How about this? On a rebounding day, let's play 2008. Let's see if it makes sense, especially in light of the fact that we could rally today when everyone figured we would get another shellacking. If this is 2008, then the following would happen: Many of the large financials would get wiped out. Under a 2008 scenario, the U.S. government has to take a stake in Bank of America (BAC) and dilute the common.
The dividends of all banks would be suspended. Wells Fargo (WFC) and Morgan Stanley (MS), trading around $12.63, would trade to $7, and this time Morgan Stanley would get bought by somebody. Maybe a shotgun merger with Goldman Sachs (GS), now trading around $89, would go to $48. The U.S. government would have to bail out General Motors (GM), again. This time Ford (F) would have to go - its balance sheet doesn't have enough cash. This time, Buffett doesn't have enough money, because he already bought a lot of stuff.
We would see a dramatic cut in the dividend of General Electric (GE). We would be looking at the collapse in credit that would cause Caterpillar (CAT), Deere (DE), Joy Global (JOYG) and Cummins (CMI) orders dry up.
If it is 2008, then we will have to see the dividends of Verizon (VZ) and AT&T (T) at risk. We will witness many of our $10 stocks trade to $5or $4 or $3 or $2 or $1.
If this is 2008, Target (TGT) would have to be cut in half. Macy's (M) will go to $5, where Chapter 11 will be talked about. V.F. Corp. (VFC) trades to $37 on a collapse in orders.
If this is 2008, then the Hartford (HIG) would go to $2, and AIG (AIG) would go belly-up all over again.
If this is 2008, then forget about the rails; they'll get cut by almost -thirds. How about CSX (CSX) at $6? Union Pacific (UNP) in the $30s? Makes sense to you? Ready for Conoco (COP) at $34? Chevron (CVX) at $56? You better be.
If this is 2008, then in March 2009, we would reach levels that would place most of the Dow Jones Industrial Average components down 40% from here. Realistic? Make sense to you?
Maybe now you see why I have so much trouble with the 2008 analogy. Do you know that every single one of the companies I mentioned is doing much much better? That the balance sheets are dramatically improved? Do you know that we have so many more safeguards this time around? Do you know how much cash there is available?
Believe me, it is much easier to say, "We are in 2008." No one will criticize me if we aren't. Maybe I can be like Meredith Whitney. Who wouldn't want that honor. But I am stuck with the facts. When I abandon them, I have no grounding and no basis to conclude things. I run the risk of saying something that makes people get out now -- a call I made in 2008 when we were right here. It was the right call to make last time around. Because of the soundness of all of these companies, however, it seems like the wrong thing to say here.
This is a rough moment. How much can the imminent collapse in Europe hurt us? Maybe 10%, 15%? Maybe the worst will be over when they finally throw in the towel on all of these stupid half measures? China's slowing. Could they have a hard landing? Does that take us down another 10%?
Either way, we are not back to 2008's levels. And, I think those are extreme predictions.
So, go ahead and say it is 2008 in the privacy of your own home. Right here in these cyber pages I tried to figure out, at the bottom mind you, how the Dow could trade to 5000, down 50% from here, and it required tons of dividend cuts and bankruptcies. I just couldn't get there. Despite the much bandied about similarities, I am struggling how to get to 6500.
It sure sounds portentous. I can really intellectualize it and throw in some solid fear mongering. Whole networks blamed a huge decline on me telling you to sell everything in order to raise cash for your needs for the next five years.
All I am saying now is that we can go lower and that we might have a better moment to buy and a better moment to sell.
I think I am being constructive in a less destructive kind of way. Nothing more than that. I just can't get to 2008, though. Wish I could, I would love to have the company of misery and get with the short crowd. But, the facts don't let me, and, in the end, all I have is the facts.