Monday, October 5, 2009

Thoughts on the U.S. Economy - 10.05.09 - An Email Dialouge



Its funny you sent me this because I was just about to e-mail you an article of quotes from Roubini, Soros, and Geohegan. I do agree with this sentiment as you know I am bearish. The fact is that Valuations are too high right now. Also, as we see 3rd quarter earnings we will see bad top line numbers which will matter much more in economic growth, job creation, and undeniably equity prices. A W shaped recession would not surprise me at all. Seeing as we have pumped so much stimulus into a system that is now feasting on it. I think Sauros is right to "trade the fed" or central banks for that matter. Is deflation really a concern? May be. Could we see this equity market collapse again? 50/50. It depends on how much guts investors have. Will investors pull money out if the market starts to go down? probably. Think Cattle mentality. As you and I have even discussed, If the S&P breaks support levels around 1005 or so it could free fall. If this is the case it means two things for Analyze Capital LLC: 1. We need to figure out a way to play this as a "hedge." 2. "We will need to follow the economy and earnings very closely to determine equity prices in the near term. It is entirely possible that "trading the fed"/earnings going forward is the correct way to play equities. Only time will truly tell what happens.

I'll leave you with this. "When you do battle, even if you are winning, if you continue for a long time it will dull your forces and blunt your edge; if you besiege a citadel, your strength will be exhausted. If you keep your armies out in the field for a long time, your supplies will be insufficient...Those who like to fight and so exhaust their military inevitably perish" (Sun Tzu, The Art Of War).


  1. Go with the flow, this is why I trend trade :p

  2. Pat, my first comment was about your quote. For the second comment, I was just reading over your argument and realized that you have a pretty solid argument. I like your thinking on this. Give me some time to form my own thesis and to do more research on currencies. Ill get back to you when I can.


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