Saturday, April 11, 2009


After 18 months of misery the concoction put before us tastes pretty good. Just one sip and you're ready to believe that all is well and good times are here again. But they aren't. Don't drink the CNBC kool-aid. Even a packet of Fed largesse and Government stimulus isn't sweet enough to drown our past sins quickly. All segments of consumer, business, and government drank a debt version of kool-aid and look where it has taken us. Our society is going to de-leverage and it is going to have a bitter taste, not a sweet one like the first 6 1/2 years of the century. 

Conserving capital is more important than missing a rally. Unless what I think is kool-aid is really a magic potion, we have more bad time ahead in both the economy and stock market. Any market recovery will not be across the board so index funds will not be attractive. Debt laden companies will be especially vulnerable as banks turn conservative and credit markets stay with a new found respect for caution. Restructurings will become commonplace. Earnings growth will be anemic and it will take years to return to the peak profit years.

If tempted to drink, take only a small sip and be ready to spit it out.

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