As we sit and watch the Dow finish down 250 points, after being down as much as 550 intra-day, we have been engaged around the desk in a lively game of 'How low can you go?' While only time will tell definitively, it certainly appears markets have been forming the most obvious top for risk assets in recent memory over the past 9 months.  Real estate activity hints at a similar conclusion:  Frenetic activity at the high end of the residential market in 2015, endless supplies of condos, apartments and new office buildings coming on line, and real estate equity and debt fund raising hitting extremes.  It all looks eerily familiar.  At the same time, it certainly feels like we are hitting the exhaustion point for central banker monetary magic.  

Of course, the real art for professional investors when markets are transitioning from 'normal' - when borrowing and lending is largely functioning so asset prices are more or less 'rational' at least as measured using manipulated interest rates - to 'distressed' - a delevered state where assets must fall to (or below) prices where 'real money' wants to own them because borrowing and lending markets are not functioning well - is to know how many days to keep talking about it before actually doing anything!  History has been anywhere from three months to two-and-a-half years for peak to trough unwinds of past excesses.  Similarly, asset price declines have been as shallow as 20-25% and as deep as 80% plus.  Given the size of the imbalances created over the past 15 years and the level of asset inflation achieved, we suspect this unwind through the full distressed cycle to a largely delevered state may be longer and deeper than average....  The waiting, til the right moment, is the hardest part (with apologies to Tom Petty)!