Here’s a good dose of gloom for you. The author is not saying it will happen, but he is arguing that Dow 5000 is not completely crazy. Frankly I’d be for it. If we could carve out all of the central bank fluff created post-2008 and returned to a real live market such a crash would be worth it. (It might not be so great for all those baby boomers who have ridden the Fed induced rally right before retirement however.)
I wouldn’t say that a crash on this scale or a re-institution of real, at least close to honest pricing in equities is likely. But I would say the both are possible. (OK, perhaps one is possible.)
In the meantime go cook a steak on the grill. It’s supposed to be nice weather in most of the USA this weekend. Monday can wait.
And even if that ranks as an outlier and a worst-case scenario, there are other, more likely scenarios where the Dow falls to somewhere between 10,000 and 12,000.
In other words, although this might be a buying opportunity, a serious reading of history suggests this week’s sell-off might also be the beginning.
Let me say on the record that I am not joining the perma-bears or extreme doom-mongers. I am simply pointing out that the perma-bulls have taken their own arguments way too far. The stock market is not doomed to collapse to oblivion, as some hysterics keep claiming. But it is not certain to keep going up by 10% a year, either. All those claiming that every sell-off is a buying opportunity, and that stocks “always outperform,” are lying to you.