This is our December 1, 2008 portfolio of classic American stocks. The declines each time the Administration takes another action is remarkable. The forward looking loss in American core business for 2009 is now in excess of 50% for this year. We may be looking at a DJIA hitting 4000 by year end if this is sustained. That means we may likely see in excess of 10.5% unemployment as well, possibly 15%. Confidence is ebbing away rapidly. The announcement of the mortgage bailout on Wednesday may likely add more bad news. Despite the erosion of the contract clause of the Constitution and the fact that mortgage holders can unilaterally have their contracts rewritten by a court, this bodes poorly for any future growth. The markets require some form of certainty. If a court can rewrite a financial agreement then the pricing of that agreement has no value. This means that this uncertainty will be factored into future agreements and thus make them less available and more costly. Beware the unintended consequences!
Tuesday, February 17, 2009
Response to Signing the Stimulus
This is our December 1, 2008 portfolio of classic American stocks. The declines each time the Administration takes another action is remarkable. The forward looking loss in American core business for 2009 is now in excess of 50% for this year. We may be looking at a DJIA hitting 4000 by year end if this is sustained. That means we may likely see in excess of 10.5% unemployment as well, possibly 15%. Confidence is ebbing away rapidly. The announcement of the mortgage bailout on Wednesday may likely add more bad news. Despite the erosion of the contract clause of the Constitution and the fact that mortgage holders can unilaterally have their contracts rewritten by a court, this bodes poorly for any future growth. The markets require some form of certainty. If a court can rewrite a financial agreement then the pricing of that agreement has no value. This means that this uncertainty will be factored into future agreements and thus make them less available and more costly. Beware the unintended consequences!
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