Bond Insurers Becoming More Troublesome

This could really put a wrench in things - I didn't realize Ambac (ABK) got downgraded below Triple A Friday. It doesn't sound like much but in this business if you don't have triple A credit you have nothing. As I wrote yesterday, Sword of Damocles. Mr Buffet, is going to be printing money in this business.

• A downgrade of bond insurer Ambac Financial Group Inc. is likely to have far-reaching effects, making it more difficult for cities to issue new bonds and forcing further write-downs at financial services companies, analysts said Friday.
• After Ambac scrapped plans to raise $1 billion in capital, Fitch Ratings cut the company's crucial financial strength rating to "AA" from "AAA."
• The downgrade likely means Ambac will not underwrite any more business, said John Flahive, director of fixed income for BNY Mellon Wealth Management. Market prices of existing bonds insured by Ambac and MBIA Inc. were trading lower before the downgrade, and Flahive suggested any downgrade could accelerate the decline.
• Ambac and chief competitor MBIA together insure $700 billion in municipal bonds, and MBIA's "AAA" rating is also under threat. The company issued $1 billion in bonds this week to preserve the rating, though that may not be enough to satisfy the ratings agencies. MBIA said in a statement Friday it intends to keep working toward maintaining its "AAA" rating.
• Since late last year, when the agencies first raised the prospect, analysts have suggested any move to cut Ambac or MBIA below "AAA" could be disastrous. The concern is that downgrades will lead to a reduction in the value of portfolios at dozens of financial institutions, said Donald Light, a senior analyst at Celent LLC. "Bond insurers are the lynchpin holding together valuations of portfolios of all kinds of financial institutions," Light said.
• Prior to Ambac's downgrade, T.J. Marta, a fixed-income analyst at RBC Capital Markets, said a downgrade of the company would lead to downgrades of all the municipal bonds it insured. Subsequently, it will become more difficult for cities, counties and other local entities to issue debt for building projects, Marta said. (again, the whole credit system is a house of cards - one part is dependent on another - when one domino falls, the ripple effect is felt everywhere - that's what makes this whole situation so frightful)
• At the very minimum the troubles of the insurers will drive up borrowing costs of cities and other local entities at a time when many are strained by weaker tax revenue, said John Atkins, a fixed-income analyst at IDEAGlobal.com.
• Buffett launched a new bond insurance business in December that has a "AAA" credit rating and a solid balance sheet. Buffett's new company also has the benefit of having no questionable loans on its books.

Barron's says....

• THE COLLAPSE OF BOND INSURERS is the latest symptom of the credit crisis that has spread from subprime mortgages to throughout the financial system.
• ... the unraveling of bond insurers, which provided a fig leaf of protection to risky investments in collateralized debt obligations. Indeed, part of Merrill Lynch's stunning writedown and loss for the fourth was the complete writeoff of CDOs insured by ACA, a second-tier insurer.
• The more profound fissure opening is the potential for the loss of the triple-A guarantee rating for market leaders MBIA and Ambac, which would virtually put them out of business. Their business model depends on their ability to put the imprimatur of a triple-A rating, effectively performing the modern-day alchemy of turning leaden credits into gold.
• Reflecting that potential downgrade, shares of Ambac plunged 52% Thursday after Moody's served notice its triple-A rating was in jeopardy. MBIA's shares lost 31% but even more stunning was the loss in its new 14% capital notes, just issued to shore up its capital. This $1 billion issue, which just closed Wednesday, plummeted to 77 cents on the dollar, putting its yield all the way to 21.75%.

TheStreet.com Weighs In:

• Recession is no longer the taboo word on Wall Street. It's being tossed around like confetti. The new phrase that can't be uttered is "systemic risk," and with bond insurer Ambac (ABK) losing its triple-A credit rating from Fitch Ratings on Friday, the real risk of a financial disaster will be widely whispered into the next week amid the possibility of more downgrades for the industry.
• T.J. Marta, fixed income strategist with RBC Capital Markets, estimates that roughly $2.5 trillion in outstanding debt is backed by bond insurers like Ambac and MBIA (MBI), and credit downgrades are a mortal threat to their business models.
• If the bond insurers fail, that raises the specter of a massive wave of wealth destruction in a global financial system that is flooded with illiquid and opaque derivative securities of which there is little understanding, except that their value is connected to credit ratings on structured finance securities
• "This is going to be worse than anybody thinks," says Marta. "What I heard from Ambac [on Friday] is that they're throwing back the lifeline and saying, 'We're not going to make it.' On a fixed income trading floor, that means the world truly is upside down."
• "Next week, we'll be waiting for not just the next shoe but many more shoes to drop," he says. "That's the bottom line here. The subprime slime was the first to go because those are loans to the least credit-worthy borrowers -- the most vulnerable. But you had plenty of speculation in commercial real estate, emerging market debt and equities, commodities, leveraged loans, junk bonds and a whole host of areas that are extremely vulnerable." (sounds vaguely familiar)
• Many investors are looking abroad to places like China for healthy investments in light of the troubles at home, but Shilling calls this idea "nonsense." He says the next shoe to drop in the downturn he's predicting could be a major sell-off in China. "China really relies on U.S. consumers to buy their exports and those exports are absolutely critical for their continued growth," says Shilling. "They don't have a big enough middle-class yet to be able to sustain the economy with domestic spending." (sounds vaguely familiar)

Cramer, Kass, and the guys over at Minyanville have been pointing out these bond insurers as a systematic risk for months on end. Apparently the academics at the Fed don't read either website. I guess they will react after the implosion.

Even Altria (MO) is Getting Hit & Some Walmart Commentary

After looking at the list of stocks in 'What Safety Sectors are Really Working? And Which are Hoaxes', and commenting Altria (MO) is one of the few actually holding up, I see even this name has now broken below its 50 day moving average. Even the safe havens are being 'smoked out' (couldn't resist) - quite interesting. MedcoHealth Solutions (MHS) has been an absolute rock and with the change in character in this market now that the technical condition has deteriorated [S&P500 in Worst Condition in Half Decade], this is the type of name I will begin to focus on more. The problem with most of these save haven consumer based stocks is (a) they still rely on a consumer who is weakening and (b) they are impacted by raw goods inflation. So I don't know why people consider them to be safe havens - this is 1990s thinking; not thinking of a World of Shortages. (I need to trademark that term).

That said nothing but cash really works in a true bear.... ask Sprint (S) or Intel (INTC) shareholders.

I also (cannot believe I am saying this) am intrigued by this Walmart (WMT) [Will There be Anywhere Left to Shop in 2010?]. If the economy is truly going to pot and we start going to a 6,7,8% unemployment rate in the coming 2 years, Walmart should benefit greatly - I outlined this in 'Target Shoppers Turning into Walmart Shoppers'. So instead of being so facetious we might have an opportunity here. A lot depends on just "how bad" things get out there. As I've outlined I think it can get very bad - but I could be wrong. I always under estimate the US consumer. But I truly think the house ATM was a large reason for continued strength and impervious attitude (towards spending above their means) of this group. Anyhow Walmart reports Feb 18th - if we see an uptick in earnings/same store sales combined with a downtick in Target, it looks like what was a hunch will become a true trend. Now with that said the whole retail group has imploded, and the next time we rally (and we will one of these days) it will be a hectic and straight shot up for most names in this sector - a rally which should be sold. Home builders have been doing the same action for well over a year. So once we get past that stage we need to continue to find true buys in this market... hence why Walmart might hold some appeal.

Back to Altria (MO) after poking around this name (I'll be the first to admit I haven't looked at Altria since the late 90s - slow growth companies open to constant litigation is just not my thing), I do see a very interesting situation developing. While US consumption of cigarettes is dropping (slightly), as with everything we want to focus on the long term international consumption factor. And in that light we have an opportunity - Altria is spinning off Philip Morris International this spring (ding ding!).

• Shares of Altria Group Inc. rose Monday as an analyst lifted her price target, saying the upcoming spinoff of Philip Morris International Inc. will enhance the company's value.
• "We see the stock trading up in the coming weeks as the company formally approves the Philip Morris International spinoff on Jan. 30, announces a share buyback and cost restructuring around mid-February and embarks on an investor road-show in early March," Judy Hong wrote in a client note.

Now I have to give props to Cramer as he has nailed this one - MO Ain't Just Blowing Smoke

• This “is among the most treacherous markets I have ever seen in 29 years of trading,” Cramer told viewers Wednesday night. At this point, the Fed is irrelevant, he said. Even if the central bank moved to cut rates aggressively, “there’s so much damage done that Bernanke may have missed his chance.”
• What’s exciting, though, is that Cramer said Altria should announce its break-up plans in two weeks. The split into Philip Morris International and Philip Morris USA has been expected, but Cramer’s prediction is that it could happen as early as this quarter. That will leave a fast-growing international stock and a slower domestic growth company with a nice dividend.

So this increases my interest in Altria as I'd love to get my hands on a secular growth story combined with recession proof theme, combined in one. Interesting story on Reuters I just found (One of the top 10 stories)

Customers Desert Smoke Free Restaurant

• Beijing's first smoke-free restaurant chain faces going out of business after its customers deserted it in droves after the ban was enforced, state media reported on Friday.
• The Chinese are the world's most enthusiastic smokers, with a growing market of more than 350 million, making it a magnet for cigarette companies and a focus of international health concerns.
• The occupancy rate at Meizhou Dongpo, a chain serving the spicy fare of southwest Sichuan province, had dropped to "about 80 percent of that enjoyed by other restaurants across the street" after it banned smoking in October, the China Daily quoted its manager as saying.
• Meizhou Dongpo had trained its waitresses how to discourage people from lighting up, but met resistance from customers who would lock staff out of private dining rooms to sneak a quick puff, Guo said.
• Beijing authorities had written to 30,000 restaurants asking them to put smoking bans in place, but not a single one had taken up the suggestion, the paper said.

Well that's just a trend I have to get behind. Philip Morris International, I await you.

Walmart and Altria - who knew? That said, after this "washout fear low" I am hoping for I do expect a nice bounce coming. We are so far away from any major resistance levels now, since we broke down so badly in such a short time span, that a decent rally should be in the offing. Further, I can only imagine the ire Uncle Ben is receiving so we might see a real surprise - 75 basis? Who knows.

In an overall sense though folks, as I wrote in my piece midweek on the S&P 500 breaking down, we have to change the midset of the past 5 years at this point where buying every dip is the way to go. Now we sell every rally. For how long? Until the market tells us differently. When the S&P 500 begins to make new highs (not all time highs but highs above the previous high point) is when we change attitude. It could be in 3 weeks, 3 months, or 3 years. I don't have an idea. Much of it depends on how bad this recession gets and how "immune" the rest of the world is. I think the US and UK are done for. Spain is a housing addicted country worst than us. And we will see a lot of griping in the European Union as some countries are doing ok whereas others need rate cuts. So that central bank authority is really going to be in a tight spot. Japan hasn't recovered in 15 years. Etc. So as I've been saying, 75% of the world is going into a consumer recession. Whatever growth we get out of the emerging markets (which are in part benefiting from export growth) won't offset that. But it's all about degree. How bad things will get is an open question. I still contend subprime is just the tip of the iceberg.... and as I've been writing since August the mortgage issues will just continue to climb the chain up to Alt A loans, up to prime loans - and throw in the auto loans, credit card loans, consumer loans, student loans and you have a subprime, debtor nation. It appears the past 3 weeks people are starting to get the picture.

On the other side we will see massive infusions of liquidity (creating a bubble somewhere in 2009-2011), and government bailouts increasing in nature as things get worse. I wrote this on Aug 31, 2007 [Et tu, September?]

Presidential candidates will be jostling to propose bailout after bailout, inciting moral hazard issues up the wazoo.

I repeated it in December [Et tu, 1st Half 2008?]

I expect a lot more programs to "save" the banks, save the poor homeowners, save everyone. More government programs, more bailouts, more money printed out the wazoo at the Federal Reserve, perhaps a surprise cut here or there, perhaps a major discount rate cut. I've said at 2:31 PM Halloween when the Fed signaled they would go back to neutral, forget about it. We are going to mid 3%s by spring 2008 on the Fed funds - the more I see, the more I could be conservative. Maybe low 3%s or 3% by summer 2008. Anything and everything will be on the table to bail out the economy into an election year. That's just the reality folks. The long term be damned, whatever course of action is needed to be taken will be taken.

It's all coming together folks - these folks are shameless, pandering and refuse to address the long term issues in our country or do ANYTHING preventative. Only after the vase is broken do they come together from their respective corners in "bipartisan" fashion, and only when forced to. And their actions will be nearly meaningless. But each of their reactive, meaningless reactionary actions places more burden on our kids, grand kids, and great grand kids. I am only wondering at what point the electorate gets truly outraged at these people. Upper 20% approval rating for Congress and low 30% for President. These people in their ivory tower in Washington just don't get it.

However, I do believe if the market continues to degrade at some point this (below) will be our "saving grace" - if you consider selling off your soul due to terrible decision making a saving grace.

Foreign buyers will be flooding the US market by spring summer 2008- specifically sovereign foreign funds - it has already begun. But this is just the first steps - many US assets will be taken over. This time it is "for real", unlike the fears of Japan taking over in late 80s - petro dollars and massive trade imbalances make for very rich counter parties. In fact this is going to be an issue for many years as we have taken no steps to shore up our systematic issues of unfunded long term liabilities, trade imbalances, and petrol dependence.

But at least it will prop up the stock market... yee haw.

Long MedcoHealth Solutions in fund; no personal position

China Discovers $119 Billion Banking `Irregularities'

Yesterday in 'China Taking More Steps to Curb Food Inflation' I wrote:

But I think China is setting up for a very similar fall to the US - in fact it might be striking in parallels - bad financial controls (if you think our banks are bad...), an out of control real estate market driven by massive liquidity, and striking inflation hitting the middle and lower classes. We shall see how it turns out, but it's starting to all sound very familiar.

Today in Bloomberg we have this classic headline 'China Discovers $119 Billion Banking Irregularities'. Folks, I've had people argue with me, how everything is so perfect in China - I don't understand the story. Trust me, greed is a universal human trait (this I understand clearly) and the financial controls (from all I've read from sources in multiple countries) are poor. So it is hard to trust any numbers coming from this country. But again, they are taking a very very very similar path to the US. Just more evidence. $119 Billion would make even US banks blush - thats a huge sum. More fallout as we go through this year, I am sure. In the rush to accelerate all facets of growth small things like say, product safety or financial controls get left behind. Cockroaches... everywhere.

• China discovered 860 billion yuan ($119 billion) in banking ``irregularities'' last year, almost triple the profits by Industrial & Commercial Bank of China Ltd. and other ``major'' Chinese commercial banks, the regulator said.
  
• ``We must strengthen our regulatory capacity and nip these risks in the bud,'' Liu Mingkang, chairman of the China Banking Regulatory Commission, said at the watchdog's annual planning meeting, according to a statement posted on its Web site today.
• China's ``major'' commercial banks posted combined profits of 299 billion yuan in 2007, the statement said, without providing a year-earlier figure. A July 5 report said the banks earned an aggregate pretax profit of 240.9 billion yuan in 2006. Assets at Chinese banks totaled 52.6 trillion yuan at the end of last year, today's release said.
  

Thanks to Minyanville.com for that heads up - keep in mind 'irregularities' outbid 'profits' by 3 to 1. Laughable. Or scary; depending on your perspective. Bubble of epic proportions building.

Earnings Early next Week

Now that we are hot in heavy into earnings season I will break out some of the more interesting reports into smaller parcels. Keep in mind markets are closed Monday, before we resume our race to 0.00 on the Dow Tuesday.

Monday
Fund Holding: Indian bank HDFC (HDB) - I expect more good, solid growth without 'financial innovation' that appears necessary for US banks to manufacture fake earnings so their CEOs can get $150M pay packages and yearly $20M-$30M bonuses. HDFC and ICICI Bank (IBN) will be powerhouses over the coming decades, and one day can overpay their intellectually corrupt CEOs as well. Can't wait; it's worked wonders in the US. If they can only convince Indian regulators to stop watching over them, since "we will police ourselves!" - that also has worked great in the US. I hold very little of either right now since I took some profits while they were holding up and rolled the money into other names that have been pole axed.

Indian IT source and Business Process Outsourcing Satyam (SAY) - this group was a darling in 2004-2006 and is a classic example of why, with the changing pace of industry, it is very hard to buy and "hold" anything for 5 years anymore. This group has been at best dead money and a loser for most in the past year - the sharply rising Indian currency along with rising labor costs is squeezing profits. Heck in a few years, US white collar workers are going to be cheaper than Indian white collar workers. Cheap dollar! Always a silver lining!

*************************

Tuesday
Ambac (ABK) - Dive! Dive! Dive!

Fund Holding: Apple (AAPL) - Alleluia! (insert Cramer sound effect here). I expect a massive Christmas season and a lot of analysts saying "I don't care if you beat by $0.30! No one can afford anything anymore!" I still think this is a $250+ stock by end of 2008*.

* Please note the above price target assumes the Dow Jones Industrial Average is > 2000 by Dec 31 2008.

Ok back to your regularly scheduled earnings outlook

Americredit (ACF) - auto finance company serving subprime customers. Need I say more?

Railroads Canadian National (CNI), CSX Corp (CSX), Norfolk Southern (NSC) - more talk of slowing economy

More banks, Bank of America (BAC), Fifth Third (FITB), Keycorp (KEY), National City (NCC), Wachovia (WB)

Fund Holding: Jacobs Engineering (JEC) - a great infrastructure company, but surely some analyst will claim they are double counting sales and that their backlog only grew at a 46.5% year over year rate, well below the analysts expectation of 46.387531254%. This will drop the stock at least 90% on fears of US slowdown and subprime exposure. CEO will ask, flabbergasted - "What subprime exposure??" - analysts will answer "It must be there somewhere, no company can do well in the coming 'End of Days' I've now modeled after missing the slowdown the past 9 months. Now 'fess up!"

Johnson & Johnson (JNJ) - after reporting a solid quarter some analyst will find a line item somewhere deep in appendix 13.2.1B showing dandruff shampoo fell off the cliff, dropping from an annualized growth rate of 10.87% last year to 10.75% this year. They will claim people cannot buy shampoo anymore and the "consumer is dead". The stock will drop 0.009% since it's still a safe haven.

Precision Castparts (PCP) - a former (ahem) safe haven aerospace industrial name - darling of 2007

Texas Instruments (TXN) - a slower growth semi name.

UAL (UAUA) - hey its an airline stock. These are the growth stocks of 2008!

Bookkeeping: 'Rising Tide' Performance Week 24

Week 24 performance of the mutual fund

Comments: Well there is no way to dress up this week. To call it putrid would be an affront to the word putrid. This was the week (as they say) the "generals" (the leaders) were taken out to the back and beaten, one by one. Every good sector I've been invested in was decimated - agriculture, infrastructure, solar, oil service, oil driller, coal, you name - it was trashed. Avoiding the bad sectors as I've done from last summer through last week did not help 1 bit this week. The sectors that held up "relatively best" were areas that investors have been fleeing in droves the past few months - airlines, a few financials, a few retailers and... well that's about it. A few beaten down healthcare stocks did well but even the leaders in that group took a hit. Truly the week where there was nowhere to hide. Unless you were an airline ETF.

This week the S&P 500 and Russell 2000 (indexes for gosh sakes) were both down 5.4% (half of a 10% correction in 5 days). Rising Tide Growth Fund had an awful week led by losses in... well everything.... down 10.45%. Truly a jarring week, lagging the indexes by 5%. While we are giving back positive performance and not in the hole, it is still a massive under performance compared to indexes. This takes us all the way back to week 17 in terms of beating the indexes, as we are now only +15.5% since inception. Still on track for my goal of beating them by 15% each year, but compared to where we were the past few weeks it's a big drop.

There is nothing good to say other than the positions now stocked at the top of the fund are among the market leaders in their respective sectors - and one day when fundamentals are again respected I do expect to see these beat the markets. But until then, fundamentals are meaningless. I am a bit upset that after waiting all fall for a true correction that never came I was caught without more cash/short exposure the time it finally happens. That comes from being too cute in trying to time the market. Lesson learned on that one. This is now the 3rd 10%+ correction we've had (August, November, January) since starting the fund - great timing I've had. :) Two more weeks until "my 2nd quarter" is over; we ended quarter 1 beating the indexes by about 16%. So after all this work the past 3 months fighting upstream against two separate 10%+ corrections in November and January, we are right back where we started the quarter. Trout. Upstream. Swimming.

Going forward I was truly hoping for a wash out event today - a horrific type sell off in the indexes right from the morning bell. We need to break the pattern of opening up in the morning, providing hope - and then selling off all day. I was hoping today would be that day, but then we had some good earnings reports from GE and IBM and it ruined the plan as the market opened up. At this point I'd like to see Dow 12,000 broken and SP 1300 broken to incite a panic. Which in turn will create a (near term) bottom. I had hoped for a tradeable bottom (as stated) last week, as we held above the August and November 2007 lows, but once that was broken this week, our fate was sealed. And the lack of short exposure and cash in the fund exaggerated the fall. Again, sentiment is awful, from such bad moods comes rallies, however brief - but I still think we need a major swoosh down to wash out the last vestiges of hope before I get confident in a bounce. We do have a lot more quality companies reporting next week that can move the market in the right direction ala Apple (AAPL) as opposed to the steady drumbeat of failed financial institutions this week. Unfortunately, we also have the bond insurers such as Ambac (ABK) - a very boring sector but one in which a failure could have massive boomerang effect throughout the credit world as without insurance we have nothing. Just when we thought we were coming out of the woods with Countrywide (CFC) being taken out by acquisition we have these monoline insurance companies hanging over our heads like the Sword of Damocles. Buffet is supposed to be starting his own company in this area - it cannot come soon enough.

Price of Rising Tide Growth: $10.597
Lifetime Performance to date (vs Aug 3, 2007): +5.97%

Comparable S&P 500: 1,325.2 (-9.56%)
Comparable Russell 1000: 719.6 (-9.62%)

Fund return vs S&P 500: +15.53%
Fund return vs Russell 1000: +15.59%

Last week's results here.

Since the market cap of the median stock in the Rising Tide Growth fund (median $9.8 Billion as of November 07) is significantly below the SP500 index (median $13.1 Billion as of September 07) but higher than the median market cap in the Russell 1000 (median market cap $5.8 Billion as of September 07), I am measuring the fund against both indexes. Click here to see all fund's holdings as of mid November 2007.

Basis for indexes is 5 day weighted average of closing prices Aug 3-9
SP500 : 1,465.2
Russell 1000 : 796.2

To see why I use the 5 day weighted average of the first 5 trading days to smooth out the volatility of the indexes as the fund launched, see here.

Please click here: fund performance for previous updates

Bear Market? This is Nothing Kids!

Yes the action stinks. Its been dramatic in how short of a time frame it has happened (I guess after months of denial, once acceptance begins, it happens fast), but in the big scope of things this is nothing.... Bespoke blog again (notice I love their statistics) with the typical NASDAQ bear market. I'm just glad in 73-74 I was too busy being born to be investing... but 630 days... of this? Ugh.

Meanwhile for those of you who missed the early part of this decade you can see all the carnage those of us "lucky enough" to be around enjoyed aka tuition aka death spiral. You can see how dramatic the drops were in such a short period of time in 00 (when we were still in denial stage - we had a big bounce in summer 00, before a 2nd free fall that year), and then in 01 when we broke down completely, and then the 278 days of 2002 that just killed whomever was left who was a 'growth investor'. Let me frame it for you:

1. After the biggest bubble in decades we had 37% drop in 74 days in early spring 00.
2. The market then put in a mini spike off that low, drawing back in the bulls (I'm raising my hand very high - guilty as charged) Correction over! Not so much. Over the next 169 days we lost 46%
3. Then we had the January effect in 2001 (yee haw) Correction over! Not so much. Over the next 70 days we lost 43%.
4. Then we had another late spring rally in 2001 (is this the end?) Correction over? No. Not over. We lost 38% over 122 days
   
5. Then the market sucked us in with a 3 month + Santa Claus rally. Finally the bottom was reached... party time. Oops.
6. Over the first 10 months of 2002 we lost 46%

Again, this was the NASDAQ - the S&P 500 was NASDAQ lite - same direction, but not the same magnitude. But what you can see in true bear markets (if we are entering one) - is you get sucked in a lot, you are given hope, you feel happy, and then the sledge hammer is applied ... over... and over... and over. To a point where you surpress such memories and only talk about it in hushed tones to those who were there with you. :) But I think a whole generation of investors was stuck with JDS Uniphase (JDSU) (down 99%) in their account... :)

So if this is another era we are entering, expect nice counter rallies of some serious magnitude within the greater context of a lot of dips. And on each counter rally we will wonder "was that the bottom?" And we won't know... until we look back 6 months later. By 2003 no one was expecting the market to ever go up again. But it did... and then its been straight up for 5 years. Easy street! Until now. And yes there were stocks that went up, during that time believe it or not (probably not on NASDAQ though). But it is as I've stated like a trout swimming upstream; some tough work to make any progress.

I do want to say... keep in mind, the action early this decade was in reflex to a much much more expensive market - the average NASDAQ stock had PE ratio >50 in early '00. We were nowhere near that valuation in this era. But certainly we could only be halfway through a correction? Or for all we know done. (I doubt that). I do also still think the small cap stocks will (when all is said and done), be the worse off, (this era's NASDAQ) - remember, if you are tied just to the US consumer without any international exposure... your situation is a lot more precarious.

Inside View of a Fed Meeting

Thanks to Bespoke blog again for this great clip. Apparently this is how the Fed works in 'consensus building' - discuss the problem so long that by the time they come to a decision the economy has already choked. How appropriate :)

One Lonely Voice Agrees with Me on Food Inflation

Thanks to a reader for emailing me this story; I've never heard of the website or the strategist but it appears to be a Canadian newspaper and the strategist is from Bank of Montreal - I could not agree with this story more, and verbatim have been espousing the same views. Food will be the future crude oil shortage. Once again while analysts fret over a month over month inventory blip in potash inventories [Morgan Stanley Worried about Fertilizer] , I just have to sit back and say ... my friend, try to look at the big picture... its scary. Call your local food bank if you don't believe me, we are already seeing anecdotal stories of large drops in food donations - after all canned beans hold their value more than our disastrous dollar.

1. Food Bank Shortage in TX
2. Food Bank Shortage in MI
3. Food Bank Shortage in NYC
4. Food Bank Shortage in Washington DC