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Jubak is turning out to be a nut case like Cramer. I have been regularly reading his articles for a few years now. The quality of research has certainly gone down and he is more and more clueless about what is happening. His actions are more of a response to what is happening rather than insight based.

I cannot fathom where all the government action will take the world but I will comment this: Financial disasters have occured in 1873, 1930, 1986 and now. In each case, different conditions led to a common theme: credit crunch and collapse of financial institutions. In each case, the economic downturn lasted for >4 years with different levels of govt interventions. To expect something different in terms of an economic swing would not be Foolish. There are a lot of things that are different about the current crisis: global nature and massive global bailouts. Some components of the economy will eventually pay for these bailouts. The cost of these bailouts could be a prolonged global economic slump. What the world may have purchased is insurance against a sudden downfall that does not give people time to adjust to lowering standards with job losses, stagflation and/or frozen or falling wages.

In the last few weeks we have seen massive swings in the market, to the deep down and back up. There is no reason to assume that this will not keep occuring for a while.

Regarding the oil. Is there any point trying to figure out the bottom? My questions have not changed. From 2007 till now, the demand has only gone down. Why the march up from $60? The usual argument of drying oil wells does not sound convincing to me for a lot of reasons. As for the analysts, Goldman predicted oil at $200 when it was at $40 and when it was at $147 they predicted it below 100. I think they got it right. Really. No one anticipated this kind of a crash so increasingly downward estimates. Estimates are always made to the extreme point: high or low.

Oil at $60 or less will help the global economy kick start. So I wish earnestly for a lower oil prices. The stocks related to oil industry are selling at a price when oil was below $40 and oil over $100 was not anticipated this first. Clearly a market dislocation. I don't think that oil has a place below $40 without a massive global depression. But it does have a place at $60 for a few years in a an environment which sees very poor auto sales, reduced air traffic, reduces shipping and trucking due to recession across the globe.

It is important to be realistic: economic malaise can last for 4 - 10 years. Sunk commodity prices are more likely to help the economy than not. High commodity prices are in fact one of reasons for the collapse that no one talks about. How long could the price of consumer goods fallen with steeply rising inputs that includes the salaries in outsourced nations? How could the potential increase in consumer goods prices along with all the commodities be tolerated with near flat wages in the developed world? How long could the rich western consumer depend on credit? This is more than real estate crash or investment bank failures. An entire way of life based on high spending is as much of an underlying cause. To change a way of life is not easy. All of us want every latest item out there in our house within 2years whether we can afford it or not. It will take several years to break this habit and will only occur by the force of a recession.

So I would neither call it a bottom nor predict where the bottom lies from this point. What we all need to do is put a survival plan in place: what is the probability of loosing our day job? What are the potential impacts of loosing the job? And prepare accordingly. It is hard to find jobs in a recession. This is when people are forced to liquidate their assets at firesale prices. No wonder people with a lot of cash make the most of recessions. Most just slip thru the cracks. A backup plan right now is far more important than waiting for the recession to engulf us completely in next 6-12 months.

As for me, I had cash position for a 20-30% fall from the peak and not to this point. I have chased the bottom so far but I will looking forward to book tax losses where ever it makes senses with the temporary upswings. I need to rebuild cash positions as well.


Anurag
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