Gizmo, if you are right, the the last three years are not Phase I of a multi years secular bear market. It is possible, but not likely, IMTO. In the 1966/82 secular bear, the low was put in the second cyclical phase (price wise, inflation adjusted, the low was 8/12/82).
Zeev, your statement if you are right, the[n] the last three years are not Phase I of a multi years secular bear market really needs to be amended. It should read, if you are right, the[n] the last three years are not Phase I of a multi years secular bear marketlike the 1966-1982 bear market. Instead it could very well be the first three years of a secular bear market along the lines of the 1929-1932 Great Crash.
I assume you'll reject this argument, as you have in the past, because you believe that the 29-32 crash was the market discounting the upcoming Great Depression. And, since you see no possibility of such a Great Depression on the horizon, then this bubble deflation cannot be like that of 29-32.
I don't wish to beat a dead horse, but I do feel the need to point out what I think is a fatal flaw in your reasoning. That flaw, IMHO, consists of giving the markets far too much credit for the ability to predict/discount future events.
The market is sometimes referred to as "the perfect discounting mechanism," because it discounts everything which is known by any/all of its participants. But, saying that the market discounts everything that is known is a far, far cry from saying that the market knows everything.
Unless I misunderstand your position on the matter, (which is, of course, always possible), I think that your analysis of the comparison of today's bubble deflation to those of the past leans much too far toward this latter position, i.e., that the market knows everything, and discounts it, rather than that the market discounts everything that it knows, however slight that knowledge may be.
In short, I agree that there is no "Great Depression II" on the horizon, but I do not think that fact precludes this bubble deflation from being like that of 29-32.
Zeev, what do you think about coming mutual fund redemptions?
To me today's situation looks very similar to the end of June/beginning of July. Some smart people who were expecting a strong rally at that time were wrong; in retrospect big redemptions probably was a major factor in frustrating decline. Shouldn't redemptions in October be even more dramatic?
If the market plays according to July scenario, we may get a significant rally at the end of the month (as many expect) but from lower levels.
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