I’m very concerned about the ever increasingly blurred line between the private and public sector. The bail out of Fannie and Freddie will serve to boost confidence in the short term, but I feel it is probably going to cost the tax payers trillions in the long run.
The FDIC is now running out of money to pay out depositors. They will have to borrow from the Treasury. This is going to be another financial event where the tax payers will shoulder the burden for bad banking practices.
I feel that once this crisis comes to an end, the financial landscape will be extremely consolidated and muddled. The government will be in a position with incredible moral hazard with so many private sector investments.
The leadership that was from the strength in commodities has vanished. Financials have bounced back but are still down on average over 30% YTD. They are by no means leading us higher.
As for the next bull market, I can not find a catalyst that will be suitable to stimulate a resurgence of equity values. Financials will be strangled with regulation and unable to create structured investment vehicles with the flexibility they previously enjoyed. Fees will be compressed and many brokers will have to find new lines of profit or fail completely. Green energy isn’t going to find a catalyst without energy prices continuing their parabolic run. The consumer is spent and the technology sector is going to suffer from that next.
My outlook may seem bearish now, but I feel that it is actually the most bullish outlook I can muster given the global and domestic economic conditions that are giving way to an unprecedented slowdown that is only in the first stages of affecting us.