Once again, fasten your seat belts. We still need a washout to set us up for a lasting thaw. Adam at goldversuspaper noticed the striking similarity between the pattern of the last few months with that of the 1937-1938 “second dip” crash in the Great Depression:
At first I did a double take and thought I was looking at recent history (with a projection of the next few months).
Just read his post for all of the technical reasons for this prognosis. He does a great job covering them. Basically, we are looking for a bottom of the wave 1 of C that started in July or October 2007. This should be the largest bottom to date in the bear market, yet we have not yet had the panic conditions necessary to scare away the premature bottom feeders and permabulls. Watch the volatility index (VIX) and the put/call ratio. When they spike, we are nearing an important bottom.
My candidate for the meaningless but newsworthy explaination/catalyst for this phase of panic is the trouble that western european banks have created for themselves with eastern european debt. I actually just returned from a visit to Kiev this week, where all of the restaurants and cafes suddenly became empty just a few weeks ago. Steel production is down by half this year, and apartment prices are down by 40% in just six months. Things have come to a standstill, the people are talking about revolution, and there is even the fear of another major war, but all is still calm for now. As elsewhere in eastern europe, the currency has crashed, but the housing, auto and credit card debt is denominated in euros or swiss francs. Ugly.
**Note: This post originaly stated that housing prices and steel production were each down by 2/3. A friend in the Ukraine sent me references for the revised figures.