Could this ugliness take another four-and-a-half years to run its course? That is the clear implication of the chart below. The deceptively demure graph, from economist Martin Armstrong, has taken on a significance and credibility it didn't have one short week ago, when I reproduced it in the Intraday Notes section of Rick's Picks as the stock market began to unravel. At the time, the chart was merely predicting a major top based on an 8.6-year business cycle that Armstrong had described nearly a decade earlier. By Tuesday afternoon, however, the chart was evolving from prediction into manifest fact, and the ensuing days of pain on Wall Street have turned Armstrong, currently in prison for stock fraud, from rumor to legend. If we have indeed begun a bear market that is not slated to end until late 2011, as the chart implies, what might lie ahead for the economy? My guess is that mounting worries about the stock market are about to deliver a devastating blow to a housing sector already verging on collapse. It doesn't take a rocket scientist to see that that a full-blown housing bust could further depress stocks, setting in motion a destructive spiral as powerful as the financial-asset boom that preceded it. 'Unthinkable' Has Arrived Fed to the rescue? For years we've been hearing that the central bank would never allow such a thing to happen. Well, it is happening, or at least it is beginning to happen, and the Fed has barely shifted gears. Meanwhile, for all of his unconvincing talk about the supposed threat of 'inflation,' one could say in his defense that Bernanke has merely been trying to distract us from the infinitely worse menace of deflation. To believe otherwise is to infer that the guy lacks the intelligence and the imagination
LATEST TRADES
