When the Bandwagon Gets Full...

Doing some surfing of the financial sites, I am bombarded with grim reminders of how bad the current economic state is. Bankruptcy here, retrenchment there, layoffs, early earnings warnings, etc.

The news is terrible.

However, every big drop I have ever seen in the financial markets (and trust me, I have seen a few...) has gone like this.

1.) The economic indicators are all turning down, but the press is still bullish.
2.) The economic indicators are still falling, and the press is even more bullish than before.
3.) Things start to fall apart. The press says we "may" see some softening.
4.) People are laid off, the market is tanking and the press says, we are seeing "softening" but not anywhere near a recession.
5.) The markets are pounded. The average person on the street is seeing real impact to their wealth and the government and press recognize that a "recession" may be here. This is where it starts to get interesting.
6.) Now, the media is all jumping on the bandwagon (or badwagon) saying that the US is done, the rest of recorded history will be that of horrible famines, destruction of wealth and utter doom.
7.) We see very strange patterns. We see huge drops in the market on light volume. The small investor is getting hammered as the market makers "shake the tree" to part the individual of their shares for pennies on the dollar.
8.) The downgrades pour in from top names in banking. All the while, the major institutions are doing some buying. As the individual runs for the hills out of fear, the big players are gradually loading up.
9.) By now, the same poor schmucks who decided to get in and "play the market" have gotten shaken out, vowing "never to buy another stock again" and how Wall Street is so unfair, and how the world is collapsing.
10.) The institutions and big investors are still buying.
11.) The pain is still all over the media. Those perma bulls from before are now superbears and vow that "this time it's different" and it's never coming back. Ironic, they were the ones that said "this time it's different" during the run up to the peak of the bull market, and how "momentum investing is the best"...
12.) The institutions have loaded up. All the ducks are in a row for the rebound and the average Joe who got tooled is "never coming back" - until the next bull market (and media) catches their attention.

13.) The market rebounds. The institutions get bigger, richer and better while Joe Average goes and cries in his beer. Funny how things work.

From what I see, the "end" may be near. Now mind you, not the end of the US as we know it, but an end to that pain.

Hopefully the consumer and the government will learn to save a bit and not let people have credit who have consistently proven that they do not deserve it.

Good Luck,

Mr. Boo.