Walter Morton

Headed For a Normal 20-30% Correction

Past cycles can be of limited use in future predictions. While there are lessons to be gained from studying history, this approach has definite flaws as well. You can say the market has changed, and matured, and globalized, and resembles little the market of 1929 or 1979, but that does not really help you predict 2009. Events of an unprecedented nature will be a part of the next decade, any of which could have huge impact, potentially much larger than the mortgage failures, including:

1. Oil at $150 a barrel due to "peak oil scenarios" or expanding wars around the globe.
2. Global warming impacts to farming & agriculture, etc.
3. The dollar collapses against world currencies to a new low.
4. China replaces us as the "#1 superpower nation."
5. A serious plague, earthquake, hurricane, or terrorist strike in the continental USA.

Any of these, or a combination of them, could take the Dow down by half, to 6000. Personally, I am usually a bullish investor and have done well in the last year on Apple, Cisco, RIG, XTO, etc. but it is highly possible that a "perfect storm" of events could set the markets in the USA back for a decade or more of bearish trends. Where to stay safe? Who knows? Cash, CDs, foreign bonds, gold -- your guess is as good as mine.