September Has Arrived!!

Let me start with an apology. Yesterday I said I have no equity positions. That is not 100% accurate. I have two. One is my employer through an ESOP. I forget about it as the stock is not sitting in my brokerage account. The other is Valcent Technologies, a company focused on vertical crop growing systems and use of algae for biodiesel. I do not have much money in it but it was up 52% today so it did catch my attention in looking at my portfolio. Other than these, though, I have no equity positions at the moment - not even in my retirement. By the way, I lost my initial investment in Valcent when it recently did an 18-to-1 reverse split, so this is not a recommendation, though I do like the company. Call it my green investment.

Disclosures aside, it looks like the September curse if upon us. As I reported previously, Fall in general and September specifically have historically had bad market performance. One day in and it is not disappointing expectations. And looking at Asian stocks this evening, tomorrow will continue with same. Right now the Nikkei is down 2.6% and the Hang Seng is down 1.6%. Personally I do not believe the month has much to do with it, but I do believe the market is very, very over sold at the moment, so no surprises here.

The downturn in the market today was hardly an earth shattering event. Everyone and their brother was writing about how the market had climbed too far too fast, how it usually takes much longer for the market to recover this far from a recession bottom, how the P/E had climbed to levels higher than average even in good times, and so forth and so on. A correction from these lofty gains is hardly a surprise. It probably only rose so much as everyone on the sidelines kept having non-buyers remorse and eventually could no longer avoid the temptation to get back into the action. Maybe after the market 2% drop today they have a bit more strength to use and avoid the temptation. We will see. Personally, I think on fundamentals the market has much farther to go south. I am not expecting a retest of the March 9 lows any time soon (thanks to all the stimulus) but we have really ignored reality way too much in the market and it is healthy for us to come back to a healthier level.

Focus on the Problem, Not the Symptoms

My biggest problem with the Administration's response to our economic plight has been its unwavering focus on the symptoms (save the failed banks) and virtually no regard for the underlying problem (massive debt loads, unsustainable consumer spending, over inflated housing prices, over built commercial real estate and the like). We have a lot of significant fundamental problems with our economy and the government is doing next to nothing to fix them. Instead, from what I can see, they are making them worse. They are promoting more debt, giving moral hazard to the financial institutions that got us here, promoting consumer spending and pretty much doing whatever they can to avoid us reducing debt or returning to sustainable ways. I find this truly upsetting. I am not sure McClain would have done much different, but I have to wonder. Sudden Debt agrees we are not on the right path.

http://suddendebt.blogspot.com/2009/08/household-debt-gdp-and-mr-obama.html

Are we entering the lost quarter century?

Okay, I am a bit down on the economy but I truly hope Ambrose Evans-Pritchard at the Telegraph is off a bit on his predictions. He suggests we are in for a score plus five of pain. Sure, I think we have long term pain ahead and are not returning any time soon to the unsustainable economy we just had, but I am hoping we come out of it in my life time. Ambrose is known for being a bit over the top in his doom-and-gloom, though not totally off base.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6110621/Our-quarter-century-penance-is-just-starting.html

Disclosures: None.