A Good Smart Bear

2010 September 12
by Dave

The bears are writing much more convincing articles than the bulls these days. Or maybe it’s just that all of the better writers are bears. Tough to say. Is it an easier position to defend, or does it just have better defenders? If it’s the latter is it because it’s the more likely outcome or is it caused by some strange punditry self selection bias? I can follow that circle around for hours, but I don’t think you want me to.

Forsyth wrote a great article for Baron’s last week comparing and contrasting the pending election to the last two mid terms that happened at the end of a recession, 1982 and 1994. His conclusion was that there is no conceivable way for Obama to emulate Regan and convince voters that the worst is past and things have already begun to improve and minimize losses to the party in the administration.

This assertion is based on the economic assumption that “in 1982 we had nowhere to go but up” and the less
explicitly stated corollary that today we have nowhere to go but down. This economic viewpoint leads to the conclusion that the best that we can hope for is to go nowhere.

Speaking of going nowhere and politics, Krugman had a nice Op-Ed piece last Thursday. He posits that the current political landscape and stated policy goals of the Republicans are likely to leave us in a position where the Japanese decade of stagnation looks damned fine. Granted, his is an openly partisan position, but it is very persuasive, or at least I had my already held opinions reinforced.

On an only tangentially related note, it seems like most of the houses on the market for more than three weeks cut their prices on september first. I know that this is a normal cyclical move, but it will be messy when house price numbers come in for September. That will probably be right before or right after the election because I think that data gets reported when escrow closes.

And finally, here is my well devised super secret proprietary trading strategy for hedging the current investment environment:

Short everything!

If the bond “bubble” bursts, it will move down faster than equities move up so you will be fine. If the economy tanks, equities will go lower but bonds can’t really go higher. And there is no way that gold is going up no matter what happens, right? You might not want to short any commodity futures, but everything else is fair game.

I will call it the Nare fund, because we dare wear short shorts. (The acronym is “Negative Asset Relative Evaluations”)

Have a good one.

No comments yet

Leave a Reply

Note: You can use basic XHTML in your comments. Your email address will never be published.

Subscribe to this comment feed via RSS