Email to Investment Partner
I’m not sure that the credit markets are going to be loosened up by the bailout. People still don’t get it. There is no credit available - to anyone. So, we have an entire world economy that has been built on cheap and abundant credit, and now it is gone. Last year I got very bearish, and said that “easy money was gone for good.” What I didn’t think is that all money would be gone (I.e. no credit at all). This is what we have now, just as debt is at record levels.
I see it in the muni market. I believe that local and state governments are going to have to start going to the Federal Government in mass to get loans. Why? Because they have no other place to raise it. The Fed is going to become the true lender of last resort.
We are going to have to see mass bankruptcies on all levels (personal, corporate, and muni government) to wash the debt out. Then people can rebuild their lives with a lower standard of living and less credit. Or we are going to have to inflate the shit out of the dollar so the debt is worth less. As I have been saying, we will not see this easy money again in our lifetime.
…I think we will hit Dow 7000 first. Didn’t I say it was going to 10,000. Nobody was saying that last year - It sounded crazy - but it happened. I also think the NASDAQ is going to 1000 - 1400 range.