Questions Moving Forward

Beyond the technical moves that have been large and volatile in the last 24 months, there a few questions I wanted to pose as we look forward at the next 12 months. These are in no particular order or no particular importance, but are just a collection of questions that help me figure out which side of the fence I want to be setting up my longer term positions. Some do have a correct and finite answer, but others will not be answered until everything plays out over time. Have fun.

- If 70% of the country is actually living paycheck to paycheck (I have heard that quoted but have no idea if it's true), then what happens to consumption if there's even a short term interrupt (2-6 months) in our financial system?

- What would happen to retail sales?

- Since 70% of our economy is based on consumption, what happens to the economy if there is an issue with our financial system?

- Does it seem like market participants have learned they're lesson yet about bubbles?

- Did you know that historically even the top economic minds of their time had no idea they were in a financial bubble?

- Do you really think that the real estate market has bottomed after a 3 year pull back and a 9.5% unemployment environment? Does that really make sense?

- Did you know that the market generally will make a mirror move that's at least as big as it's first momentum move after and extended pull back?

- What do you think is happening with all the pre-foreclosure houses sitting in limbo right now? I'm talking about the ones where the bank shows a $450,000 loan on their books but the house is only worth $240,000.

- For the "Strategic Defaulter" living in the house above, lets see how much extra disposable income they've had if they haven't paid their mortgage in 2 years, but the bank hasn't kicked them out yet. Lets say that their monthly payment is $2250. x 24 and there's an additional $54,000 that family had available to consume and artificially inflate the retail numbers over the last 24 months.

- How many strategic defaulters do you think there are in this country?

- What do you think is going to happen to their spending habits when they actually have to start paying rent or paying a mortgage again?

- What do you think will happen when the banks actually have to realize that $200,000+ loss on that home loan? Multiply that by over a million + houses that are likely to foreclose this year.

- Where is the government going to generate tax revenue when retail sales are down and less of the population is working and less are consuming?

- What do you think happens to the value of the US dollar every time we take on more debt by selling more bonds? (It's an easy math equation, it gets deluted and loses value. There is no other correct answer)

- What will happen to our US debt when interest rates go up? (just like on your credit cards, our monthly payment is going to go up)

- What is the current Fed rate? (0 to 0.25%)

- How much further can the Fed cut rates to stimulate the economy?

- What affect do you think our country's addiction to consumption will play in the next 12 months? What if they don't have access to cash or credit?

- Do you think having citizens addicted to consumption is good for a healthy economy?

- Do your answers to the questions above give you confidence in decisions being made by our country's top economic minds?

- Do you think that there are opportunities to make substantial trading profits in the current environment?