Sunday, February 7, 2010

Great Depression 2.0

Make no mistake about it, Great Depression 2.0 is under full steam.

In case anyone is wondering... no, there is nothing we can do about it. Though we can certainly make it worse. Since late-2007, our government has done everything they can to maximize and extend the pain.

This is my best-case prognosis:
2012: First major low (Dow 3,800-ish)

2012-2020: First major bounce (Dow might double to 6,000-8,000)

2020-2030: Final bottom (Dow stabilized below 2000, with a quick dip below 800)
Great Depression 1.0 was a 25 year grind before reclaiming the 1929 Dow high in 1954. GD 1.0 was of generally of lower severity than at least four deeper depressions (1775-6, 1836-42, 1862-5, 1874-94).

Our depression should be the worst. It is our first large degree ABC. It started in 2000, so my forecast to last 20-30 years, essentially the same as GD 1.0, is probably way too rosy. Time is difficult to gauge, and not as important as touching the price targets. If you apply the simple EW guideline of 3/5ths the boom-time, we could, and perhaps should, languish for 90 years.


  1. Thanks Sunshine.

    I agree, we are in for some hard times. I know enough to prepare for it. I hope my son and his children will take my words to heart.

    I will get "worse" befofore it gets "better."

    The most important thing is to stay in the right side of the market for the long term, whether I outlive it or not.

  2. The worst case scenario is going to be interesting. Save it for the rally peak (following this leg down) when my supply of schadenfreude will require a top up.

  3. FDR

    Thanks for your update. You never waver. I wonder how many will drop out of the DOW in the next few years

  4. FDR - What count do you like best here. It looks like we are in an A B C pattern here from the top. This little move up being X or part of C? If X then the next leg down would be an A wave, correct?

  5. What is strange about this market is comments today out of UBS. UBS saying friday was a classic capitulation day and that the market is set to soar through March and April as the market is as undervalued as they have ever seen it. At the same time the Elliot Wave camp is on the DOW 400 train. I have not seen this wide a set of viewpoints since the last market high. While elliot wavers believe the market should trade off last years earnings, UBS claims it should trade off this years earnings or next years earnings. This will be a good thing to look back on in a year and see who knows what they are talking about and who doesn't. Stay tuned, as 1 camp will die for good. I hope it is UBS that dies, for now I will just watch the battle. If I had to bet, I would bet that the market wins and nobody's call ends up right. That would mean the market fluctuates between 9000 to 11000 all year and ends close to unchanged. That would surely satisfy no one and keep the two camps battling for next year as neither were right. The market is good at that, as those that held through the whole shit storm are still fine and those that called the top were right. Either way, unless they covered, they both still have the same amount of money they started with. So elliot wave was right and UBS was right, with the buy and hold. I guess it all depends on when you close out your position and not when you enter.

  6. FDRAOA - If I suscribe mid month - Do I get 30 days or just till the end of the month to view your investment choices at work? Small fry here with less than 50k in cash assets, so it all matters! Thanks.

  7. "FDRAOA - If I suscribe mid month - Do I get 30 days or just till the end of the month to view your investment choices at work? Small fry here with less than 50k in cash assets, so it all matters! Thanks."

    Subscriptions last through the following full month, so it's actually best to subscribe on the 1st.


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On Nov 2, 2010, I plan to vote (FOR or AGAINST) my incumbent congressman

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