Sorry, Dorothy, No Easy Way Back to Kansas this Time

If we collectively click our heels together, can we avoid a recession and a protracted bear market? I suppose we have not tried this yet, but certainly all other forms of wishing we were someplace else have failed. I have been a serious bear for more than a year now, so I am not just the latest Chicken Little burned by the market this week. In fact, I have been short the market for months, so I have some extra change in my pocket this weekend.

It really does not matter who is ahead in the presidential polls, what Bernanke says, or how much of our tax dollars Dub’yuh sends us by mail, we are faced with a recession and a bear market. All I want to know is how far down the death spiral do we go and will we continue to dig in our collective heels in vain, thereby extending the pain for many quarters. For those eternal optimists (also known as pundits on TV, retail stock brokers and politicians), can you please tell me how we ignore the following facts?

• Hedge fund meltdowns and bond defaults
• Bank failures and corporate bankruptcies
• Record foreclosure rates and looming credit card defaults
• Unemployment rising and food prices soaring
• Oil prices at new record levels
• Consumer confidence at historic lows and a weak dollar
• Polar icecaps melting (sorry, that’s just piling on)

I know these optimists will say that despite all of this, it is always darkest before the dawn; however, that wonderful idea only applies at the end of the death spiral when we experience complete capitulation (including from these optimists). I am afraid that the worst is ahead of us, not behind us.

You had better look at Japan or many Latin American nations if you want a history lesson on what we may be facing today. Can you spell S-T-A-G-F-L-A-T-I-O-N? Anyone? Anyone?

An even scarier prospect is how these problems can ripple through our global economy…