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Just as market tops are marked by expectations that economic strength will persist indefinitely, stock markets hit bottom when an economic downturn is taken as full fact, when conditions are widely expected to get substantially worse, and when investors have largely given up on any hope that the economy will improve in the foreseeable future.

With the U.S. Dollar Index breaking decisively below its long-term support level, the sun is finally setting on the golden age of American consumption. As America's economic dominance fades, so too will the faith in the central thesis that has explained its apparent success and has shaped the majority of recent economic theory.

...A proper bailout must take a completely different approach and cannot be limited to “just” a quarter million homeowners. Someone who purchased a house that is too expensive to maintain is best helped by downsizing to a less expensive home. However, homeowners are often “locked into” their mortgages as the mortgages are higher than the market value of their homes. Leverage is great when home prices are rising, but is painful when prices are falling.

http://www.321gold.com/editorials/saville/saville073007.html

http://www.fpafunds.com/news_070703_absense_of_fear.asp

The U.S. trade deficit with the rest of the world leapfrogged in recent days: aside from goods and services, we are now importing “consensus based crisis management” from Japan. Out of fear that a cleanup of bad loans would trigger widespread defaults, Japanese banks got themselves deeper and deeper into trouble by hushing up the problems. We are talking about the crisis at Bear Sterns’ subprime hedge fund.

http://www.dollarcollapse.com/iNP/view.asp?ID=55

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Let's look at this argument closely. First, why does Siegel say that the earnings yield is an estimate of the real return on stocks? Think of it this way. Reported earnings subtract out depreciation, which is another way of saying that earnings are reported as if the company reinvests only enough to replace depreciation and keep its stock of productive assets constant over time. If the company were not to invest anything for growth, it would theoretically be able to pay out all of its net earnings as dividends. If earnings on the fixed stock of capital could grow at the inflation rate by virtue of monetary factors alone, you would get zero real earnings growth. Then holding valuations constant over time, the earnings yield would be a measure of the real return on stocks. Fine if you believe the assumptions. Now let's look at the data.

http://www.321energy.com/editorials/taylor/taylor040307.html

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Remember also that banks operate on a ratio of about $10 of assets (generally loans outstanding) per $1 of shareholder equity capital. So a 1% loss of existing loans can wipe out about 10% of shareholder capital. Since banks are required to hold such capital against their loan portfolio, wiping out capital also wipes out part of their ability to originate new loans. Importantly, bank capital requirements are a separate constraint from the reserve requirements placed on a bank's demand deposits.