May 2009

As winter turned to spring and quick as a lightning flash,
We recovered from the losses and made back the ‘09 crash.
The sentiment and trend have both made sharp and sudden turns,
Giving the bears and shorts alike, horrific third degree burns.
Just a few short months ago, it all seemed so very dire,
The consumer had collapsed, the banks were all on fire.
Their wallets all were empty, their book values all had vanished,
Saving was in vogue, all consumption had been banished.
I remember it quite well, every night there on the tube,
They said the Fed’s work was in vain, and that Geithner was a boob.
As Citi’s stock broke through a buck, we looked on with much disgust,
Thinking TARP, TALF and P-PIP had all been such a bust.
The depression was upon us, it was getting very bad,
Except for Taleb and Roubini, we all were feeling very sad.

And then the thing it softly hit bottom, without making any sound,
At the moment that it happened, there were no bulls here to be found.
The rally it was false, a head fake we all said,
After all we knew full well, capitalism was now dead.
But it kept on going higher, day after day, week after week,
Although the macro stats and news flow were still looking very bleak.
Things were all still getting worse, just not quite as quickly as before,
A second derivative change helped the market set a floor.
The talk now everywhere is of sprouting new green shoots,
Only time it will reveal, the depth of their underlying roots.

The way the bulls tell us the story, things will end up being fine,
Nothing now can stop us, not even flu or plague from swine.
Ignore the prices of the houses, though they continue to be sagging,
Don’t sweat surging unemployment, an indicator that is lagging.
Obama and Bernanke will fix any problems that we have,
If your mutual fund is impaired, they’ll pass a bailout of your NAV.
If it’s Chrysler that’s gone bust, give it to the unions and Italians,
If it’s your strategy for Afghanistan, send in some more battalions.
Stimulus, healthcare and green energy, it all can be afforded,
Don’t worry if you haven’t saved a penny, you’ll be kindly well rewarded.
If the Chinese don’t buy more Treasuries and start puking all our dollars,
The Fed will print more just to buy them, those depressionary scholars.

And the bears think they know better, that they are wiser than an owl,
On this rally and economy, their advice would be ‘throw in the towel’.
They know this turn is just for suckers, for the money that is dumb,
The S&P’s going back to a six handle, that awful place we just came from.
Our households and our businesses still have much delevering to go,
Though our assets are declining, big debts we all still owe.
All the governmental actions just delay our day of reckoning,
Out on the near horizon, financial ruin it is beckoning.
Take no comfort from green shoots, which all will soon be withering,
Buy gold in heaps and bury it, this is no time to be caught dithering.

And as for me as an observer, what is my present opinion,
On this bull and bear debate, raging across this wide dominion?
As with many things in life, the answer’s somewhere in the middle,
There is no easy answer to our tangled financial riddle.
Did we overdo the leverage and create much false prosperity?
Did we put off many problems and leave them to posterity?
It’s clear the answer to these questions is a high conviction yes.
What’s more, we haven’t fixed the banks with recent tests of stress.
Yet there still are many things that give me hope for times ahead,
I do not sit around in fear of a future that I dread.
So bears stop hoping for no end, to our economic pickle,
And bulls take time to reassess, these rallies can be fickle.
Good luck to both sides of the coin, may you find alpha by year end,

Here’s to hoping we soon return, to days when beta is your friend.