I'm sure most people know the five stages of grieving. Denial, Anger, Bargaining, Depression and Acceptance.
Let's apply this to a bear market shall we.
Remember late 06 and early 07? Remember the repeated calls of a bottom in the housing market? DENIAL
Now let's fast forward to summer and fall of 07. The market makes it's initial decline as the bear market gets underway. At this point no one could deny that housing had been in a bubble and that bubble had burst. Now the world started looking for a scapegoat to focus it's wrath on. Predatory lending seemed to be the convenient target. It was the mortgage lenders fault. Definitely not the fault of all these people buying multiple homes and lying about their incomes. Definitely not the fault of home owners extracting equity out of those homes to buy cars, big screen TV's and go on vacations. ANGER
Now the government has jumped into the fray with plans to fix these problems. First off lets just let the Fed monetize bad debt. Maybe banks will forgive part of the loans. Or the government will give the states money to prop up prices so people that made bad decisions won't have to pay for their mistake. Hell they bailed out Bear Stearns. BARGAINING
There are two stages still missing. We need to move on to depression. At some point the world will realize that these problems can't be quickly fixed. It's going to eventually dawn on investors that in the end these people are going to have to face up to the fact that this bear market is going to play out till the end no matter what the government does. People are going to have to suffer the consequences of their actions. DEPRESSION
Finally the market will realize that there's no way around this and it will accept the fact that the cleansing process is necessary and once it's over the world can start fresh again. ACCEPTANCE
Then and only then will the secular bear market be over. We are just now transitioning from anger into bargaining. Despite the 3 month rally the housing collapse and credit bubble deflation is no where near done yet.