So, here’s the deal:
I decided to take a couple of days off from the market to immerse myself in all things related to construction and home improvement. Why I left it until November to put an addition onto the addition on the west wing of the cave is a mystery. Just know that being the DIY’er that I am, I’ve had rocko amounts of fun with with power tools and nail guns. My hired help has stood in amazement at my construction skills, as I’ve handily and effortlessly, chopped up 2×4’s and 2×6’s like a madman at a Canuck sawmill .
Speaking of chopping stuff, I see that Mr. Market has been chopping off bull balls lately. I’ve backed off from my long positions (again).
So, have I been taking losses upon losses like the degenerate offspring of Bill Miller, you might ask? Not really, as unbeknownest to you, I put on some [[SDS]] yesterday, in between a coffee break and lunch. My equity position is now 5% net short (again).
Now that we are a year into this credit crisis, the potential for further writedowns and the continuing deterioration of economic numbers has elevated risk to another new level. In this environment, the impact of monetary policy is weak. Confidence in the system has to be restored, credit needs to flow freely and housing needs to stabilize before we see any kind of sustained recovery in the market.
Our economy will continue to be a loser until at least the 2H of 2009. Euroland and Nipponville will face an even deeper trough than ours. Globally, more rate cuts ahead, as the credit crunch and the recession dominate Fed and fiscal policy.
There is nowhere for investors to run and hide. People should even be cautious about bonds out farther than one year, for as the credit crunch eventually clears, and growth begins to emerge, bond yields should move considerably higher, as investors move back into the market.
That said, for those taking a longer term view, there are attractive valuations in stocks right now. I think one strategy to play this would be to simply divide up your capital into numerous pots and trickle money into the market at various levels and intervals into the megacap, dividend payers.
Back to work.
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