I am seeing things clearly now

Just got back from a one week vacation in Seattle and Vancouver Island in Canada. Was a really fun trip and I even caught up on some sleep!

I was also able to organize my thoughts a bit more on the debacle we are facing right now in the markets. My end conclusion is ...... lets be bears. We are still in the relatively early stages of the debt deflation cycle. Real estate prices are down 50% in my home town but the banks have only written down 5% of their loan portfolios. The banks are insolvent. Credit is being choked off to the economy as we speak. So we are going to have a bad recession.

What's the take away? Lets be bears. Lets short the bad sectors of the market, or sit in cash in strong currencies (i.e. not dollars). Back during the mania in 2000 when so many of the technology related companies fell 90% or even 99.9% many value hounds including myself wanted to go long while we were still in the bear market (aka - circa fall of 2000). Bear market went on for another 2 years! - with market not finally bottoming until fall of 2002.

We are maybe twelve months into a bear market that should be worse than the prior bear given the deflationary debt spiral implications of massive bank failures (props to Irving Fisher). So we'll let the rally run some more. Maybe we have another two weeks of the bear market rally left with a nice bump after the Fed meeting tomorrow. But lets not kid ourselves - we are in crisis mode in the economy and banking sector and it does not get better in the foreseeable future. So after the rally we reshort and trade this sucker.

-BG