Dear Subscriber,
Just when some investors had begun to believe that things couldn't get
any worse on Wall Street, yesterday's dramatic bloodletting proved
that the end of this bear market is nowhere in sight.
No surprises here: Last July, with the Dow around 11,400, we warned
you that the Industrials would soon plunge to our medium-range target
of 7200 a 37% decline.
That forecast has now been fulfilled in spades: Just over one week ago
on Monday, February 23 the Dow closed under 7200 for the first
time since 1997, just as we warned.
But it didn't stop there: With yesterday's 300-point plunge, the Dow
blew away the 7200 level to close below 6800 and many of the most
bloodied stocks on Wall Street took one of their worst beatings of all:
US Bancorp fell 26.5% ... Morgan Stanley dropped 27.3% ... Citigroup
plunged 29.4% ... Freddie Mac cratered 33.3% ...
And Conseco the insurer I warned you about in the Money and Markets
issue of February 23 (Red Alert: Major Meltdown Imminent!) plunged
58% yesterday in a single trading session!
"Bottom-Feeders" Beware!
Unfortunately, many investors seem to believe that it can't get any
worse and some Wall Street pundits are even urging you to pick up
some stock market "bargains" at these levels.
THAT WOULD BE A HUGE MISTAKE: What looks like a "bargain" today could
be worth 50%, 75%, even 90% less tomorrow.
Case in point: Anyone who invested $10,000 in Monaco Coach, for
instance, at the "bargain price" of 46 cents yesterday morning lost
$8,700 in a single day as the stock plummeted to just six cents per share.
Next Stop: DOW 5000!
Clearly, bottom-picking in any great bear market is extremely
treacherous. Just when you think it can't get any worse, it does, in
fact, get worse.
Right now the market is headed for a quick rendevous with my next
medium-term target, at 5000 on the Dow.
But even after we hit 5000, we'll still have a long way to go.
Remember: In the Great Depression, the Dow fell 89% from its 1929
high. An 89% decline from the 2007 high would take the Dow to
approximately the 1500 level a 78% drop from yesterday's close.
Moreover, there are sound arguments that this crisis is actually worse
than the Great Depression. Average earnings have plunged 61%
year-over-year, much more than during the Great Depression. In fact,
the last time earnings declined more than 61% was 141 long years ago!
And today, GE shares are in a death spiral, a signal of looming
bankruptcy just the first in a series of blue chip failures.
This is why my team and I hosted last week's emergency briefing and
it's also why ...
