S&P 500 (SPX)

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Current revision

The problems with the economy and the credit markets are far more deeply rooted and intractable than what is reflected in current market prices

Many informed participants have a decent awareness of the former, but seem to be in denial regarding the latter.

Beyond this current assessment, media reports indicate a further coming wave of real estate defaults beyond the subprime mess. The financial markets, already struggling with the current impact of the bursting of the real estate bubble will encounter extreme difficulty accomodating further deterioration. In certain quarters this is known as cardiac arrest

When the stock market begins to more accurately reflect these realities, you do not want to be long!

Proof on the ground supporting this view can be found by examining the FOMCs own rationale supporting their rate reduction action taken on December 16, 2008

Market action in the new year have served to confirm this assessment as evidence of further deterioration in the banking, auto, housing, and consumer sectors have emerged. At this writing, January 15, 2009, the Dow Jones Industrial Averages has traded below 8000. The Federal Reserve has indicated a requirement for substantial additional funds, perhaps on the order of another $1 trillion, to bolster the banking system

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