BLUE BEAR

i am and have been very "un"constructive on the economy and the equity markets for some time now. in fact, i believe we are in the 2-3rd year of what will be looked back on as the "2nd great depression" that could last for a other 3-7 years. the good news is i was bearish starting from the end of 2001, so i was correct and did well for quite sometime. the bad news is i have remained bearish during the recent surge and it hasnt been fun or profitable.

so heres my current connundrum. it seems very obvious to me that nothing much has changed in the "real" economy for most people/businesses, and in fact many of the "critical" issues, i.e pension problems, over-capacity in almost every industry, high corporate and personal debt levels, record high default/bankruptcy rates, airline industry distress, auto industry problems, weak int'l economies (germany, france, italy and one other are in technicalrecessions), high energy costs (oil $31/brl & natural gas $5/btu), employment declines continuing as we export jobs to china & india...now even including white collar jobs, dis- or deflation, ballooning FED deficit, growing trade deficit, baby boom retirement wave wave upon us, war in iraq, afghanistan, & on terror, etc, etc, have not improved at all.

even with numerous band-aides and anesthetics prescribed by the FED and the president, none of the underlying issues have been resolved, and the negative consequences have only been postponed for a later date, presumably sometime after bush gets re-elected.

in fact, much of the recent "good mood" has been a direct result of the stock market rally. which i guess should have been obvious as every single strategist and economist called the turn in such perfect harmony. that would include the recent surge in M&A activity, investor sentiment, consumer sentiment, retail spending, smiley faces, more cautiously optimistic CEO's. unfortunately, i thought fundamentals and reality stilled mattered but i was proven very wrong. my guess is that i won't be wrong for very much longer.

whats also obvious is that the stock market cannot hold this all together just by being UP. the whole thing smacks of "manipulation" coordinated by the federal government. They "reflate" and throw all this "liquidity" at the economy. force banks to lend regardless of risk, return or return of capital, and HOPE that time heals all wounds of the bubble and the broken economy.

its hard not to sound disgruntled but as a bear, i am that way alot. you know the deal, nobody likes a bear. i feel like there is a conspiracy going on. everybody wants stocks to go up and wall street and the government are just fine with that. up is good and down is bad. yet we all should remeber this.

all great bear markets have equally sensational rallies that 'reconvince' the masses to believe again. its just part of the cycle of fear and greed. its now pretty obvious that too much, got too good, too fast.

they'll call it a correction. they'll tell you it had to pullback after such a strong rally. the gurus on the stock market infomercials will hail it as a great buying oppportunity in the newly started bull market. don't believe them and take back your capital. if you don't the market will swallow it up again in a continuation of the greatest bear market in history.

have a grateful day!

larry