I am not here to convince anyone of anything. I am just sharing my game planning for next year.

1. Unemployment lags the economy and really lags the market. Always has, always will. It is a classic lagging economic indicator. I have shown this in previous posts by researching historical Govt stats. It is very consistent. Employment has NEVER led the economy out of recession, not in 100 years.

2. Foreclosures will lag the economy and market even more than unemployment. It takes several months of delinquency before legal proceedings can even be taken (no. of months varies by state). Right now, the banks are so backlogged, they are not foreclosing as quickly as they legally can.

3. Housing sales are improving, but slowly. The affordability index is near all-time highs (low index number). 90% are still employed and can buy a house if they need to. Housing sales will not lead the economic recovery either. They will lag employment, which will lag the recovery. First thing to recover will be business capital spending. And home builders will not benefit until the inventory of already built houses is sopped up. So, new home starts will lag home sales numbers.

4. Banks are backstopped by the govt. That has been proven the past year. The regulators are making sure the reserves are adequate to cover “worst case” foreclosures, so the mortgage, credit card, auto loan, CRE problems are already in the stock prices and in economic expectations (this was the whole “stress test” exercise a few months ago). And CRE is not ready to collapse. That is absurd. You have nothing to back that up. In fact, General Growth is being pursued by several CRE suitors who have money to invest.

5. The Christmas season retail numbers were much better than expected. This will be seen in about a month when the Q4 numbers are released. But we already know this by the weekly reports from the industry.

6. I do have reservations about govt spending. This is why I have a weak dollar strategy the first part of the year. I am planning on the Fed taking back money supply and the govt cutting back spending. If that doesn’t happen, I will just stick with my weak dollar plays. Worst case here is a profligate govt and a reckless Fed that continually weaken the dollar. I have a good game plan for that which is commodities, emerging markets and other anti-dollar investments. So, I can win in this scenario, as long as the keep the presses printing.

Too many people get stuck in ideology. Investing is not about idealism, it is about strategy, pragmatism and flexibility. I have no axe to grind with anyone. Just trying to make a living. Good luck to you.

- Brian McMorris

Related Posts:

• Obamas lack of experience rises to the surface once again.
• Another outstanding rant by Denninger—
• Citigroup, Inc. (C) and General Motors Corporation (GM) are not investment, they are trades.
• Inflation – the real threat to sustained recovery
• On the basis of one time honored metric that I rarely see discussed, the market is extremely over valued.

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