The crisis moved in for good, and the headlines took on an apocalyptic cast

An interesting quote below from Mohamed El-Erian, Co-CEO at PIMCO on the change in market psychology we've been witnessing over the last several months:

"In spring the real estate crisis moved in for good, and the headlines took on an apocalyptic cast. In June the stock market, which had been gradually declining, went into free fall. Skyrocketing oil prices was one factor. Staggering losses by banks and the freeze-up of the credit markets were another. Escalating grocery bills didn't help. It feels like there was a switch that occurred overnight, we went from one regime to another. The markets flipped from optimism to pessimism, plenty to scarcity, liquidity to de-leveraging, disinflation to inflation, stable asset prices to volatility.

The reality is that there have been a number of changes that have been going on for a while. They reached a critical mass and then started interacting with each other, and the dynamics became nonlinear. The financial innovations that had propped up a whole highly leveraged world went down like dominoes, and the party they underwrote -- the houses, the buy-outs, the hedge fund fees -- was over."