Bomb Shelter Economics

So the market is down a noticeable amount in the last few days and we have a new and lousy jobs report to chew on. Sentiment was great last week and now people are coming out of the woodwork today calling for double dips or a depression (look at my twitter feed today). It is very difficult to believe that things have changed that much so quickly. In fact I doubt they have.

Taking in a lot of differing viewpoints is very constructive in terms of learning and formulating your own assessment. But where economic and stock market cycles are concerned things do not change on weekly basis. Trends can change very quickly but not cycles.

My thesis all along has been that the worst financial crisis since…can’t resolve in just a couple of years. That does not have to mean Armageddon but we should expect many bumps in the road on the way out of this and we know from past cycles that feel good rallies during the worst of times can be enormous. At some point someone coined the term stumble along the bottom which I took to using. While I suppose that term could mean different things to different people I believe this is what we have been encountering and will last a little longer.

The issues confronting the US are threats to the system which go beyond normal cyclical contractions. Most other countries have only encountered (maybe slightly worse than) normal cyclical contractions. Europe and Japan as exceptions.

I do believe it will slog on for a while longer as more of a malaise than Armageddon but regardless of the outcome (malaise or Armageddon) increased exposure to foreign assets will become increasingly more vital for US based investors.

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