Are we in for rough times, yes but not that bad. Money is based on credit, and I don't care who you are, when some of the funds who are not broke decide to start investing then the marekt will turn around, people are greedy and when they think they will make some money they will try.
Something to be mindful of though is value, if you go back to 1987-89 bank stocks such as wbc and ANZ had "pullbacks" for those who are brokers, crash for those who owned them in the order of magnitued of 50-60% from their all time highs. So bearing in mind that history repeats we could say that th emost the main bank stocks could go down are 50-60%.
Now for those who remember it was said that wbc etc may have gone down the tubes at those levels. True or not who knows as it never happened, but at the moment we are down on bank stocks generally speaking of the order of 40% so another 10-20% is certainly possible, historically speaking.
The direction of the stock market in Australia is CONTROLLED y the big banks, if they are going down the market will go down, if they go up, then the market will go up.
I have hopefully learnt lessons form the past and I now know that we cannot have a market going up unless the financials like the banks are going up, so they have to turn first before we can see a general broad based turn around in the market for whatever period of time. Easiest way to do it is whack on a moving average and YES choose the setting that best curvefits the historical happenings and then use that as a basic guide, or whatever other thing you want.
When the money starts flowing back into bank shares then money can start flowng back into the other shares.
Thats why the sub prime was and is so bad. The whole financial system is based on the valuation of the value of the banks and its banking activities
The whole monetary system is a debt based liability system that relies on the extension of credit, effectively our currency is made up of promissory notes.
These notes, or our currency is only valued on the basis of what some one else things we are worth, so if that perception changes then we are worth more or less as the case may be.
When you go to a bank and apply for a home loan they obtain power of attorney via your bank agreement/loan and do up a promissory note, that is the 'cash' that forms the deposit in their books which allows them to lend multiples of the loan they extended to you, to other people.
Banks do not lend money, they extend credit, for those who don't understand, go and investigate and you will find that if you added up all the money that a bank has on 'deposit' you will find that it is way short of the money they actually lend.
As I have said elsewhere, the current finacial system operates as an inverted pyramid, meaning there are lots more in the top layers than the bottom layers, so when you start peeling away at the top level and removed a layer, a single layer removed does not sould like much but that single layer has more debtors than the layer below it, so it takes a while before people see the layers coming undone, however because it is top heavy, by the time they see it coming undone, most of the people who it is coming undone for are allready caught and can't escape.
Anyway, we can guess and think all we like, but lets hope too many people do not get too hurt financially.