Well it’s official. Going by the S&P (which is a far better barometer of the stock market than the Dow) we are in the worst bear market since the Great Depression. (h/t Calculated Risk)
The number by itself is rather trivial, to me what is far more alarming is how quickly it has plunged and how anemic any rebound attempts have been. The crashes of ’87 and even ’29 quickly saw large recovery efforts and the fact that the market could not maintain a multi-month long rally from the early October crash shows things are seriously wrong [in fact, by measures of market volatility there is a strong argument that the sustained amount of uncertainty and panic is even greater than any time during the Great Depression]…and those seriously wrong things are showing up in the credit markets. Spreads across all levels of corporate debt compared to treasuries are far higher than any post WWII period, and treasury yields are at record lows. In summary, the market is saying that we are going to have a large and worldwide deflationary spiral. At best we can hope to be like Japan which had the “Lost Decade” now turned to two lost decades (and going by their stock market nearly three lost decades) and realistically Great Depression 2.0 is baked in.
Let us be optimistic, steel for the times ahead and hope for good leadership. Once we work through the current mess we have our brightest times ahead of us, and I think it is no exaggeration to say that there is a good chance that 2050 will be as different from today as 1950 was compared to 1900.
Still, for me it is highly surreal as I’m going about my everyday life as normal and yet feel that within a year or so the world might be completely alien to me. I am fortunate because I am young and don’t really have any responsibilities but I’m also becoming aware that there is a good chance that we are in for a rough 10-15 years, and of course I will be starting a family and taking on other responsibilities within that time period.
So I’d like to ask: how has this whole thing affected people here, whether it has already happened or just changed future plans? Also, how bad do you think things will get and how are you preparing? And finally, what ideas do you have about helping family, friends and neighbors? That last question is one that I am currently wrestling with because I think I will be fortunate (or just immature) enough that my life will be most affected by it.