Max Pain

The properly famous Sir John Templeton who died recently said the time to buy is at the moment of maximum pain. When is that? He never said, but I think we have been close this week. I actually put a toe in yesterday and rented some equity positions.
I say rented because I think that while the panic and chaos of this week is behind us, economic realities are still very much not about to let loose a rousing verse of "Happy Days are Here Again."

The government's decision to create JBOA (Junk Bank of America) should ease concerns that each day will bring another investment bank failure. Its regulatory prohibition on "naked short sales" in the financial sector should also create buying pressure of financial stocks.

Naked shorting is the act of selling a stock one does not own and has not borrowed. It is the flip side of buying a stock for which you have no money nor any idea of where you will get any. There are rumors that the massive short selling of financial stocks began on 9/11 in London and Dubai? Financial terrorism or just a clever trading strategy, I don't know. But when you have a house of cards, one swift kick to the foundation can have devastating effect.

The relieving the pressure of uncertainty should move the market up slightly, until the the next concern takes hold. That will, in my opinion, be driven by rising unemployment, declining consumer spending. With consumer spending at over 70% of GDP rather than the historical high 60%'s, burdensome consumer debt and tightening credit that driver of economic growth will be taking a breather for some time.

From the investment perspective, opportunities and risk will alternate in the coming years so that gauging cyclical moves correctly will be the only way to succeed in the market and remain ahead of inflation. The days of secular bull, buy and forget will be for the next generation. My father had the 50/60's, we had the 80/90's, our children will get their chance in the teen/20's.

John Barnyak