Pirate Investments, LLC

Captain's Log

Nov 25, 2009
Plastic Bananas, the stock market and other things that are phony?

The news is bad… market goes up?
Unemployment on the rise… market goes up?
Growth revised down… Market goes up?

I should think that by now with the current economic climate that the Dow would be near 8000ish.

Don't get me wrong, I would take a Bull over a Bear every time, so allow me to explain. Until consumers have extra cash in their pockets and a job to give them confidence (and their neighbors have a job too for that matter) they will be too scared to spend and the US economy will continue to contract. Gimmicks like “Cash for Clunkers” and the “Fist time home buyers credit” are like an economic “morning Lilly”, they produce a short lived bounce that are sector specific.
Job growth will not come anytime soon in my opinion because of the reactive nature of corporate America. Corporations are acting like the average person who sees signs that a famine is coming. Like that person who begins to save money and store food, the corporation will take steps to conserve capital and lower its inventory, overhead etc. to enable it to get through hard times.

As I see it, the economic model in America is like a pyramid, the base of the pyramid is corporations and small business and the consumer is somewhere in the middle, the government is at the top (yes we all support the government through various taxes) right now, the base is under attack and has a cold. These business who have been demonized for years as the boogie man - ie.. “Big Insurance”, “Big Oil” etc... etc... But it is corporations who employ most of us. No offense, but when is the last time a hobo ever offered you a job? So the base of the pyramid is eroded, what do you think happens to everything that is supported by the base? Right, it comes crashing down.

I could continue ranting about capital markets, the role the cost of labor plays in the global economy etc… etc… but I will cut it short. I will close by saying I have closed out my positions for now. I am fighting the temptation to take up short positions. I feel comfortable in cash at the moment with 1/4 in Euros and 1/4 in Pounds Sterling (missed the gold boat).

Best regards, Barney


Disclaimer – Pirate Investments opinion articles are not recommendations to buy or sell securities. Pirate Investments Captains Logs are for entertainment purposes only.