Hi Folks,

Still waiting out the news from the different properties and decided to do some looking around at the market.

Seems we have two sides debating on the events of the next few months. At SH, we have Mike Swanson who is recommending that everybody sell as he predicts that we will hit a serious bear market in September and October. I responded to that article with some thoughts of my own as I believe he is a little late in recognizing the bear. The bear started in August 2007 because of the sub-prime crisis and was amplified in January and June of 2008 with the corrections which occurred. I would not even call them corrections but forced markets drops based on the over exposure of the large investment funds.

Think about it. When the likes of Bear Stearns, Fanny May and Mac, and conservative banks lose money, things are really heading for the dumper.

But is it all bad news?

I do not believe it is. While Mike would consider me an "unrealistic constantly bullish" investor, I would disagree with him in that those who find quality companies and who can withstand a short term bear are in a better position to later prosper than those who are constantly guessing on the start and ends of both bulls and bears.

Don't get me wrong. A lot of long term investors have lost a lot of money the last six months as many resource companies have seen their share prices decline up to 90%. But if all had sold on the same day a bear was announced they would have ended up in a much worse position as their fear would keep them from getting back in until the rally was well on its way.

What I have witnessed the last six months is a low volume burn fueled by the wounds of the large investment funds. Unlike you and me, they are in business to make money every quarter. When that is threatened, they try to mitigate their losses to as little amounts as possible. Often times all that is required is that they lose less than the guy across at the firm across the street. To limit losses they might sell something they bought at a higher PP hoping to buy it back later at a cheaper price.

If the market sentiment is that we are in a bear market, they will start to short and bash. But what happens when there is nothing left to short? When no targets are left to try to steal? When the cannot buy up the cheapies as they have no capital due to the public's lack of faith in the market that they turned downward through a shorting campaign?

Not all funds make money shorting. Some looks for undervalued stocks and ride the waves up. Some make great profits as they margin their holdings to buy other shares and ride a bull. But what happens when all the rules break down? When the bull crashes too fast and the shorting gasoline being poured on the fire causes all equities across all markets to continue to fall. At this point many are forced to cover their margins as their investors pull out to move to safer grounds?

I believe we are witnessing a global meltdown of markets due to fund and financial institution overexposure. When the mortgage backed securities created a "run on the bank" situation, these institutions were forced to sell assets. This caused the equity free fall. As the shares dropped in value due to a forced increased supply for sale, so did investors ability to borrow. Though the FEDs fiddles with lowering interest rates, it never really brought the confidence back to the market that normally would occur. To make matters worse, the trading volumes created by leveraging assets started to dry up as less money was being loaned for this purpose. Though the central banks were kicking in $$, those with access to those dollars remained tight and viewed everything but T-Bills and Bonds as risky investments. I mean, if you can't trust something like a mortage backed security, what can you trust?

So here we are today with the market running to bonds and other so-called safe havens. Fear is prevalent in the market as those who rely on income from investments panic to shore up their equity and wait out the bear. And a chain of falling dominoes continues to take its course. With every mutual sell order comes another stock being sold from the fund, resulting in the bids being taken out rather than the asks.

Not a massive selloff if you look at the volumes overall but enough to keep buyers away, which is all that is needed to see things really start to fall.

So we sit on the NOT island surrounded by a hurricane, but with a shelter called results which will protect us until the sun shines again.

There are many cheapies out there and the challenge will be to manage portfolios as we bottom out so to best position one's risk while taking advantage of the the extremely low buying pressure.

I will leave you with an article that brought a smile to my face today. It is bullish but then again most investors do not get into the stock market to lose money so they are naturally bullish. They key is to not be manipulated by the hype in the news and line the pockets of the fund managers who are required to bring home short term results for a living:

http://www.ramonajournal.com/news/20...

M1.