GD 2.0: Jim, We Are There.

Jim Cramer said today on Mad Money that we need to do everything to avoid Great Depression v2.0. Sorry Jim, We are there. The question now is how long is it going to take to get out of it. And whether we can get out of it without major war. His recipes might be right. When I wrote GM Has To Die, I didn't mean that it (or other autos) should get no help. I think government should help them, help big time. But they should pay a steep price for that help. A lot of people have to go, and Rick Wagoner is number one on the list. Bob Nardelli is number two, hiring the guy who almost ruined Home Depot (HD) to head Chrysler wasn't a bright idea, to put it mildly. Unfortunately, thousands of others have to follow, but US auto companies have to be restructured.

Anyway, we are in GD 2.0. Today's FOMC report forecasting recovery is way too optimistic. I think of the end of 2010 the earliest, most likely 2011. I don't believe recovery can happen before stabilization of housing market, and that wouldn't happen before end of 2009. Houses are still overpriced, inventory of new ones is way too big and builders are still building new ones. Prices have to come down to normal affordability level, home ownership have to fall to normal level of 65%, only then we can see housing stabilization.

Can it be worse? Sure.

Full disclosure: at the time of publication author did not have any positions in GM or HD. Positions can change any time.