Those images of soup lines and other references to the depression era have terribly distorted the perceptions of the man-in-the-street. I wonder how many people have any sort of realistic outlook of what is likely to happen in the economy. For example, many people are not aware that a recession means the cessation of economic growth – not the cessation of economic activity. The economy will continue to perform at a level just a couple of percentage points behind last year. The country will not stop functioning, as some people have come to believe. Importantly, few Americans have a realistic understanding of the level of economic activity in other parts of the world. They remain caught up in the out of date notion that the U.S. is the only important driver of world economic activity.
With the Dow hovering around 8000, the problem is that there have been absolutely no signs of capitulation whatsoever. What that means is that the Dow could fall much lower from current levels. Even worse, we are still at the early stages of the economic fallout. Consumers have not fallen yet and hedge funds have only begun to fail. Hundreds of corporations will file for bankruptcy and thousands of banks will fail. The results of the holiday season should begin another downward turn. I invite you to check back to a couple of articles I wrote a few months ago to serve as guidance for your investment strategy. http://www.marketoracle.co.uk/Article6229.html