04/13/10 Taipei, Taiwan – When will the de-leveraging bust resume?
When we stop worrying about it.
This afternoon, we realized that deep down, our feelings had changed: we had stopped worrying about a resumption of the bear market.
Not that we’ve stopped thinking about it. We think about it every day. And we’re sure it’s coming. But we have stopped worrying. No matter what we think, we feel that somehow this will work out okay…we’ll be all right. We’ll stumble along…
Thinking and worrying are two very different things.
Thinking is purely superficial. It’s the worrying that counts. When you’re worried about a financial crisis, you sell out your risky positions and hunker down with cash. When you’re not worried, you’re happy to float along… You’ll change course when the danger becomes more imminent, you tell yourself.
But don’t forget:
This is a Great Correction. It began almost exactly three years ago, when New Century Financial – the second largest subprime mortgage company in the US – filed for bankruptcy. It will continue until debt levels in the private sector have worked themselves down to more reasonable levels.
How long will that take? Maybe 5 years. Maybe 20.
Meanwhile, you can’t expect much from this economy. Businesses are not going to add jobs. Consumers are not going to shop.
Is that all there is to it? No, there’s a lot more. That’s why it’s a Great Correction and not just an ordinary run-of-the-mill correction.
…there’s the correction of the huge the expansion of credit
…there’s also the correction of the stock market
…and the correction of the real estate bubble
…and the correction of the world economy and its dollar-based monetary system
Here’s what to expect:
…US stocks will begin falling again
…foreclosures, already running at twice their normal level, will increase
…bankruptcies, now at record levels, will go up too
…bonds will eventually collapse (but may turn out to be decent investments for a while longer…as the de-leveraging continues)
…the dollar too could go up when the crisis feeling returns; over the longer run it will be dangerous to hold it
…China will go through a financial crisis (potentially ‘Dubai times 1,000.’ As Jim Chanos puts it)
…states, cities, and entire countries will declare bankruptcy…
Those things don’t seem like threats to you? Well, they don’t feel like threats to us either. But that’s what makes them so dangerous…
…we’ve stopped worrying about them.
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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How I learned to stop worrying and love the Squid…
Mr. Bonner, you need to differentiate between an ongoing financial crisis and a currency crisis. The latter is indeed something you need to ‘worry about’ in this climate just about every dam day.
And when it does happen it sure as hell won’t be over an extended slow shutter snapshot-in-any-given-time Bonner-euphemismistically coined ‘Great Correction’ but rather one hell of a long Greater Global Depression or GGDI for those into cutting-edge acronyms.
This is the reality of things today as they have already developed. Not as in are developing mind you. Euphemisms are for wishy-washies who don’t know better when confronted with single point events that are looming. A currency crisis is THE non-euphemistic crisis event we now face. And it will happen literally almost overnight.
You will not be able to honestly call it a Great Correction then my friend so you better have a better euphemism in the wings for what is now certain to become GGDI.
RH
Mr Bonner,the longer you seem wrong,the more right you will be!WJVDV
You’re absolutely correct – you shouldn’t be worried at all.
There in no way in hell this market is going lower. Sure a pull back of 3 or 4% along the way but we’re going much, much higher. Barring a major global crisis – war, etc., we’ll challenge the 2007 highs in pretty quick order.
So yes, don’t worry, just buy stocks!
If you’re not drinking yet, you’re not paying attention.
Harry’s Investing Triptych:
1) Don’t worry.
2) Be happy.
3) Buy AAPL!
Has a Mogomboesque feel to it, no?
Rick Halsen, what is the “I” in your cutting edge acronym GGDI standing for?
And BB: somehow I got the feeling that your views or at least the (non-)condfidence with which you are proposing them heavily depend on the rise and fall of the gold price…
Lost & Found…
GGD(I) as in Roman Numeration.
GGDI however IMO is not likely to be followed by GGDII. I think this one is the end of the road as we currently know it. Unfortunately nukes in so many insane hands now will make that a certainty.
RH
OK. I didn’t see the tree in the forest…
I wonder if the people will turn around if and when something like for example nuking the big apple by a grassroots terrorist organization (or even an individual) happens. I don’t think so, though.
Unfortunately, the places where one can feel safe are getting less and less on good old mother earth the more politicians are trying to bring peace with force and stuff like that…
My two cents.
Are you still refering to Amazon.com as: “The rever of no returns?”