From Bill Gross in Fortune:
While 2008 will probably be best known as the year that global stock markets had their values cut in half, it was really much, much more. It was a year in which every major asset class - stocks, real estate, commodities, even high-yield bonds - suffered significant double-digit percentage losses, resulting in the destruction of over $30 trillion of paper wealth. To blame this on subprime mortgages alone would be to dismiss an era of leveraging that encompassed derivative structures of all types, embodying a belief that economic growth was always and everywhere a certainty and that asset prices never go down.
another quote:
The outcome essentially depends on the ability of the Obama administration to rejuvenate capitalism's "animal spirits" by substituting the benevolent fist of government for the now invisible hand of Adam Smith. Federal spending and guarantees in the trillions of dollars will be required to fill the gap created by the deleveraging of private balance sheets. In turn, lenders and investors alike must begin to assume risk as opposed to stuffing money in modern-day investment mattresses. The process will take time. Twelve months of the Obama Nation will not be sufficient to heal the damage ...
Hmm. I thought the "hand" was meant to be invisible. I think it's working now, slowly grinding away and doing what it needs to do to adjust and correct for excesses. I tend to be skeptical every time I hear people say "This time it's different..." We're in a corrective recession, and we'll emerge eventually. And America will emerge first, because we have the most dynamic and creative economy in the world.
The fantasy that somehow the government can spend the US out of a global recession is, I think absurd. But they have to appear to be doing something.
To put it all in context, I borrowed this 20 yr. chart from My Trader's Journal, up through Oct 3. Today the S&P closed around 870, so we have been below the trend line for a while. Whatever that means. To my eyes, this chart shows a double bubble, and when the next one happens, I'm getting off at the top.
