cyclingscholar

Surviving the Short-Term to Participate in the Long-Term

Whenever I see the reference to a BLACK SWAN, my eyes glazeth over. It's the lastest buzz word for folks who have a limited vocabulary, just like 'new paradigm' and 'end of history' were in their day.

This is a SEVERE BEAR MARKET brought on by a bursting housing market, and we'll get over it. Just like the bursting tech stocks of the earlier part of this decade.

Given the need to reduce the deficit, we will have to either (1) raise taxes, (2) cut spending, or (3) print money. All three are tough medicine for the market to swallow, and will act as a drag on real growth for a long time. Accordingly, EPS estimates are falling, and PE ratios we are willing to pay are contracting. Result: a severe bear market.