Thoughts - 6 / 16 / 2009

First a note about this market, be very very careful. Anytime there is an upside market hesitation the result can be a short but significant downside event. What event could trigger this? Well in this market all it takes is a government report, a missed estimate in housing, a missed estimate in unemployment, in manufacturing. Any reports from the government that would suggest the bottoming out of the economy is not yet at its bottom. These announcements will trigger speculators to sell or short the Dow Jones Index. And when this occurs, the Dow Jones takes a rapid decline - and then waits for the government to put some good news out. This has been happening repeatedly throughout the crisis. Good news is released, followed by more good news if the dow jones rises, followed by bad news when the Dow Jones stalls. The Bush,Obama,Paulson,Greenspan,Bernanke,Gheitner government has made a gigantic error in how to deal with the capital markets. Timing the markets with news releases is a sure way to create uncertainty, and that leads to volatility, and ultimately lower volume. Each one of these issues is troubling to investors in the equity markets and poorly performing equity markets remove more funding groups from the markets themselves.

The Credit markets remain closed to developing businesses and to troubled mortgage holders. Of the first amount of TARP that went to the banks, who enjoyed the benefits? Only the companies and mortgage holders WHO DID NOT NEED IT. The troubled mortgage holders saw very very little of it. Developing businesses are out of luck. And it is credit to those growing businesses that creates economic expansion.

Bill Maher, comedian and political pundit, said it best. "The banks we bailed out are laughing at us. They [wrecked] the economy and then got to keep their jobs and businesses." He is right. The rationale for bailing these banks out was a simple one...this crisis will expand if we don't keep these banks alive and functioning and lending. But all we have done is allow executives from these banking institutions that ran their assets and shareholders into the ground keep their jobs. Meanwhile they refuse to extend credit to business owners and home owners who, in turn, lose their homes and jobs. And meanwhile these bankers are bailed out ultimately by the taxes of the people they refuse to do business with....

We can't even sit back and wait it out because inflation is growing at a faster pace than the banks are willing to pay us in interest for saving money. We are forced to actively invest simply to maintain the value of our savings. Our method of choice, invest in the highly liquid, under valued, equity of Fortune 100 companies. Consistent historic earnings and low multiples relative to their peers.

Its a broken record, but it works people.

Build Value Every Day.

Brad van Siclen






Let's collectively start thinking about how to live through this. I believe perspective is the cornerstone of any business or investment related decision.