What price sustainability?

So with all the fear and loathing in London at the moment, where exactly do markets have to fall to before we can touch the bottom?

I think it all boils down to what the real economy can support in terms of inflation adjusted growth. The graph shows indexed prices for the Dow Jones Industrial Average, the UK Nationwide house price index and spot crude oil prices.













I've indexed them to around 1973 both because that's the year I was born and also because that's the year the Black and Scholes option pricing formula was unleashed on the world. I'm not necessarily saying that derivatives are bad but they do tend to create leverage which outstrips natural growth with inflation. Hence the reason why we need to come back to roughly where the green line is. Looks like the Dow is almost there now, give or take a couple of 100 points.