UPDATE

many people, including asset managers appearing on cnbc/bloomberg, in the us and those in hk do not realize how bad the situation is in the usa.

the reason is very simple, they focus on historic statistics, like pe; length of recession; peak to trough of markets etc, which first of all do not really apply in the current mess. the problem for this long and severe downturn is because there is a basic change in the lifestyle of americans. they, in aggregate, started to save [for survival purpose] due to massive unemployment in a very short while.

there is an american saying - it is recession when your neighbour is unemployed, it is depression when you are unemployed. the fact now is both are unemployed.

in past recessions, people can fall back to low salary jobs in the retail sector. because people started to save, no one is shopping anymore. this also causes further unemployment in the retail sector and vacancy to rise in malls. when malls become 10, 20, 30, 40% vacant, shoppers start to desert them for more crowded ones. this in turn causes rent to fall and investors or reit unable to service their debt and further drop in prices of these mortgage backed securities [mbs] if the loans have been securitized.

the reason for such low salary in the retail sector is because it does not need a lot of skills and a lot of labor supply. imagine the us has 70% of the economy based on its internal demand. the retail sector is a much bigger sector than most thought in terms of employment. contraction and more stringent conditions in consumer credit is also one reason that people are forced to save. simply look at the drop in exports of japan and hk to the magnitude of 40+ and 20+% respectively, you can tell how hard people in the us started to save or at another angle, they do not have money to spend which draws a similar conclusion.

the us is now in a vicious circle of credit contraction, unemployment leading to further credit contraction, foreclosures, defaults in every kind of debt [consumer, commercial, property related etc], price destruction in mbs.

when will this cycle be broken? only history can tell, but there are telltale signs when this happens. look for long dated treasury yields to rise above 4-5%, share price of apple above 100, oil price closing up to 60/70s, us govt loans to finanicals are partially repaid.