Meltdown Prevention Phase Completed

The restructuring of the auto industry is kind of the completion of the meltdown prevention phase of the Greenspan Bubble pop. The Obama administration has focused on restructuring the parts of the economy that were too big to fail, like big banks, big insurance companies and big auto companies. 

The result of this phase completion has been a rebound in consumer confidence and an expansion of price multiples in the stock market.  It is good that the too big to fail companies are now owned by the people of this country, it was time to take the country back from the corporate greed that has prevailed for the past 29 years.

On the other hand, putting a floor to meltdown fears does not make a bull market in stocks or cause long-term inflation.  We will point out again, the world was worth 45 percent less this past March than it was worth in June 2007.  Deflation of this magnitude will not go away through government led liquidity measures.  Much more aggressive real stimulus, not just filling holes in balance sheets, will be needed to get this economy going.

Our concern now is all the companies that are too small to save.  By and large they are the heartbeat of the country, they take care of their employees, carrying them through weak periods and that they have been doing in the hope that some of this liquidity would trickle down to them.  So far it hasn’t, it is sitting in the accounts Goldman Sachs, good job Hank, and Bank of America.

What does one do now in the market?  To us conservative individuals may want to be in cash, aggressive individuals may want to be starting a scale up short position.  The only thing that will change our minds will be some real stimulus.

The Performance numbers on our Portfolios that we promised yesterday are:  AGGRESSIVE PORTFOLIO….May  +0.6 %, Year to date +25.3 %, 12 months + 51.7 percent;  CONSERVATIVE PORTFOLIO…..May  +1.0 %, Year to date +14.9 %, 12 Months + 21.6 %;  EMA ETF Fund….May + 0.4 %, Year to date + 10.6 %, 12 months  NA; The Market (S&P 500)… May + 5.3 %, Year to date + 1.8 %, 12 months  – 34.4 %.

The EMA ETF Fund Nav was 1133 at yesterdays close.

7:53 AM CDT