[Porsche-O-Phile]

(1) Psychological damage (a prelude to capitulation, which is necessary before a "bottom" is reached and a reversal starts)

(2) Job losses (the same Wall St. that normally celebrates payroll cuts is starting to get nervous that nobody will be able to afford/pay for goods & services now... Duh)

(3) Housing (still - it ain't going away). Prices still WAY too high, lending becoming way too restrictive, tons of excess inventory, tons of crappy mortgages still poisoning the system in the form of MBS-es, etc. The poison needs to work its way through - this will take years, if not decades.

(4) Desensitization to Government Action - the numbers like "billions" and even "trillions" are just not registering anymore. The government could announce a 20 trillion dollar infusion of cash into Main St. tomorrow and I doubt it'd do much. It's starting to look too much like "panic" rather than "quick, decisive, bold action".

(5) Decoupling of Dollars from Value - this is what I honestly think the #1 underlying cause of the problem is - and it's been exacerbated by overreliance on credit for the last 20-30 years. The concept of a "dollar" as a unit of money having a certain value has become disconnected from peoples' psyches. They don't think of money as money anymore. It's just numbers. It's not thought of in terms of value or work required to obtain it (to pay it back). It's just numbers on a piece of paper. This was probably (IMHO) the #1 reason for the housing bubble. People just COMPLETELY lost touch with what the value of things was and how to represent that in terms of the base unit of currency (the dollar). The numbers became so wildly de-coupled from reality it was unprecedented.

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The bottom is coming. My prediction right now is that when the DOW hits the "psychological bottom" that the market tried to establish back in November, it'll PLUMMET for a week or two and settle out at a new low - probably someplace in the 6000s. That's where it will really settle.

I honestly do think the DOW is overvalued slightly (maybe 10% or so) - even now. I'm considering shorts on the index...