One of the implications of Peak Credit is that financial earnings have peaked. And because of reduced leverage, earnings in the financial sector are not coming back for decades. Those earnings were all a mirage in the first place.
Next consider homebuilders given that lending standards have dramatically tightened at banks. Those profits are never coming back. What happenes to profits at major pharmaceuticals if and when the Obama administration allows drug imports from Canada and other places?
One must also factor into the earnings equation boomers facing retirement in the wake of falling home prices and retirement accounts taking a cliff dive. Trillions in potential spending power has been wiped off the books.
Expect boomers to travel less than expected, buy fewer toys (boats, cars etc) than expected, gamble less than expected, and downsize much more than expected in every aspect. This in turn will reduce the earnings potential of non-financial corporations for decades to come. Thus expectations that a new rip roaring bull market will commence once the market bottoms is sadly misplaced.
In the meantime, remember that rising unemployment, rising credit card defaults, rising foreclosures, rising numbers of walk aways, and declining earnings of non-financials means we have not even bottomed yet.
This secular bear market will last a lot longer and be much deeper than anyone thinks. Sadly, very few are prepared for it.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
