Tuesday, November 18, 2008

Great Depression v2.0: Reason For Optimism

I wrote why I think we are falling into Great Depression here and here. So far, my thoughts were right, unfortunately. But lately I found a reason for optimism.

Everything is happening faster than I expected. I expected Fed rate to be below 1% in January. Target rate is 1% right now, but real rate is below 0.4%. I expected commodities go down in price, with oil reaching $90 for a barrel by the end of this year. You know where oil is. I expected dollar to go up relative to other currencies and wanted to make 10% in about a year, in half a year at best. I made almost 15% in less than three months.

Looks like things are moving faster than in the first Great Depression. And faster than in Japan after 1989 crash. Which tells me that maybe we will go through this one fast. This doesn't mean it's going to be easy. No! It's hard enough already, and going to get harder. Just one look at my portfolio makes me cringe. But we will go through this in three years, four max. Maybe two, but it would be way too optimistic. It's just a hunch, can't confirm it with numbers. And comparing to most of "analysts" it's way too pessimistic, they think that in 18 months everything will be just great. But even four years will be great improvement comparing to the first GD. And, I hope, we'll get out of this one without big war.

Can we make money from this hunch? Don't know yet. Big moves in commodities and currencies are probably done. Stocks are trying to breach October lows, and don't seem to be oversold, which means that probability of breach is high. I'm taking a break to think. Jim Cramer is right: this is a trader's market, not investor's market.

Seeking Alpha Certified

No comments: