Granted, the person that wrote the following (who is not me!) is "just" a blogger, but they predicted the timing of the crash to within a month, at the beginning of 2007. They have also been right on the depth of it so far.
I think we're due for a counter-trend rally soon - perhaps from the end of this month. I would expect it to last for a couple of months before the decline begins again with a vengeance. Such rallies can be sharp, and can temporarily revive a spirit of optimism, as the March to May rally did. I would use it as an opportunity to cash out and sit safely on the sidelines. Both the opportunities and the risks are very significant for those who play the market under these circumstances. Rules can be changed mid-stream, markets can be closed, trading systems can be overwhelmed so that trades cannot be executed, volatility can whipsaw you all over the map etc. Investors should be fully liquid at tops and fully invested at bottoms, and we're still very, very much closer to a top than a bottom. My long-standing guess for the extent of this phase of the decline is for the DJIA to break the October 2002 low of about 7500 at least, but the next stage should carry the market significantly lower. I would be surprised if we didn't see DJIA 1000 by the end of 2010, and I still don't think we'll have reached a bottom by then.
We're already in the middle of a systemic banking crisis and I think we will see massive bank failures - globally, as this crisis is by no means confined to the US. Credit will essentially disappear, except for the very wealthy, and even then at punitive interest rates. Those who still have scarce cash will hold on to it with both hands, whether they are banks or individuals. Hoarding will drastically reduce the velocity of money, aggravating the spiral of deflationary debt defaults. Money pumped into the system will disappear into a black hole of credit destruction rather than increase available liquidity, as without confidence there is no liquidity. So far, attempts to inspire confidence have rung hollow, and have done nothing but heighten a sense of desperation.
The impact of a real liquidity crunch on the population of most developed countries (particularly the credit-addicted anglo-saxon economies) is hard to imagine. Money is the lubricant in the economic engine, and without enough of it, the engine will seize up very quickly. That means our centralized life-support systems will fail, or at least become very much less reliable, so self-sufficiency will be important. My usual advice, in roughly this order and proceeding as far down the list as your resources will allow is:
*hold no debt (for most this means renting)
*sell equities, most bonds, commodities, real estate, collectibles etc
*hold cash and cash equivalents (short term treasuries)
*don't trust the banking system, FDIC or no FDIC
*acquire as much control as you can over the essentials of your own existence
*be prepared to work with others and to pool resources as you will be able to achieve far more
*if you still have surplus resources, then consider gold as an insurance policy
Real estate goes illiquid faster than almost anything else (except perhaps alphabet soup derivatives) , so you can't wait and see how things turn out. Renting means paying someone else a fee to take the price risk for you, which is a good bet when we're on the verge of a historic collapse in property prices. My guess is that purchasing power will be so limited that property prices will fall by 90% on average. Unemployment will skyrocket, and the real interest rate (the nominal rate minus negative inflation) will be high even if the nominal rate is low, so that debt will become unmanageable for most people very quickly. Debt slavery in one form or another awaits many people - indentured servitude, debtor's prison, being strong-armed into the military etc. This is why it is so important to clear debts now. Cash will be king for a period of time.
As for gold, it will hold its value over the long term as it has for thousands of years, but deflation should reduce it's nominal price first as people who are forced to sell bring prices down. Even Gaza, which produces no gold, became a gold exporter when its people reached a terminal state of desperation. Owning it now means paying a higher price than later, but it may well be worth doing if you can afford to sit on it for a long time, and are prepared for the risk of its ownership being banned. That wouldn't stop you owning it, but it would make storing and trading it difficult and dangerous, hence the need to be able to hold it for the long term. Personally, I'd rather have more readily useful supplies on hand.
For daily coverage of the credit crunch, check out The Automatic Earth at
http://theautomaticearth.blogspot.comPersonally, I think Roubini is far too optimistic. I'm expecting an "L-shaped" depression starting in 2009 and lasting for at least two decades, and even then only recovering partially. The reason for my thinking is that the world is facing a much bigger problem than just a financial crisis. We are at the beginning of a convergence of multiple problems in the global ecology (climate change, the death of the oceans, loss of soil fertility and fresh water etc.), energy (Peak Oil exacerbated by a loss of capital for replacement alternative infrastructure) and the economy. This convergence is going to make it very difficult to recover from a depression, just as the depression is going to make it difficult to address climate change or energy supply disruptions.
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