Start with the big picture today.
We are in a secular bear market since 2000. In 2003 we started a cyclical bull that was supposed to end in 2005 when the real estate market slumped. Unaware to everyone the fed started a massive liquidity injection by discontinuing M3 and running M3 at 16% annually along with banks increasing leverage and risk. This extended the cyclical bull by 2 years exacerbating the credit bubble. The economy needed to contract but it was prolonged and now the contraction is doing more damage.
We are in the middle phase of the late cyclical bear in a secular bear. So all downside movements are amplified. The bottom will be long and painful and will extend at least into 2009.
We should get another cyclical bull in 2009-2010 (optimistically ) and that should lead into a secular bull is this was a normal secular bear and we are able to resolve all the credit expansion problems of the previous secular bull 1980-2000. those problems are trade and budget deficits, a services heavy national economy, an missing manufacturing base, too little regulation, and inappropriate risk taking.
The secular bull has to start with the acceptance that a 5-7% return from the equity markets are generous, and value investment and holding stock for the long term (3-5 years) is the best practice.
If that doesn't' happen by 2012 then we are in for an extended secular bear that will go out to 2020.
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