Tuesday, January 6, 2009

What is the Strangest Thing That Could Happen?

Over the short term, the market has a lot of pitches. Fastballs, curves, change ups. Over the intermediate term, it throws mostly curve balls - that is, it does a fantastic job of harpooning conventional wisdom and catching most participants flat-footed. It pays to spend some time thinking about what set of events would have the most people totally unprepared.

Here's what might fit the bill: What if this is not "the worst financial crisis since the great depression?"

It's possible that jobs and housing prices stabilize around here. Oil might have found a home in the $35 - 60 range. The Fed is now buying up mortgage-backed debt. Credit could improve. The Obama love fest continues. Maybe we needed to correct real estate prices and punish the financials by flushing out a few bad apples. We might be done.

If the worst of the economy is right now, stocks are cheap.

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