We are really fucked. This is going to hurt everybody. I must admit, and I have a Ph.D in this shit, I have been like a deer caught in the headlights. The scale of the devastation is enormous, and the only safe haven is gold, but of course for many it is too late. Much of the damage has been done. My heart really goes out to all those that are about to retire.
No amount of platitudes are going to make you feel any better. I have learnt that markets will remain irrational longer than you can remain solvent, and that is becoming a scary reality. This is therefore an opportune moment to revisit an earlier post of mine dated 21 November 2008, many of which probably thought it was grossly exaggerated.
On 6 October 2008, Jim Cramer, a loud mouth CNBC presenter (for those of you that have watched him on DSat), discussed the future of the DOW after an intra-day decline of 800 points.
He suggested that you revise your 5 year plan, "as a drop in the DOW to 7700 is a real possibility."
At the time I contributed to his projection by adding my 2 cents worth, which I continue to stand by and share with you below .............
"The Dow at 7,700? I partially agree, except I think it will be lower, significantly lower. I think it will settle somewhere between 5,270 and 2,550. The reasons are simple. If we take current earnings which are already on the decline, and assume they decline to 2003 levels, which is about another 30% decline, and we then use two PE ratios, the average for the last 50 odd years of 16.54 or we use the PE ratio that seemed to prevail throughout the bear market of the 1970's of approximately 8, we can recalculate where the Dow may end up. So it is not inconceivable to see the Dow decline by another 50 - 75%."
One thing that has really pissed me off, other than rebuking myself for not making what seems to have been simple decisions in hindsight, is that this whole meltdown is as a result of the USA, yet no commentators have focussed on this. It will also be a cold day in hell before they admit it too.
When folk used to ask me about my investment philosophy I always used to joke that a meltdown is nothing to fear because we would all be fucked. Well it is no longer a joke, and we all are.