At the macro level, I am quite concerned for our great nation, however, praying and keeping our fingers crossed is the only thing we can do at this moment as we continue to avoid taking bitter medicine and take band-aid approaches and adopt only temporary fixes when in fact what we need is a major surgical procedure.
Federal Reserve's current monetary policy is pretty risky (as it has been for years now) and is only aiding congress to avoid or delay taking tougher medicine. It only exacerbates the situation and adds even more risk to our already precarious condition. We may very well get lucky, but we can push our luck only so much. Avoiding Economic Armageddon is the key here and it does not look too good.
There are two camps at this interesting juncture of our financial lives. One camp is for “Pessimists” or “Gloom and Doom” folks, where I belong to, and the other one is for “Optimists”. Pessimists or folks from Gloom and Doom camp think of themselves as being “realists” and they think of the Optimists as “hopefuls” at best and “day dreamers” at worst. Just to be fair, one of these big “day dreamers” otherwise known as Paul Krugman, a nobel prize winner and a popular economist went to the length of calling these “realists” as zombies.
By any count, the year of 2010 was one heck of a lucky year in addition to a year of 2009. First 8 months of the year 2010 was “back to basics” for the financial markets; come September and the animal spirits were back in vogue with a vengeance fed by big daddy Fed’s shot in the arm.
As 2010 draws to the close, we wonder what happened in late 2010 and what is in the store for 2011. We consider all of 2010 gains, which were all pretty much packed in last few months of the year as one of the biggest Santa’s gift. So, let us consider ourselves lucky for now and smart investors are already getting off the runaway train just to avoid a possible wreck.
Looking forward, we would venture to say that more likely than not, it will be a “back to basics” time in the year 2011 and beyond. We sure are running out of our ammunition now. Further, the magician can pull only so many tricks out his hat anyway. In all, unless our country gets its fiscal house in order, the Armageddon scenario remains likely, no matter how small a probability. Let us fasten our seat belts.
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