I emailed one of the brightest guys I know today. He is easily one of the most connected guys on the planet. Economist, trader, & major player in politics. I asked him his view, not for a trading tip or strategy, but because he does have a vast understanding of how things work:
I know you run in an interesting world…how much worse we getting?
No comment in writing.
So I called. The short of it from his fundamental big picture economy perspective?
1. What happens when all of those Circuit Cities are sitting empty? Multiply the effect out across jobs, commercial real estate and their competition, i.e. Can Best Buys of world survive? Now apply this thinking to all retail. How long can you go without a new suit? Think about it. He sees retrenchment on wide scale.
2. He sees us either at 1978 or 1931 and his guess is that we are at 1931.
3. When do stocks stop falling? When one of the big guys, preferably the bull’s poster boy Mr. Buffett, collapses. Buffett going down would be a signal for panic, which would lead to an eventual selling climax. He wasn’t predicting this, it was just his temperature gauge on what needs to happen for pain to subside. He did note Buffett’s derivative exposure.
4. From a trading perspective, this is not insight you can really use unless you see stock markets tumbling another 50% from here, you are a buy and holder, and just want out. He could see 50% more down from here.
Sobering stuff. As I said, these comments are not a trading strategy, or prediction, but just feedback from an associate of mine who has been around the block.