Last November I predicted that the stock market would bottom out somewhere between five and six thousand points. It looks as though we'll be there soon — the Dow closed today below seven thousand for the first time in almost twelve years. I also said that once the Dow dropped below six thousand it would probably rebound to slightly above six thousand and hover there until a general economic recovery kicked in.
The Dow belongs at just above six thousand, since that's where it was before the high-tech bubble, followed by the real-estate bubble, inflated the value of stocks irrationally.
At the same time, though, I predicted that if the Dow dropped below five thousand, which remains a possibility, it would signal a total collapse of confidence in the system and its ability to recover. This would probably lead to a worldwide panic, plunging us into a catastrophic depression from which we would not emerge for decades.
In other words, it's crunch time — a favorable moment, perhaps, to stock up on canned goods and gather a supply of cash or, better still, gold, for a potential emergency.