Just A Correction?

We hear each day the idle prattle of Wall Street “Buy Side” investors, discussing whether the recent decline in stock prices is just a correction in a healthy market, or whether this is the start of a bear market. Not surprisingly, to a man these ‘experts’ seem to unanimously agree that this is just a correction, and that a bottom is close at hand, not to mention the John Chambers quote that “this is the strongest global economy I’ve ever seen.” In our view, these guys need to have lunch with the Housing Market economists who have been saying the same thing over the last 18 months -- still no bottom there either!

In our view, the ‘pundits’ arguing that this is just a ‘correction’ are absolutely kidding themselves as there is an overwhelming argument to be made that prices are headed much lower, and within relatively short order. The mistake being made is a complete lack of understanding of the opaque nature of the credit derivatives market.