Just reading the VIX suggests the Dow has at least one more violent leg down. Certainly there are enough potential catalysts in the air.
CRE defaults, Alt-A and Option ARM defaults, China’s economy about to go into reverse, etc.
Then we need to start considering when and how many muni bond issuers are going to default - and if they do, and the bonds were wrapped by the monolines that are still on their deathbeds... what will happen then? California’s debt situation alone will roil the markets for weeks.
There’s a bunch of shoes waiting to drop this coming year.
And housing is STILL overpriced. Housing has to come back in line with what is supported by people’s incomes, not what is made “possible” with absurd and fancy loan products.
When housing is sustainably affordable based on mean household incomes (ie, that the median home price is back in the area of 3.0X median household income), then home prices can be supported by actual income.
In California, they have easily another 15%+ to fall to get into the range of sustainable home prices without fancy mortgage products.
Debt deflations hurt.
“Just reading the VIX suggests the Dow has at least one more violent leg down. Certainly there are enough potential catalysts in the air.”
I disagree. VIX peaks at bottoms. It peaked at an incredible 70 in late November. It was a panic bottom unparalleled in 50 years. That was the bottom for the stock market, which remains undervalued as of now. We wont get that panic VIX reading again, and if we do, time to buy.
Probably we will have a january rally and a pullback in the spring as the market digests whatever nonsense Obama comes up with and Q4 and Q1 numbers are shown to be bleak. Recoverey wont be until later in 2009, but stock market will anticipate that in the late spring when the real rally will occur.
But we have already passed the bottom, the bad news is priced in to the market, and any price under S&P 900 or Dow 9000 is a good buying oppty.
The above super-negative reporting is a good sign that we will be going up soon. It casts a negative pall on the marketplace and makes buyers less certain and willing to invest. The intrepid investor wins.