Why Only Fools Think the Bottom Is In

[Guest]

Re: Why Only Fools Think the Bottom Is In

Good stuff Nero3. Very thought provoking, and with fresh ideas. I think you are spot on in many respects.

Housing in some major markets within the US for instance, will level off this year IMO in nominal terms and may even get a little relief bounce. Some anecdotal information - I am seeing foreclosures in my old central neighborhood of San Diego now, where an average 2 bedroom condo rents for $1300 / mo, and in the one case I'm looking at, the foreclosure has been "marked down" by an impatient bank (even some non-foreclosures, sold by long time owners get marked down this far!) to $180,000. That is maybe the price for a decent home in some smaller city in the central states of America, but most certainly not in one of America's premier beach-towns in Southern California.

What can you buy with a measly, devalued $180K US B0nars today in the center of an old historic neighborhood in San Diego? Try this: Corner lot, three to four bedrooms, prime location near all amenities including the central city trolley station, only fifteen blocks from San Diego State University - all in the absolute center of the city This neighborhood saw $650 prices at the top in 2005-2006, so this property represents a 72% discount. Meanwhile a "one size fits all" iTulip orthodoxy states flatly that "all housing is sitting on flim flam fundamentals and must go down for years more". Do we detect a discrepancy here perhaps?

It might be a good idea to remember, that before there was iTulip, most of use were accustomed to using (and trusting!) our two eyes, for the simple practice of running some comparables and understanding when values are so totally destroyed, that they represent a sharp anomaly to their market context. iTulip provides compelling analysis, with a superb strategic interpretation of the macro. But it's possible that by taking every single one of it's positions, and applying those conclusions religiously to every instance (housing has many years to fall, stock market ditto) is a misuse of this website's intelligence because it is unreasonable to assert that the same rule can apply to the same extent everywhere.

As SeanO has pointed out elsewhere, you can look around in markets that you know well, know like the back of your hand, and understand that when you are able to buy a home in a premium beach-resort city, second largest city in California and one of the densest urban regions in the country, with severe geographic limits on all four sides, and by putting $36,000 down, obtain a mortgage of $900 per month for a three bedroom detached home, you have well and truly discovered some solid ground at the bottom of this housing collapse and there are some outstanding bargains lying around with no bidders.

What does this mean? It means you could buy such a property, rent it out to a former two bedroom condo dweller who's been paying $1300 per month, and you'd have a $400 per month positive cash flow, plus the market security of being able to offer a 3 bedroom detached home in a market where people paid the same money for a two bedroom condominium. At which point presumably, iTulip's indignant orthodox priests would insist that the rental price of condos must imminently plunge down to arbitrage this discrepancy. But the residential apartment complex rates in this city have been absolutely unaffected by any market turmoil, and have barely dipped a fraction. To suggest they must collapse to meet these low house prices is simply nonsense.

The fact that such assertions applied to the equities markets draw so much scorn at iTulip should make iTulipers firmly decide to think a little more "iconoclastically". iTulip's a wonderful beacon. But anyone here who relapses into a state of indignation when a newcomer has the temerity to suggest there may be some real bargains in the equities - such people may benefit from a little more willingness to challenge whether all of iTulip's current prognoses could possibly be right to the same degree, when applied everywhere. By definition, such an assertion would be absurd.

I think you have filled your head with so much faulty information from "professors" living in an academic world, that it would take several hours to convince you. I am sure I could achieve it, but I'm afraid I don't have the time. Think of these professors as music critics or music historians, not musical people, or gifted musicians, you could put guys like Warren Buffet into that category. Here is a graph for you:

http://finance.yahoo.com/echarts?s=U...l=UNP;range=my

The development in the railroad share from 2000-2008 is the real inflation rate, as railroads tend to track inflation. Here you also have the real inflation:



The same does emerging market shares. Strength in these market's tend to show the devaluation of the dollar. The same is the case with gold.
House prices barely tracked that, and then corrected. House prices are a hard asset. Just like commodities. I should add that I know real estate, as I own a lot of real estate. It's not a bubble the way some guys such as Robert Shilling suggest. It was a bubble for sure, but the stupid CPI blows it way out of proportion. The 100 year old data series brings no meaning with the adjustments done to the CPI after 1980. This is why professors don't tend to be investing geniuses, or rich.

This is from the UK, but paints the same picture as the railroad shares, or the shadowstats CPI:



I espect the housepricecorrection to stop where it is now on a nominal basis. The built in inflation pressures are much higher now than in the 1990-s. Due to that, house prices will level off much faster than in the 1990-s, as there now is a pent up stagflation problem coming, causing a nominal prise rise / real price decline, while the RMB appriciate, yields rise, and the stock market in general recover as after 1975.


Here are one of the better blogs:
http://www.noisefreeinvesting.com/blog/

Go back in the archives to you get to railroad shares, look at the salary vs expense ratio, and you will understand that you have very high inflation and a squeeze of worker salaries. In the glass house world of professors like krugman, they sure don't notice this. A lot of real estate have not increased more in price, than the increase in cost of various expenses related to getting rid of garbage, paying for heating oil, etc.

This trash driver company, is an example of a stock that are able to pass on inflation. That's why they rise. Inflation that's not measured by the CPI.
http://finance.yahoo.com/echarts?s=R...l=RSG;range=my

House prices are much, much cheaper than you think.

[Supercilious]

Re: Why Only Fools Think the Bottom Is In

It is almost time to go short. People at work are talking about how great the stock market is going right now. Bah, bah, bah. The sheep are lining up. It will not be pretty.

I can't help think that there is a conspiracy to manipulate the markets for the greatest fleecing possible. It is an addictive game, and they have the sheers. God I want to bet!

That pretty much describes the current market.
I'm currently in an all short position. It is always a good idea to assume in your investment strategy that the the markets are optimized for the greatest fleecing possible.

I am warning you bulls... I may buy stocks soon!

Yup. By the way. I think they are going to reinstate the uptick rule... that is going to make things interesting.

[metalman]

Re: Why Only Fools Think the Bottom Is In

I think you have filled your head with so much faulty information from "professors" living in an academic world, that it would take several hours to convince you. I am sure I could achieve it, but I'm afraid I don't have the time. Think of these professors as music critics or music historians, not musical people, or gifted musicians, you could put guys like Warren Buffet into that category.

you're barking up the wrong tree. i don't visit shiller or roubini or krugman or the other profs/econ hacks. itulip is run by a business person and investor. that's obvious. the forecasts on the housing market and stock market have been dead on back to 1998 due to analysis not abstract theory. i figure ej uses the same techniques he learned in venture capital... including the idea of an 'invesment thesis'.

did you sell real estate in 2006? another real estate guy here... sean o'toole did. selling then and buying now, you'd look smart... not like a professor.

Here is a graph for you:
http://finance.yahoo.com/echarts?s=U...l=UNP;range=my
The development in the railroad share from 2000-2008 is the real inflation rate, as railroads tend to track inflation. Here you also have the real inflation:

yah, yah. we've all seen the shadowstats stuff. bart and finster did all of that way before williams.

The same does emerging market shares. Strength in these market's tend to show the devaluation of the dollar. The same is the case with gold.
House prices barely tracked that, and then corrected. House prices are a hard asset. Just like commodities. I should add that I know real estate, as I own a lot of real estate. It's not a bubble the way some guys such as Robert Shilling suggest. It was a bubble for sure, but the stupid CPI blows it way out of proportion. The 100 year old data series brings no meaning with the adjustments done to the CPI after 1980. This is why professors don't tend to be investing geniuses, or rich.

price of gold is not the same as emergiing market shares. read itulip reports that got us into gold and kept us there since 2001... it's not a simple story of dollar devaluation.



if itulip's analyis of the housing market is so academic, why has it been 100% correct since 2002? if you can show your track record on housing going back to 2002 you can be just as credible.

This is from the UK, but paints the same picture as the railroad shares, or the shadowstats CPI:

looks like the old itulip charts on housing but with one crucial difference... the itulip charts were created before the event.

I espect the housepricecorrection to stop where it is now on a nominal basis. The built in inflation pressures are much higher now than in the 1990-s. Due to that, house prices will level off much faster than in the 1990-s, as there now is a pent up stagflation problem coming, causing a nominal prise rise / real price decline, while the RMB appriciate, yields rise, and the stock market in general recover as after 1975.

sorry, i'll go with the forecaster who called the bubble from beginning to end. he says debt deflation with heroic efforts to keep the housing market from crashing even faster. i mean, can you imagine what housing prices will do if interest rates rise?

Here are one of the better blogs:
http://www.noisefreeinvesting.com/blog/

Go back in the archives to you get to railroad shares, look at the salary vs expense ratio, and you will understand that you have very high inflation and a squeeze of worker salaries. In the glass house world of professors like krugman, they sure don't notice this. A lot of real estate have not increased more in price, than the increase in cost of various expenses related to getting rid of garbage, paying for heating oil, etc.

agree with you on the professors. why are you arguing that point here?

This trash driver company, is an example of a stock that are able to pass on inflation. That's why they rise. Inflation that's not measured by the CPI.
http://finance.yahoo.com/echarts?s=R...l=RSG;range=my

House prices are much, much cheaper than you think.

again, agree. asset re-inflation is not working. but prices of commodities... intermediate goods... finished goods... are all rising... all as forecast here last year while mishmash was yapping about deflation.

here's where you get off track from the ideas 'professed' :cool: here... the usa housing market is a creation of gov't tax and monetary policy. those policies will change... count on it. renters will not keep subsidizing mortgage debtors with mortgage tax deductions and other tricks. the usa's broke... can't afford them. tax burdens will shift. the fire econ is on it's on its last legs with obama and timmy and summers trying to keep the game up. obama is hoover (too bad!) trying to protect fire econ boyz. the next pres/congress will not keep the game going... he/she (:eek will cut it off and send the money elsewhere. ej said years ago into infrastructure/energy and that's about right, too.

[kartius919]

Re: Why Only Fools Think the Bottom Is In

The last two bubbles had a very positive effect on the economy. It drove up wages and debt allowing more people to spend on the 70% consumer economy. This pushed up asset prices including stock prices. Now to believe that a new bubble is forming, there must be a new mechanism that drives up income and/or debt accumulation. Without those two spigots, you can't sustain or even grow this consumer economy. So what is this new mechanism that will form your new bubble? In essense, how do you see the US go about forming a new ponzi scheme whether it be in solar, conservation, etc. that makes up for the current 700k a month job losses? Will all the financing come from the US gov't? Will they come from foreign central banks?

You are argue that stagflation is the likely outcome. To me, stagflation means rising costs of living while wages remain stagnant. This leaves to more income diverted to costs of living rather than non-discretionary. Less computers, less cloth, less nifty gadgets. Again, my question is how will the shopping malls and centers survive such a shift? If they can't survive, who will eat up the fresh new batch of losses from commercial real estate? What will happen to the corporate bond defaults? Will the gov't eat up all the losses? If so, does the solvency of the US gov't become suspect?

[nero3]

Re: Why Only Fools Think the Bottom Is In

I think that was very well said nero. In some way the whole debate about the "recovery" doesn't make too much sense.

Those who argue the recovery is not real are in some way right, because there was no change to sound fundamentals required for a real recovery. The scam show goes on. Nothing really has changed in this crisis (some may argue things are even more corrupt and fraudulent than before). I think though, the "recovery is fake" camp makes a fundamental mistake, believing Mr Market is guided by the solid fundamentals of free and open markets.

Well,... I have news for that camp. Mr Market is high as a kite on the derivatives LSD and bailout shrooms he got from the Wall Street shack and from Uncle Fed. His sense of reality has been replaced by a psychedelic dream. And as nero said it's the perception that controls everything. So, if Mr Market sees the Chosen One, riding his magic unicorn down the rainbow, and brining him Hope and Recovery,... then Recovery we will have.

On the other side the "recovery is real team" also forgets that real life cannot be build on the psychedelic illusions even if those illusions are pushed forcefully by Uncle Fed and the Smart Money Masters. Yes it is true, illusions can last for a very long time (more than the average lifespan of a human being), but in the end there is always a rude awaking to the crude and unpleasant reality.

If the Money Illusionists will be able to maintain this illusion past our lifetime, then the Obama Miraculous Recovery (TM) will be as solid as ... gold ... (at least for us). If the illusion collapses, we will all see in horror that Mr Market, Mr Bank, and Miss Treasury have no clothes.

There was that old mayan proverb: "Can a man kill a God? Yes, when he stops believing in Him."

For time being Mr Market is God... so, let's get another dose of bailout shrooms from Uncle Fed and celebrate the Recovery

A lot of wise words here.

George Soros describes how market's works in his various books.

let's say the market perceive recovery, that will probably weaken the dollar, and that will affect the fundamentals of the market in a way that could further weaken the dollar. It don't have to be that way. After 1980 the dynamic worked towards a stronger dollar. It depends on what is good for recovery. Now I think a weak dollar is what the US need. The the determinism, or faith based method of investing that some uber bears have is doomed to fail. I think that if you position yourself, both in career, in investing, and otherwise in life, to not be among the worst, and the weakest things will work out fine.

[Guest]

Re: Why Only Fools Think the Bottom Is In

I'm reading that after a brief correction, this relief rally may have as much as another two or three months to run, so anyone planning to "play" this unfolding progress with short positions thinking they are "invested with the major trend" may have a lot of risk for their trouble. Two months of pent-up bullish rebound off the past year's declines can destroy short positions beyond all redemption.

Sure there is likely another bad market swoon out there within 12 months, but from today's prices, the question should be rather, do you think that three years out from now equities will be significantly higher, or flat, or significantly lower?

To say things like "I"m getting ready to go short here" or "I'm getting ready to go long here", does not say much unless one stipulates whether they are getting ready to go short or long for longer terms, which would give an indication of where one thinks the market is *really* going to trend from here. The rest is trading, so it makes no real comment on the three year's out call.

[nero3]

Re: Why Only Fools Think the Bottom Is In

you're barking up the wrong tree. i don't visit shiller or roubini or krugman or the other profs/econ hacks. itulip is run by a business person and investor. that's obvious. the forecasts on the housing market and stock market have been dead on back to 1998 due to analysis not abstract theory. i figure ej uses the same techniques he learned in venture capital... including the idea of an 'invesment thesis'.

did you sell real estate in 2006? another real estate guy here... sean o'toole did. selling then and buying now, you'd look smart... not like a professor.



yah, yah. we've all seen the shadowstats stuff. bart and finster did all of that way before williams.



price of gold is not the same as emergiing market shares. read itulip reports that got us into gold and kept us there since 2001... it's not a simple story of dollar devaluation.



if itulip's analyis of the housing market is so academic, why has it been 100% correct since 2002? if you can show your track record on housing going back to 2002 you can be just as credible.



looks like the old itulip charts on housing but with one crucial difference... the itulip charts were created before the event.





sorry, i'll go with the forecaster who called the bubble from beginning to end. he says debt deflation with heroic efforts to keep the housing market from crashing even faster. i mean, can you imagine what housing prices will do if interest rates rise?



agree with you on the professors. why are you arguing that point here?



again, agree. asset re-inflation is not working. but prices of commodities... intermediate goods... finished goods... are all rising... all as forecast here last year while mishmash was yapping about deflation.

here's where you get off track from the ideas 'professed' :cool: here... the usa housing market is a creation of gov't tax and monetary policy. those policies will change... count on it. renters will not keep subsidizing mortgage debtors with mortgage tax deductions and other tricks. the usa's broke... can't afford them. tax burdens will shift. the fire econ is on it's on its last legs with obama and timmy and summers trying to keep the game up. obama is hoover (too bad!) trying to protect fire econ boyz. the next pres/congress will not keep the game going... he/she (:eek will cut it off and send the money elsewhere. ej said years ago into infrastructure/energy and that's about right, too.

Well you are like a devoted fan then. That's ok, but outsourcing your thinking is in my opinion a mistake. Obama is not Hoover. Obama is the rebirth of Michael Jackson, did you not know that?

[metalman]

Re: Why Only Fools Think the Bottom Is In

Well you are like a devoted fan then. That's ok, but outsourcing your thinking is in my opinion a mistake.

i direct my juvenile anti-authoritarianism at the gov't and bankers... and i'm not so crazy about cops, either.

Obama is not Hoover. Obama is the rebirth of Michael Jackson, did you not know that?

ok.

[tombat1913]

Re: Why Only Fools Think the Bottom Is In

Why does this thread even exist. You can discuss your gut feelings and reads of investor sentiment all you want, but this has already been addressed by the Grand Puba and here's your answer...

Are you kidding? I think even the "Grand Puba" would agree that his thesis should be debated and intellectually challenged. Even the greatest minds are not always correct.

[Guest]

Re: Why Only Fools Think the Bottom Is In

Maybe rjwr wants everyone to "get in line". :rolleyes:

Are you kidding? I think even the "Grand Puba" would agree that his thesis should be debated and intellectually challenged. Even the greatest minds are not always correct.

[metalman]

Re: Why Only Fools Think the Bottom Is In

Are you kidding? I think even the "Grand Puba" would agree that his thesis should be debated and intellectually challenged. Even the greatest minds are not always correct.

nah. hang around long enough you'll learn that argument is how itulip arrives at its ideas in the first place... with hudson, mayer, rogers, etc. honed and beaten into shape.

why does the finster 'deflation!' thread exist? ain't no deflation spiral, but the thread was a great contrary to the contrarian excercise anyhow. was there ever a threat of a deflation spiral? that silly idea is all but dead but not that long ago it was a pitched battle with mish claiming victory.

remember when ej used to argue with rick ackerman? why bother. he gave up on mish, too.

luke and symbols will argue with a rock for the sake of arguing.

[rogermexico]

Re: Why Only Fools Think the Bottom Is In

Think of these professors as music critics or music historians, not musical people, or gifted musicians, you could put guys like Warren Buffet into that category.

Warren Buffet the gifted musician is down 40% still. You would be better off with an actual gifted musician.

I should add that I know real estate, as I own a lot of real estate.

"I should add that I know the debt market, as I owe people a lot of money. Or "I know the S&P 500, as I own an index fund" These do not function well as rhetorical appeals to authority either.

It's not a bubble the way some guys such as Robert Shilling suggest.

I don't know who this guy "Shilling" is, but Robert Shillers work on housing valuation over the past 400 years is pretty robust.

I espect the housepricecorrection to stop where it is now on a nominal basis.

All you folks calling a bottom in anything that has already crashed are just geniuses. Did you sell all your real estate 25% ago and and your stocks 40% ago. Real estate and stocks already crashed, and in real terms RE is not done crashing. And yes, this is bear market rally in stocks. Stocks may go up a while, then they will go down again, just like other bear markets.

The built in inflation pressures are much higher now than in the 1990-s. Due to that, house prices will level off much faster than in the 1990-s, as there now is a pent up stagflation problem coming, causing a nominal prise rise / real price decline, while the RMB appriciate, yields rise, and the stock market in general recover as after 1975.

You are free to completely ignore the whole itulip debt deflation thesis and its distinction between assets bought with credit and P/C economy goods, but you would make more headway convincing us by telling us why the thesis is wrong. Yes, nominal RE prices may have bottomed after crashing. So what? Rank order the expected future performance of Gold, Ag commodities, Oil, residential real estate, and shares. Are you saying vegas condos and Bank Stocks will outperform WTI , Gold and Food? I disagree

In the glass house world of professors like krugman, they sure don't notice this.

The "professors" are straw men. Almost none of us believe them either.

House prices are much, much cheaper than you think.

I also own real estate, including residential, commercial and Ag forest.
I have also built and remodeled many properties as a general contractor.
I became my own contractor when I found out how much money I could save not paying some guy to inflate the shit out of everthing and then add 10-15% for supervising the fleecing.

House prices are still not cheap if you have any clue what they actually cost to build in an economy lacking FIRE inflated labor and material inputs and FIRE inflated land prices.

[Guest]

Re: Why Only Fools Think the Bottom Is In

Lots of fiery finger wagging from the pulpit there Rogermexico. My sense is that Nero's opinions are put forward a lot more calmly. BTW I have seen Robert Shiller mis-named on multiple website and newschannel references as well. There is a guy called Gary Shilling whom he gets mixed up with.

I read you and feel like someone is trying to cast me into a piece of plaster of paris, with the rigidity of your viewpoints. After two years reading here, frankly I "just say no" to long strings of dogmatic assertions like this. All the rest of your comments, with the rhetorical jeering:

This stuff: "All you folks calling a bottom in anything that has already crashed are just geniuses. Did you sell all your real estate 25% ago and and your stocks 40% ago.".

If it were me, I'd just advise you to P*ss off.

Then this: "I also own real estate, including residential, commercial and Ag forest. I have also built and remodeled many properties as a general contractor."

That's wonderful. We look forward to your input on this sector with bated breath.

Then this: "You are free to completely ignore the whole itulip debt deflation thesis and its distinction between assets bought with credit and P/C economy goods".

Good, so if he's completely free to ignore whatever he wishes, why don't you pack up your tent and go heckle someone else?

Warren Buffet the gifted musician is down 40% still. You would be better off with an actual gifted musician.

"I should add that I know the debt market, as I owe people a lot of money. Or "I know the S&P 500, as I own an index fund" These do not function well as rhetorical appeals to authority either.

I don't know who this guy "Shilling" is, but Robert Shillers work on housing valuation over the past 400 years is pretty robust.

All you folks calling a bottom in anything that has already crashed are just geniuses. Did you sell all your real estate 25% ago and and your stocks 40% ago. Real estate and stocks already crashed, and in real terms RE is not done crashing. And yes, this is bear market rally in stocks. Stocks may go up a while, then they will go down again, just like other bear markets.

You are free to completely ignore the whole itulip debt deflation thesis and its distinction between assets bought with credit and P/C economy goods, but you would make more headway convincing us by telling us why the thesis is wrong. Yes, nominal RE prices may have bottomed after crashing. So what? Rank order the expected future performance of Gold, Ag commodities, Oil, residential real estate, and shares. Are you saying vegas condos and Bank Stocks will outperform WTI , Gold and Food? I disagree

The "professors" are straw men. Almost none of us believe them either.

I also own real estate, including residential, commercial and Ag forest.
I have also built and remodeled many properties as a general contractor.
I became my own contractor when I found out how much money I could save not paying some guy to inflate the shit out of everthing and then add 10-15% for supervising the fleecing.

House prices are still not cheap if you have any clue what they actually cost to build in an economy lacking FIRE inflated labor and material inputs and FIRE inflated land prices.

[thousandmilemargin]

Re: Why Only Fools Think the Bottom Is In

Correct. The question is at what point are we going to meet the brick wall. Fantasies can last for an awful long time. Communism lasted for some 80 years and it was a relatively short one on the scale of history. If the current market fantasy last another 10-15 years ...;)

The true question is not if the recovery is real or not, but how much longer the current illusion can last?.... because the brick wall is there waiting.

The last 30 years was built on delusion, so a few more years of fantasy wouldn't be out of the question.

It IS possible that 6700 was the nominal bottom on the Dow. The current rally is just blind optimism, but if the market starts pricing in massive inflation once the relief wears off, stocks could go sideways for a decade while inflation reduces real valuations. The excess could be worked off in a 1970's style inflationary bear market, with the acceptance of reality coming in 2017.

My best guess is that we are still months away from pricing in serious deflation, so I expect another leg down. But another 6 months of multi-trillion dollar money printing could create the expectation that this bear will look like the 1970's, so we could see a bottom in stocks later this year even though no economic recovery is in sight.

Remember that the nominal low of the 1970's occurred in 1974. Stocks rose strongly in nominal terms between 1974 and 1982, even as they continued to decline in inflation-adjusted terms.

We are likely to see the same thing once inflationary expectations are created, it just a matter of when monetarization gains traction.

[thousandmilemargin]

Re: Why Only Fools Think the Bottom Is In

let's say the market perceive recovery, that will probably weaken the dollar, and that will affect the fundamentals of the market in a way that could further weaken the dollar.

I'm thinking that the dollar is likely to remain strong as long as stocks slide, as deleveraging creates a demand for dollars. But once inflationary expectations are strong enough, you will have an expectation of a falling dollar combined with an expectation of rising nominal stock prices. This creates a nominal bottom - people aren't scared of stocks any more as they expect inflation to support stock prices.

Once stocks start to trend up again, the deleveraging pressure stops, and the dollar starts to slide. This creates further inflationary expectation, and the situation is self-reinforcing, with rising stocks and a sliding dollar for the duration of the bear market.

As in the late 70s, nominal stock prices will rise while inflation eats away at real value, until a return to bargain valuations eventually ends the bear market.

To get this started, you need a plausibly low nominal bottom, combined with strong reasons to expect inflation. In other words, how many trillion does the Fed need to print before people start expecting an inflationary, 1970's style bear market rather than a deflationary bear market.

My guestimate is that by October 2009 the Dow will have fallen to around 5000, making a bottom plausible, and the Fed will have printed up another 5 trillion or more, making an inflationary scenario plausible. Just a guess, for the purposes of illustration.

Once these two factors are present, the market can find a bottom, regardlesss of the underlying economic reality, and then start trending up in nominal terms for the rest of the bear market - which may not reach inflation adjusted lows until 2017 (if the 1970's are any guide).

Given the lack of a gold standard, you have to expect this bear market to start resembling the 70's rather than the 30's at some stage. And if you use inflation adjusted charts, and take the year 2000 as your starting point, it already looks a lot like the 70's.