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The Upside of Anger


It's important to understand how we got here.

Instead, I share them to provide context and clarity for those confused about how we arrived at our current condition.

To understand where we are, we must appreciate how we got here.

That's not a quick conversation or convenient sound bite.

It's a chronology-an evolution if you will-that built the cumulative imbalances that led to this contagion.

The end result of this situation is certain. There will be debt destruction and financial cleansing.

It's an unfortunate but necessary process, much like a forest fire that's powerful and scary but ultimately leads to rebirthing and fresh foliage.

Once we arrive at that destination, a sustainable foundation for economic recovery will be in place.

Our singular goal is to get there in one piece.

The path that we take to get there has seemingly boiled down to two scenarios.

The first is credit cancer that is chewing through industries and infecting sectors. This will phase through homebuilders, banks, "financials in drag," technology, retail, credit card companies and commodities until the body is rid of disease.

The other is an outright crash; a collision where credit seizes, capital markets freeze, price discovery permeates and social mood shifts as we come to terms with the new world order.

Neither is particularly appetizing but both have a silver lining.

Acceptance is the first step towards recovery and the world has finally admitted we have a problem.

Character Witness

The greatest opportunities are bred from the biggest obstacles and this will again prove true. Those who preserved capital and reduced debt will be in a position to prosper once this process of price discovery passes.

I'll draw the analogy between our current environment and the mania. Everything they said the Internet would be eventually came to fruition, albeit not without a tech crash.

Globalization will play out much the same way when the "outside-in" recovery arrives. It will be led by China and India and be as powerful as the pundits claimed it would be.

Alas, that won't occur without a debt crash.

Somehow over the last six years, the business cycle ceased to exist. Recession became anathema, the distinction between patriotism and bullishness blurred and profiting was viewed as a right rather than a privilege.

Minyanville was branded Cassandra for repeatedly pointing out potential pitfalls.

Government intervention, dollar devaluation and credit creation pushed the comeuppance out on the curve and we're now paying the price.

We will eventually be viewed as Pollyanna, seeking opportunities from amongst the rubble and positioning ourselves for global growth. That seems far-fetched given the current conundrum but mark my words, this too shall pass.

Capital preservation, debt reduction and financial intelligence remain core tenets as we find our way to that point of recognition.

I sincerely hope you join me on that journey.

No positions in stocks mentioned.
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