A New Month

After those fine breakfasts of fried eggs, Spam and Valveeta this weekend, I realized how I felt about the markets after the events of the past six weeks. I felt just like I did after the Crash of 1987 - a bit stunned and even more disgusted with the markets and the panic. My guess is that huge numbers of "investors" have similar feelings. Hiding in cash was the wrong move then. Is it different this time ?

Economically, the time periods are quite different. This was mostly a panic of the rich, but the underlying economic problems were twofold: (I) a gross overvaluation and overbuilding of housing primarily in CA, FL, NV, AZ and a few places like DC, and (II) an oil and commodity bubble caused by pension fund and hedge fund speculation. Both events caused real economic shocks that in normal times would have, and were, causing a slow growth period. Toss in the panic of the rich and foolish pharisaic libertarian Republicans and ... voilà ... a harsh bear market, credit crisis and recession ensue.

What is left to fix ? The price of residential real estate in CA, FL, NV, AZ is getting close to true values based on incomes of the residents. Oil prices are back to longer term trend values. To fix is whatever damage was caused by the six week credit panic and the momentum and expansion of that damage. Perceptions are damaged, too.

Perceptions can change quickly. Damage caused from the credit panic can be quickly cured with extensions of credit. The cures and cash are really being pumped rapidly into the economy. The Fed rate cuts help anyone with floating rate loans, such as Prime Rate home equity loans. And the lower oil prices save people money at every fill-up.

I think this malaise will quickly dissipate as the reality of the damage is that it's not as bad as the talk nor is it permanent. But of course, I'm an optimist.

Actions

Doing nothing. Alpha Fund had a good week and is about 150% long.

Word of the Day

"Monad" - noun [$10]; also monadic (adj.) and for sense 2. monadism (n) = monadology (n).
Monad means the number one; a unit; 2. (philosophy) any ultimate unit of being (e. g. a soul, an atom, a person, god); 3. (biological) a simple organism, e. g. one assumed as the first in a genealogy of living beings.
Monadism = Monadology means 1. the doctrine of monads as the ultimate units of being; 2. (sometimes upper case 'M') the philosophy of Leibnitz.
Sentence: The monad of the US Presidential election is the electoral vote, which was created by the framers of the Constitution as a compromise among the larger and smaller states to balance population with regions.