The system has been crumbling and decaying in one way or another for a very long time, like 30+ years.
Do you think that every Worldcom/Enron/Tyco/Adelphia scam came to light ?
That every crooked “Duke Cunningham” got caught ?
The losses will be buried and traded sideways for as long as possible. They aren’t writing down securites that are worth 20c on the dollar until they absolutely have to. They will keep them on their books at cost.
As Warren Buffets wisely said, “It isn’t until the tide goes out that you see who has been swimming naked”
There will be MANY false alarms that will shake the markets a bit. A few hundred points here, a few basis points there, cut and raise, etc.
Dollar will drop, then recover a bit.
There already was a run on Countrywide Bank, but it’s FDIC insured.
The problems didn’t start this year or this week. In the big picture we are in the middle of a gigantic mess. It could continue in this limbo for 10 or 20 more years (or longer)until the tsunami hits, or it could be hours away.
The stock market is a minefield. Too many people are way too complacent about their “investment”. It’s totally built on the greater fool theory, just like housing was in 2005.
Houses take time to unravel. Stocks can unravel in hours, days, weeks, etc.
Nobody has an instruction manual on what to do in times of real crisis. Complete seat of their pants decisions (and some of those pants are gonna be stinky)
It IS going to come. It’s only a question of when. There is too much debt piled up and too many people without any integrity to care about the system. They only care about themselves and there own pile of cash. There are people making tens of millions while other people are barely getting by.
I read about a pension fund that had to have at least an 8.50% return to fund its obligations. That’s 50% higher than a riskless return, huge expectations. Just a probable example of exposure to ABS/MBS that may be worthless while they are looking for above market returns. City, county governments, Insurance companies, the fallout from this worthless debt is beyond wildest imaginations.
The trickle down will be to many “average” investors, including 401K’s and MMA at the local bank.
Be prepared. Expect what everybody else doesn’t. I’ve never wanted to be more wrong in my life.
Having a cushion of cash keeps me content.
