I disagree. If Italy gets to the same point that Greece is at, Europe will have a crisis that causes more global financial loss then did the U.S. mortgage debacle.....and that's just Italy. What happens when Greece, Italy, and Spain topple? Or all of the PIIGS? This European debt crisis is far more serious than the U.S. mortgage debacle both in the severity of loss and the inability of over-indebted governments to be able to do anything to prevent it due to fiscal inflexibility from decades of overspending.
Value investing is all about downside protection. Do you really believe that stocks are at reasonable prices assuming a worst-case scenario?
U.S. businesses are in a much better shape than they were in 2008, but sovereign entities are not. Thus, if we dip back into a depression (assuming we ever really recovered from the last one) we won't see the same kind of steep 2009 recovery that we saw before that was induced by trillions of government stimulus because the governments will not have any flexibility to spend anymore or borrow anymore. Try to convince companies to spend their cash piles going into such a depressionary environment.
I'm no expert about what is occurring in Europe, but it seems that a Greek default is all but inevitable and is likely the best solution in terms of biting the bullet now for a better long-term outcome. Beyond that, I think there is still the possibility for other countries and their banks to be spared; however, there is no guarantee of this. Whatever the outcome, we can be certain it will be painful for the entire Euro area, and thus will be painful for the U.S. and the rest of the global economy. It seems like a decade of flat/declining equity markets may be just what we have ahead of us. Japan lost two decades and had long-term spouts of deflation even though the global economy wasn't in a recession. Can you imagine the global consequences if both the Euro area and the U.S. go into a decade or two of little to no growth and are in deflationary depressions?
This to me would suggest that markets are actually UNDERREACTING and that we could certainly go much lower. I'm not a fan of speculating in commodities, and I do not personally own gold, but I think that equities will go much lower and gold will go much higher before this is all over. Market timing is near impossible though and I could always be wrong. I would think that beginning moderate positions in undervalued companies now would be a good idea, and to add to these positions slowly over the next two years.
I think going forward is going to be a once in a lifetime opportunity for stock-pickers/value investors; however, it's going to be a very rough ride. If you can't stomach extreme volatility, you may consider other investments outside of stocks, bonds, and commodities over the next two or three years.
