Bubble or Bust

Well, I hate to tell you, but I told you so. I just finished watching the closing bell, whose ringing was drowned out by boos from the crowd. The Nasdaq is down 3.86%, the DOW is down 3.3%, and the S&P is down 3.44%.

Now, I personally don't believe that this is going to be the collapse that I've been talking about. I would love to hype this up and yell at the government and huge amount of liquidity that has been created, but I won't.

I'm fairly confident that this will be more of a harsh market correction than anything, but with consequences, always consequences. This has obviously been a chain reaction started by the 8% decline in the Shanghi index, but that's not it. Another large driver of this correction has been the lending/housing market.

I am going to throw a couple statistics at you just for an interesting point that you can bring up around the dinner table. This is the largest single day drop in the DOW since the first trading day after 9/11. At its lowest point, the DOW was down just over 546 points. The DOW has dropped for its 5th strait day. We saw a record amount of volume traded on the NYSE. The DOW was up 2.5% on the year before today and that was wiped out.

Now I don't want to belabor the markets here too much, but I would rather look at the big picture here. I believe that we will see another 5-8% correction, and I expect the market will continue to drop for the rest of the week and maybe slightly into next week. The thing is, is that most Americans will probably look at this as a buying opportunity.

I tell you what, I'm sitting here watching the talking heads on CNBC try to spin this and it is rather interesting. I mean they are talking about getting into large caps, in the long run corrections are healthy, yada yada yada. Listen this is definitely, in my opinion, just a little bump here. The talking heads are saying this is a bump on the ride up. I say this is a bump on the way down.

Let's look at the big picture. Human beings, myself included, are emotional investors. The more you limit that emotion the better you will be in the long run. This is going to kill consumer confidence, which actually came out this mourning and was higher. I would like to see that statistic reconfigured at the end of the week. If consumers are scared they will save their money, which will lead to less consumer spending, which will lead to lower GDP growth.

As you regular readers know, I believe in a sort of day of reckoning for the world economy. And you know what, this may be it, but I really don't think so. I think we are seeing more and more signs of economic troubles as each week passes. Higher than expected inflation, economists lowering their expected GDP, housing markets not bottoming out like everyone keeps saying, the lending market creating a credit crunch, and now this whack to the stock markets that folks have had nothing but great things to say.

The deck of cards that is the world economy will collapse, but I don't believe that this is it. Look, the cars haven't flown off the track yet, but the ball bearings are starting to wiggle loose.