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.