The Crash of 2008   

• The Great Depression of the 1930s scarred anyone who survived it for life. “The Crash of ‘29” is now deeply embedded in folk and market lore. But in the nearly 80 years (1929~2008) since the mother of all bear markets, what have we learned? Absolutely nothing!
• Judging from soaring credit spreads and imploding stock prices, the world’s central banks and national treasuries have lost control, despite having the benefit of Keynesian economic tools unavailable to their peers in the 1930s. In the year and two months since the crisis officially began (August 2007), we are no nearer reaching a solution. Indeed, the situation is getting dangerously worse.
• By all accounts, the crisis had its roots in the bursting of the US housing bubble and to a “shadow” banking system outside the control of conventional regulation. By Q2 2008, the Case-Shiller index of US home prices had fallen 20%, representing the deepest recession in the US housing market since the Great Depression. The YTD declines in the S&P 500 and the DJIA are the largest since the 1930s?but the US market has actually faired relatively better than other global markets. 
• Take the Japan’s Nikkei 225 for example. The Nikkei 225 has plunged 31% over the past 10 trading days, which represents the biggest fall since the index began in 1949. Last Friday, the index at one point plunged over 1,000 points and trading in the futures was halted in the biggest one-day fall since Black Monday in October 1987, or the height of Japan’s excess credit bubble.
• Bear market crashes end in only one way?exhaustion. The bottom will be signaled by one-day surges on huge trading volume that dramatically break the downward trend. While we do not know when or by what catalyst this will occur, we do know there will be at lot of screaming bargains to be had when it does.
• The Nikkei 225 is now trading at the lowest P/E ratio in over 37 years, dividend yields are back to 1975 levels, the whole TSE 2 is selling at a 50% discount to book value, and 84% of the TSE 1 is selling below book value.

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