It will get better before it gets worse

Remember this...right now this is a financial crisis and not an economic collapse..yet. Hence there will be a rebound based on the unprecedented response from the governments of the world to rescue the system. Ben Bernanke in fact has an opinion piece today in the WSJ titled "We're laying the groundwork for recovery".

However, the problem is much much bigger. It's of the debt burden carried by individual Americans and the country itself. It's of unsustainable consumption in the US and the difficult in controlling commodity costs when welcoming billions of Indians and Chinese into the middle class. It's of the ridiculous leverage built up in the system which will not end until it is smoked out!

In short, my forecast is of a recovery to 1200 this year. This will be fueled by the fed cutting rates further, Obama being elected president and hope that the bottom in housing is in. In fact, we may even see a rise up to 1300 early next year. From there I strongly believe it will start getting worse, slowly at first and then faster as the effects ripple through the real economy. I think a real bottom for housing will not be until 2010 or 2011 followed by flat to modest increases thereafter. Right now, I think the best time to buy is end '09 to early '10. As always, watch this space for updates to all the forecasts :)