Happy New Year, everyone! This is my first letter in several weeks. Because the economic data reported in December was just plain awful, I decided to stop delivering the drip, drip, drip, of negative news and allow everyone to enjoy the holidays.
Now, that we are in 2009, I feel comfortable in resuming the transmission of data to describe the current state of affairs. In a word – ugly – will be the operative word for 2009. As you know, 2008 was the most brutal year, for virtually all assets classes, except for treasury and municipal debt. Holding these specific assets, while our financial, banking, and credit systems imploded, not only protected your principal, they increased your account value. Individual stock portfolios, mutual funds, ETFs, and so forth, meanwhile, experienced declines of 20, 30, 40 percent or more.
Last year’s margin call on global assets played havoc on the global financial structure to the point of its near collapse. The forecasts and predictions for 2009 are grossly overly optimistic. Analysts and money managers behave as if 2008 was a routine year. Nothing could be further from the truth. This year, the pain will appear from the beneficiary of ongoing de-leveraging; negative GDP growth and rising unemployment.