Sinking Feeling

Not only because of today's market. Mostly because people making decisions can't get their act together. Sure, generals are always ready for the last war. For current financial leaders last war was inflation and deflation was distant memory. Some of them even said that it's easy to fix deflation, just run the printing press. Year, right, and Japanese experience didn't tell them anything. As if Japan was some obscure country, not the second biggest economy in the world.

Interest rate cut by European Central Bank is telling, I didn't expect 0.5% from Trichet. But cut by Bank of England is more like full blown panic. It tells me that, despite falling LIBOR rates, there are some other problems ahead. Maybe banks are lending money to each other, but credit is still not cheap for people and businesses. Banks are cutting credit card limits. And it looks like people are not eager to spend money, awful! They cried that people need to save more, spend less, but when it really happens and they see consequences, truth hits them: it's a road to total disaster. Our economy (and I mean world economy here) is mostly based on production of discretionary goods. Which means that people really can cut expenses when they want and bring economy to its knees. Last time such thing happened, in 1930s, depression was cured by World War II. Now discretionary part is much bigger in economy, people can cut their expenses much deeper. What can pull us out of it now? Nuclear war? Thanks, no thanks.

Bought more Altria (MO) today. Looks like we are going to retest October lows, so I'm ready to buy more.

Too many talks about bottom. Too many people are bullish, even some permabears. Sorry, bottoms don't happen like this. We need total capitulation, when almost everybody is bearish.

Full disclosure: at the time of publication author had a long position in MO. Positions can change any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.