It first started to occur to me around 5 years ago that the housing market would probably crash and that it would almost certainly drag credit markets down with it along with home builders, mortgage insurers, bond insurers and several financial institutions.
But, if you had asked me 5 years ago what the Dow Jones Industrial Average (DJIA) would trade at given that:
1) 3 of the top 5 investment banks in the US would no longer be independent and the final 2 would be tottering
2) the US government would take over Fannie Mae and Freddie Mac because they were insolvent
3) the US government would own 80% of AIG’s equity because it was also insolvent
I would have said the DJIA would be at $5,000, not $11,388.
What color is the sky in most investors’ world? Does anyone really believe all these bailouts will be cost free?
Don’t get me wrong, my investors and I are doing very well both absolutely and relatively to the market.
But, isn’t the US economy entering what could be the worst recession since the early 1980’s? Isn’t government intervention on a scale not seen since the Great Depression an indication of how bad things are? Isn’t the world economy entering the first widespread slowdown in a generation?
Then, why is the market down so little?
I have no idea. In fact, I’m dumbfounded.
Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.