commodity bull..which enabled latin america and russia to harness resources at viable margins...All going to hit a speedbump as US consumer is petering out (notice that KSS, SHLD, and WMT have all warned for 2H '07...spending slowdown has commenced)... But the lack of hyperspeculation during the uptrend is the important part. Not going to see prechter's wet dream here. Just a common cold.
Good post, but what if the liquidity problems persist? Bids will dry up and the market will be sitting on a vacuum. The whole thing could free fall on ordinary volumes. We already see billions of dollars worth of subprime related instruments with no activity due to no bids (or so a Goldman Sachs bigwig was saying on NBR last week). I truly hope your scenario plays out. If we can make it through the next two years we'll have survived a critical period in economic history (imho). regards