I’ve mentioned the idea that XLF must lose at least 80% of its value from peak for the US economy to have bottomed out. Yesterday, perhaps as a house-warming gift to Pres. Obama or a moving present to Pres. Bush, the markets tanked and XLF fell to its all-time low of essentially 8. Since it peaked at almost 32, that’s close to 20% of its value.
Two ways to look at this:
- XLF has hit 20% and bottomed out. We’re in the recovery!
- XLF didn’t actually hit 20% and should really be closer to 5 before a recovery starts. We have a long way to go.
I can’t say which is true but note that the UK has scared the financial world with this week’s revelations. There are many more skeletons left to be found. It’s like Belle Gunness’s yard out there.
My guess, which is entirely speculation and should not be treated as anything but that, is that XLF won’t have bottomed out until at least March, perhaps May. A bottom closer to 10% of peak seems more reasonable, given what was wrong in the financial sector.
This means that you have only a limited amount of time to revamp your career for the recovery. Time to get started if you haven’t already!