The Dow has closed below 7000. This means that 10 Years of wealth growth has been wiped out, in less than 2 years, since July 2007.
The interesting issue here is that fund managers are starting to say it is still too early to buy!
Is it really too early to buy? That depends on our assessment on whether there will be a Depression. The Dow dropped from the peak of 380 to 40 points between the period from August 1929 to July 1932, i.e. 3 years of downturn. 40 points signified levels not seen since the 1890s.
The Dow made a historical high in July 2007 at 14000 and if we use the same calculations of the Great Depression to project where the Dow will bottom, i.e. about 90% downturn, then, we are looking at 1500, i.e. back to levels of the 1970s.
The interesting issue here is that fund managers are starting to say it is still too early to buy!
Is it really too early to buy? That depends on our assessment on whether there will be a Depression. The Dow dropped from the peak of 380 to 40 points between the period from August 1929 to July 1932, i.e. 3 years of downturn. 40 points signified levels not seen since the 1890s.
The Dow made a historical high in July 2007 at 14000 and if we use the same calculations of the Great Depression to project where the Dow will bottom, i.e. about 90% downturn, then, we are looking at 1500, i.e. back to levels of the 1970s.
The level of 1500 sounds ridiculous, but so was the level below 7000, a year ago. The big question is whether the US Government can solve the woes of the Financial System, where losses are estimated to total US$2.5 trillion to US$3 trillion? So far, the US Government has thrown less than US$1 trillion into the Financial System, which is why we have not seen much positive results.
Actually, I would venture a guess based on Fundamental Analysis that the situation will not be so critical, and possibly, if the Financial System Problem can be resolved within the next six months, the Dow may bottom out at 5600.
I would not be willing to put my money where my mouth is, today, as we have to consider the new information that arises when we get there, to see if there are evidence to support such a guess.
We must never make decisions based on a Forecast, but to listen to the market. However, Forecasts provide a potential roadmap for us to monitor deviations from normal movements.
Best wishes,
Ooi
Actually, I would venture a guess based on Fundamental Analysis that the situation will not be so critical, and possibly, if the Financial System Problem can be resolved within the next six months, the Dow may bottom out at 5600.
I would not be willing to put my money where my mouth is, today, as we have to consider the new information that arises when we get there, to see if there are evidence to support such a guess.
We must never make decisions based on a Forecast, but to listen to the market. However, Forecasts provide a potential roadmap for us to monitor deviations from normal movements.
Best wishes,
Ooi
Visit msnbc.com for Breaking News, World News, and News about the Economy
Visit msnbc.com for Breaking News, World News, and News about the Economy
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