My position: I am bearish on the fundamentals that are the basis of our economy, but I am only taking a slightly bearish stance with my clients’ portfolios. Why? As we all know, the market’s value is simply the result of an investor’s perception of the US and the world. That perception is, for the most part, disconnected from reality. This “misperception” can last for years or even decades, until the eroding fundamentals finally undermine the basis for the perception. Therefore, I could dump a client’s assets into precious metals now and not see the payoff for years.

  Rather than have a client screaming at me until the inevitable occurs, I'll slowly shift assets as the perception becomes reality.

Dark Knight,

Half a point..and about a 40% chance for a .75% cut. Why do we need that? Money is very tight, We have a perceived lack of liquidity crisis.  My opinion on the differences and problems this time around. Most recessions (yes, we are in a recession, but for those of you that argue about the 2 quarters...just replace "slow down" for word recession) are caused by the fed raising rates, but this time the fed is cutting rates that were already low by historical standards.   So given the fact that money is very tight, and rates are already low, what is the fed to do other than keep lowering rates.  If rates were very high right now, this strategy would be advisable, but we have just a few more cuts available. The fed can lower to zero (we are almost there), but I feel we will still have a solvency issue with the financial institutions.

The lack of transparancy within those institutions have most of us blinded to the depth of the problems.  Our deregulated financial sector has become so complex, very few can even comprehend the structures that are now falling. I keep my eye on the on how short the banks  and institutions are on cash.    The amount of money the FED is lending to banks to support there balance sheet has been getting out of hand.  For your reference, look up slosh reports.  Also evident are all the muni bond ARS that are not being bought.   I know an insider that just quit because he couldn't stand watching his institution running around like a headless chicken.   This is just my opinion, take it as you want...the lack of liquidity, even though the rates have been dropped to almost nothing, is unprecidented.  We have problems like we have NEVER seen in the financial industry. This is a total solvency of the financial system melt down. (resulting in the current liquidity crisis).   I will say it again, like i have in the past, the subprime and mortgage crisis is just the tip of the iceberg.  And even if all of these financial market issues could be solved with a crash and a reset of the system (that will take some time), we will still have a natural resource and commodities crisis looming.   Knowing what I know, the FED and the powers that be will do anything and everything in their power to avoid a fast market crash...even going as far as to throwing cash out of a helicopter and destroying the dollar (keep an eye on the dollar, very important).  So, currently,  I plan for a reasonably slow and long bear market.  For most of my clients, it is about preservation.  Cash and fixed positions, oil, brk, commodities, energy..are some of my longs.  I also personally play the swing trade, the bear market bounce (like this week) and am short in many positions.   B7

Personally, I think the inflation problem is the big wild card.  I say this, because as long as that 10-year bond stays higher (thus mortgage rates), people are not going to refinance and buy new homes.  As we all know, that is one of the big engines that drives this truck.

  Additionally,  I am actually REDUCING my overseas exposure.  A weak dollar makes US exporting more attractive.  All of those US based multinationals are going to continue to crank it out.  I think the international sphere is starting to look over-valued right now.