Lessons Learned

Failure is the strongest motivation to change behavior. Buying distressed assets rewards the same behavior that got us here in the first place. The moral hazard remains when the government steps in to save the skins of those who brought us to this point in the first place. Any parent knows that rewarding bad behavior in children only leads to more bad behavior. Why should our government reward its misbehaving citizens at the expense of its well-behaved ones. Quoted from a respected market letter. We could not have said it better and would add, this market correction will not be over until many bankruptcies are allowed. Debt can not be just rolled and rolled. It has to be reorganized in a civil manner and then written off or converted to some new form of equity.

Hedge funds are now sitting on a record $155 billion in cash or 8% of assets. We have a record short interest outstanding as a percent of daily volume. And the problematic hedge funds are begging their "investors" to stay with them if they lower all their fees. "So many people don't know what is going on." The consensus is now for a hard landing in China...and probably for the rest of the world.. And the word DEFLATION is being tossed around. Remember the consensus has been wrong at all market tops and bottoms.

Central banks around the world, which in a coordinated effort, now three years old... have succeeded in strangling all capital markets primarily to deleverage the markets and secondarily to fight perceived inflation. They have won on both fronts. Now we'll see how smart they are and begin to reverse the stranglehold......interest rates and lending polices have to immediately go lower. We'll see in short order....if not... the stock market trending lower will persist....if not accelerate.

Solar activity (sun spots) cycles have gone to zero....the past month and a half....for the first time since 1913....or nearly 100 years. This has always been followed by severe cold cycle measured in decades. This is going to be a long winter ahead. Does anyone mention Peak Oil anymore?

Danny Boy seen here on a true sky blue day. He stays warm all winter.