Dead and Deader

Dead and Deader

Phil Davis of Phil's Stock World is sounding a little bearish.

Excerpt from Stock World Weekly

Redrum, redrum, REDRUM!

OK, if you haven’t seen “The Shining” that may not make sense but the short story is Shelly Duval should have listened to that crazy kid and gotten the Hell out of that house. That’s how I felt about the markets after reading Wednesday’s Beige Book.

Hsac, hsac, HSAC!!!—would be more accurate (and if you can’t figure that out, perhaps you should stick to Cramer or some simpler form of financial analysis). In Wednesday morning’s post, I point- ed out that Hugh Hendry, one of the only analysts I actually respect, had said “Bad things are going to happen and I still think the closest analogy is the 1930s” and we discussed the massive drought in the US and how conditions are, indeed moving towards what we did have in the 1930s—from the record income disparity to the rising unemployment to the destabilization in Europe... No wonder I titled Thursday’s post “Déjà Vu All Over Again.”

It’s a shame that we waited all this time with our cash only to finally see opportunities on the short side but we need to play the cards we are dealt. Yes, there are many companies that do seem cheap—just as there were many companies that seemed cheap in July of 2008, when we slipped from 14,000 in October 2007 to 11,000 on the Dow and seemed to find a bottom. In October of 2008, things seemed even cheaper as we held that 8,000 line—who knew we had another 20% to fall after that and wouldn’t see 8,000 again until the following April?

Our only bullish premise since we bought at the June bottom was that we would get some form of stimulus to move the markets higher. We were not deluded into thinking things were actually fixed, nor do we think that the stimulus (if it ever comes) will actually fix anything but you can inject a few hundred cc’s of adrenaline into a guy who’s pretty much dead and still get a reaction—that’s all we’re expecting—just a little reaction to some additional stimulus.

But what if the stimulus doesn’t come? Then all you have is that economy that’s pretty much dead and getting deader every day. Even worse, all of the economy’s friends and neighbors are dropping like flies and not only does Uncle China seem unwilling or unable to give us a transfusion but he’s starting to look like he may be about to keel over as well.

Riots, chaos, mayhem—these are not the earmarks of a contented society. To watch the financial news all day is to miss out on what’s really going on in the World, which is inhabited by the bottom 99% and the bottom 90% of that group are in dire straits indeed. 

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