< Return to Bears pageSelf Fulfilling Prophecy
Presidents, Prime Ministers and daily news anchors declare our situation "the worst economic crisis since the Great Depression." People believe it.
Since 2006 the american home is now its on its way to where it was before 2000. It looks like it will bottom in Dec 2010 (or as late as Dec 2011), but at that time the decline in home prices will have slowed as the housing surplus is consumed.
Stock prices will fall below normal levels as earnings drop during economic contraction. Stocks will reach P/E ratios of 7 to 10 before they become good investments.
The stock market appears to be on its way to a bottom in July 2010, with Dow at 4000 (since 1995 was beginning of bubble, the markets should return to pre-bubble levels).
The big bailouts and stimulus will have a "turbo lag" that will eventually get the economy reving up, but don't expect that until the second half of Obama's first term. He will force the economy to heat up with increased money supply (inflation) and government backed loans (inflation) for business and homes. Obama will run his second election campaign on his economic success story and continue pumping up the economy in the second term. The economic crisis will not be forgotten and Social Security will be the next crisis in the post Obama election. The next president will be forced to further devalue the dollar to bailout Social Security and Medicare. So, expect another bubble to get started in a few years with a Dow peak even higher than the last and expect it to crash just as hard (in the year 2030), but again expect government bailouts to slow the decline (so that the next downturn lasts from the year 2030 to the year 2040).
