Do you really think that 10 Trillion dollars can get taken out of the US economy, and not have widespread unemployment? That is the equivalent of the DOW going negative. The total Cap of NYSE is less than 10 Trillion. So, it is hard for me to believe that we could have the equivalent of that much of a wipeout, and not have record high unemployment. Here in OC, close to 50% of the new jobs since 2000 are in RE. A huge RE depression, would leave most of these people out of work.
Do you think there is another industry or industries, that would be strong enough in the midst of a national depression, to absorb that many job seekers? There is a domino effect in our economy, things do not stand alone. Layoffs at 7/11 and Burger King, accountants at Big 8 firms, and attorneys(not a displeasing thought) would also lose jobs. Tons of small businesses would go under.
We are completely built on one asset class right now. If it implodes, the effect is alot bigger than what you are talking about.
I just think you are not being realistic. Make no mistake, a 30% drop will create the largest recession we have ever had. Even that is going to be an awful time for us here economically. I do think that could happen. I just model all of my views on history. A 50% drop is a “it will be different this time,” view. It is that because we have never had anywhere near that previously. There are always ways of justifying why it is different this time. However, history has shown us that most of the time, it is in fact not different.
I look at that argument the same way I look at the bulls argument, for more upside appreciation. Just my opinion, I could be wrong. Maybe I am too optimistic.
Poway, mostly I agree with his comments, but the conspiracy theory aspect to it is not based on facts. Asset bubbles are caused by the most basic human emotions such as greed. I do not think you can isolate one symptom like that and blame it. If everyone were conservative, and prudent, these huge peaks and valleys in prices would not occur.
However, I like it though, because I make a living off those peaks and valleys in trading.
