Oct

23

T o t OThere is a tremendous preponderance of negative news. 14 of 16 headlines on my monitor are negative.

Credit defaults are up.
Unemployment is up.
A forecaster predicts Dow 5000.
Recessions are likely.

Yes. As I write this with S&P down 20, is this good or bad? Is the economy in a recession as of March '08 good or bad when it is announced nine months late? it's due to oil prices that we were not in one so far, but it will almost definitely put us in as of 9 30 2008 GDP, and later, because oil prices are added back to GDP and the previous adjustment was way up, and this one way down.

Does this override the 10 P/E and the resilience and the Triumph of the Optimists? One can give up principles or try to manage money properly and take account of laws of economics and the required return that investors demand, let's say 60% a year when VIX is this high.

Dan Grossman adds:

To quantify, the 30 to 1 leveraged assets referred to by Vic that have been/are being reduced or liquidated to create the current environment, at the beginning of 2008 the five largest investment firms (don't know exact definition) held $4.3 trillion of assets.


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