Friday, November 14, 2008

Doom & gloom entry

I started off the year by calling the economy "a$$". I have argued since the 2nd half of 2007 that the bailouts would only prolong this a$$ economy. While it is real hard to say with any certainty what will happen when a new Congress and President lead the country in 2009 I have to admit that even if they did everything right I still have a good chance of being right on this new prediction. Drum roll please!

The economy will be super-a$$ due to all the bailouts and most importantly the pending bailout of the US auto makers. With each new bailout, confidence further drops in the Gov't's ability to right the ship and the bailout of US auto makers will be the nail in the coffin. I have yet to meet anyone who supports that bailout (US auto makers) but the Liberals won Congress & the White House on the backs of the Unions so I will be SHOCKED if that bailout doesn't take place. Plus, what logical justification can one give why you bailout one industry and not the other or one company and not the other??

And when I say super-a$$ I mean everything but Depression Era which translates into the economy being worse than everything seen in the US between now and the Great Depression. And now for an ounce of perspective for those who think the worse is behind us.

From a market investment perspective the Great Depression lasted much longer than the ten years (1929-1939) your history book dictates:
Day 1 (9/3/1929): Pre-crash high (381).

7 weeks later (10/24/1929): Black Thursday-- crash begins (300).
3 years later (7/8/1932): Crash low (41).
25 years later (11/23/1954): Pre crash high attained (381).

While I don't believe cycles last that long today I do think that even a fifth (5 years which also happens to be my estimate for this downturn, plus or minus 2 years) of that 25yr period listed above would be much more than the average person thinks this downturn would last. I hope you note this blog entry and use it to call me a fool if it turns out I am wrong. Oh what a happy fool I would be in that case.

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