[quote=Allan from Fallbrook] Problem is, if you look at the Great Depression as an analogy, you’ll realize that 1930 (the year following the crash) actually looked very similar to 2009: Things seemed to be improving. The bottom really fell out in 1932, however, and most historians agree that the supposed “smart money” got obliterated in this period. Again, classic bear trap.
[/quote]
It is not that simple with history. Yes, most smart money was wiped out in 1930. However, it so happens because in 1930 we encounter a severe drought that ravaged the entire agricultural business. So if the history were to repeat itself, we need the swine flu to become a real global pandemic.
I’m just saying that you are right: the risk is out there that something could trip the country into deep recession, as the economy is still fragile right now. But at the same time, it (the drought or the flu pandemic, and the consequent depression) does not necessarily happen.
The other thing is that although TG has called the bottom, most investors (and most piggs) have not “all in” yet. So the “smart money” wouldn’t necessarily got obliterated this time around. They are ready to take advantage any sale should it happen. Just look at TG, he is now using only one week’s pay check to pay his PITI and saving much of the rest for investment right now. His bottom view may not prove to be correct, but he is positioned to take advantage of the lower price, if that happens.
In CA, unemployment is already 1/9 (and probably above 1/8 in Riverside). But we will need much more severe unemployment rate to disrupt the plan of investors like TG. But no one is predicting 25% unemployment rate yet…
If you want to be the first to predict 25% unemployment, at least try to figure out the sequence of events that will lead to it, instead of just saying “we’ll see the floodgates open”.
