COULD STOCKS GO THE WAY OF HOUSING...?
The problem with markets is that you need a seller AND a buyer...
With stocks...the market specialists play the role of buyer of last resort... No such buyer exists in the housing market...except perhaps the bank/mortgage holder in foreclosure cases...
But the stock specialists and market masters are not fools...they will not stand in front of the moving train...just to save the market from an over priced condition... We saw that this week when the market masters jump off the tracks during the China debacle...
So, while stocks may be somewhat insulated from the horrors of the housing market...they are not totally immune from the same "liquidity" problems many people are feeling in selling real estate in todays market...
If an asset is almost certain to go DOWN IN PRICE... Who is going to buy it...?
All rational buyers will simply stand aside and let prices fall to a reasonable level before commiting to a sale...
The big story of stocks in 2007 could be that they become more like real estate...and that's pretty scary...
