Five in Five

When the nations largest bank goes up 50% in five days and the nations largest natural gas producer goes down 42% in five days these are moves that might be made in five years. Traders are right on schedule trying to figure out tops and bottoms. Percentage moves like this typically occur at new major inflection points. We think we are headed lower ether like the summer of 2002 or the summer like 1987. So either a slower trend lower (another 10 to 20%) over the next 6 months or a major gap down of the similarly percentage very shortly.

Remember our goal is to not lose money in 2008.

This is not your typical recession. Too many think it is....

The consumer is completely tapped out and will take years to rebuild their personal balance sheets. All the worlds equity markets will continue to be tested.

The next big test will be the private equity leverage and their debt short and longer term that can't be supported. A major auto company has some $30 billion in August to be rescheduled...it might not be...no one will want to buy their debt...this could be the first material bankruptcy and acid test of our thesis. For this trend to end we need debt to be either paid off with cash, not new debt, debt in a work out with conversion to new equity or simply the complete write off of these liabilities not write downs.

Keep your powder dry

Danny Boy seen here nibbling on the ball, killing time.