Timing and Politics

The big question is what is Mr. Stock Market telling us....what is it discounting...what is the future of the USA and it's earning power.

From an editorial in the WSJ:
"Whenever any citizen is exempt from having to pay taxes, the untaxed citizen has little incentive to insist upon a responsible government. If we allow the tax rolls to fall to 56% (proposed), then we will soon be dangerously close to a tipping point where the majority of the public has no stake in insisting that politicians stop wasteful federal purchases and subsides to special interests."

A quote from a money manager, "In our experience the first default waves are largely made up of the weaker companies whose bonds have the lowest recovery values. As better quality companies come under pressure, higher quality assets come into the market and thus better recovery scenarios are realized. The experience of many investors with Leveraged loan investments made in late 2007 and distressed asset-backed securities made over the past three months show that being too aggressive too early can be painful. While one can never perfectly time investments, (the) goal has never been to be the first one to dive into water: it is more prudent to assess the depth first."

There were only $300 billion of bonds and Leveraged Loans due in 2008. They jump to $600b in 2009 and almost another $500 billion in 2010. Again we believe all things related to leverage are going to be in work outs for years....at much higher costs of capital....no need to chase distressed debt.

Crowd theory and herd mentality are making far too much noise right now. Everyone is bearish, lowering estimates and price ranges.....just as they did the opposite this past spring.....typically Wall Street makes these lows and highs at important market junctures...i.e. the street is usually wrong at the wrong times. This creates opportunity for long term investors.....far too many people are bragging about cash stock piles. America's greatest branded companies rarely have been this cheap or attractive in a global business environment and the envy of all its competitors.

Danny Boy seen here sees snow clouds on the horizon.