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Assets in Free Fall


Casualties of ongoing crisis too numerous to calculate.


It's a long day livin' in Reseda
there's a freeway runnin' through the yard
and I'm a bad boy, 'cause I don't even miss her
I'm a bad boy for breakin' her heart
And I'm free, I'm free fallin'

-Tom Petty and the Heartbreakers
John Mayer's 'Free Fallin' video

Are We "Free Fallin"?

Over the past year or so, I've used imagery such as hurricanes, tsunamis and avalanches to describe the economy. The question of whether a financial tsunami would hit us has now been answered; it's reaching not only our shores, but those of most of the world. The avalanche is also most certainly in motion, heading straight for us, potentially forcing both markets and the global economy off a cliff.

Now, imagine an unbroken fall from a very great height.

Recall the look on Wile E. Coyote's face right before he falls: He flaps his feet and waves his arms in an attempt to stay airborne, but to no avail. The Roadrunner watches in amusement as Wile E. arrives for his date with destiny at the bottom of the canyon.

Unfortunately, it seems the economy needs "gravity lessons" of its own.

Our New Set of Problems

Much of the pain felt in the financial system to date has stemmed from subprime lending and the write-offs accompanying both poor lending standards and the financial alchemy of investment bankers.

Many optimists hoped the subprime mess could be contained, and that other parts of the economy and financial products would emerge untouched. To that end, our government has thrown trillions of dollars at bailouts, buyouts, intervention, rule changes and the like.

But subprime lending, in my opinion, was nothing more than a shot across the bow of the financial system - it was just the opening act. For the main event, I'm seeing a performance of "Free Fallin" that would make Tom Petty and John Mayer proud.

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No positions in stocks mentioned.

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