The bear market has a long way to go yet

In 2009, Companies will have to do everything possible to stay in business, and that means making big cuts in costs. Corporate earnings will vanish – and shares will plummet even further.

Primary equity bear markets to which we are now condemned, commenced from levels where prices were much too high and won't end until prices are much too low. Any premature expectation that the primary bear markets have ended is no more than a false dawn. De-leveraging, the unavoidable consequence of the credit contraction, is far from finished and will continue to create a never ending stream of forced sellers. Major stock markets should fall by as much as another 50%; in which case, FTSE will bottom out below 2,500. As unlikely as that may seem to some, it is no more than should be expected given the unprecedented conditions and the abiding lessons of history.

This paragraph was first published on 6th November 2008 in Issue Number 583 and is repeated each fortnight until eventually replaced.

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