[Porsche-O-Phile]

Sadly I think you may be correct. There are a lot of factors lining up very badly and while I hate to be "doom and gloom" about this, I've been using the "D" word for a while occasionally in conversation now for several months.

I see our prospects as roughly:

5%-10% chance of recovery and optimism within 2 years
20%-25% chance of recession lasting <2 years
40%-50% chance of a prolonged recession/stagflation lasting 2-5 years before any sort of meaningful turnaround
15%-20% chance of honest-to-goodness DEPRESSION with collapses of financial institutions, runs on banks, market crashes, etc.

It's a very real possibility. Here are some of the factors I see as very problemtatic for the economy over the next few years:

- blood-in-the-streets butchery of U.S. manufacturing and loss of jobs to China and elsewhere

- the insane/idiotic run-up in housing prices, making REAL homeownership (not "loanownership" impossible for many families)

- the ever-rising price of energy, particularly oil

- the extremely low prime rate right now (which doesn't leave much to cut)

- rising inflationary pressures (look at Ben Bernanke's comments today for more on this)

- continuing subprime volatility, resulting in (1) unease over lenders extending credit and (2) lots of uncertainty with respect to people not knowing how much "poison" they have in their investments, particularly M.B.S.es (Mortgage-Backed Securities)

- Strong probability of a Democratic administration for the next four to eight years, with associated increases in taxes, spending and welfare programs

- Possibility of a bailout program for subprime borrowers in trouble

- Exploding ARMs (my understanding is the peak of this will come late 2009/early 2010)

- Plummeting dollar value against foreign currencies



(I'm sure I'll think of more later, point is there's not a lot to be partying down about right now)