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What Do Terms 'Bubble,' 'Crash' Really Mean?
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The Dow Jones Industrial Average, the tech-heavy Nasdaq and Standard & Poor's 500 each have lost more than 20 percent of their value over the past eight trading days. So, technically, Wall Street is crashing.
But that's not the scary part.
Historically, crashes have behaved pretty much the same way -- the thing that crashes loses about 75 percent of its value over time before recovering.
For instance, the Nasdaq peaked at about 5,000 just before the tech bubble burst in March 2000. It bottomed out two years later at about 1,200, having lost 75 percent of its value.
Does that mean that we're looking at the eventuality of Dow 4,000?
"Dow 4,000 would be an insane extreme, but this will get worse before it gets better," Hanson said. "I say that not with any fundamental evidence, but because the consensus seems to think that and they vote with their dollars in the market."
The housing picture is a little more promising, Hanson said: Your home may lose 20 percent of its value, as it may have already, but the market is not so oversaturated that your house is likely to lose at least 75 percent of its value.
