2016 Continues to Look Like 2008

Several weeks ago when I was ranting how 2016 looks nothing like 2008, 2016 not a 2008 Redux and later The One Comp to 2008 that Does Hold Water I compared the January 2008 period to that of 2016. It’s a comp that continues to make the rounds so here it is updated, yet again.

2016 2008

If this comp continues to work, which they seldom do to fruition, here’s what’s coming next.

2009

Remember, the January 2008 decline was 20% all in and 2016 was roughly half that if you are looking to forecast the magnitude of the current rally.

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2008 Redux This is Not

2016 is just a week old, yet all I am reading and hearing is that it’s going to be a terrible year for stocks and similar to 2008. 2007 – 2009 was a generational bear market, the likes of which have only been seen during the Great Depression. These types of strong deflationary spirals take decades of mistakes to create and leave investors scarred even longer. In the western world, we have never, ever seen a repeat within 10, 20 or even 30 years.

Heading into 2008, the housing crisis was already in full bloom. Leverage at the banks and on Wall Street was at epic levels. Corporations had very little cash on hand to buffer any weakness. Today, the massive leverage has also been purged from the system. Banks are sitting on more than $2 trillion in cash and corporations have another $1.5 trillion. Housing is stable and lenders are tight with their money. The economy may not be hitting on all cylinders, but it’s far from teetering on collapse. There are no Lehmans, Bear Stearns, Fannies, Freddies, AIGs and the like hanging on by a thread.

To compare 2016 to 2008 is either grandstanding or just plain ignorant.

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