Thoughts from Keynes and overshooting

There has a been a lot of talk about speculative bubbles and how they can push prices higher but there has been less talk about overshooting on the downside. A speculative bubble burst could represent the current situation. We have moved from euphoria about gains to depression about loses; consequently, using concepts about fair value may not make much sense. Stocks may seem cheap but they could get cheaper as the overreact continues.

As Keynes stated,"the fundamentals can stay irrational longer than you can stay solvent."

Until the markets believe there is a return of some rationality there will be continue decline to the downside bubble.