It is often said that the sure sign of a market bubble about to burst is when you hear incredible index forecasts from otherwise sensible analysts. Like last year, when we got a few forecasts of Sensex at 40,000 in 2008. The theory behind this theory is that, as the bubble reaches its limits, these rosy forecasts make everyone complacent and least prepared for the inevitable fall that follows. The more outrageous the forecasts, the more complacent people become – or so the theory goes!

By the same logic, we should be able to call the bottom of a downturn when the forecasts are the scariest. At some point, enough people may decide that it cannot get worse than this and start buying.

So, going by the predictions of total losses, are we anywhere near the bottom of the ongoing global credit crisis?

Way back in September last year, US Fed chairman Ben Bernanke put total sub-prime losses at below $100 billion. The number kept getting bigger and scarier in subsequent months as the crisis spread wide and far. The worst loss forecast was close to $500 billion by one of the big Wall Street firms, who still pretend to know all about the big picture though they still can’t get a handle on their own losses.

Now, the IMF has beaten them all with the biggest number we have heard till date. Close to $1 trillion, $945 billion to be precise! It still beats me why they didn’t add another $55 billion and made it a round and impressive number.

So, who all are going to share these nearly incomprehensible losses? Banks will be the worst hit and will account for nearly half of the total losses, the IMF says. Global banks have already provided close to $200 billion and have announced an additional provision of $80 billion this quarter. That means, the big banks will have to absorb another $200 billion – mostly on commercial real estate and consumer finance assets.

The other half of the scary number will be shared by institutional investors, retirement funds, insurers, hedge funds and so on.

Does the scary IMF forecast mark the beginning of the end of this crisis? Or is it just another number before an even scarier number overwhelms it? It maybe a while before we have an answer to that question.