Gotta tell you (and long time readers can attest) we were very frustrated throughout the 1st half of the year as we were screamed at by pundits about the "2nd half 2008 recovery" - I think at least 5x a week for months on end I used that line along with the term "Kool Aid thinking"during late winter and spring. After that thesis proved to fail, the Kool Aid pundits turned to "as gas drops 50 cents the consumer will be back" - hedge funds ran into retail stocks to run them up on "that thesis" - I said that one will be proven to be wrong but we looked foolish those weeks/months as we held none of the stocks that people were running into on false pretenses. Remember, in the stock market - perception is reality. It does not matter if reality is wrong as long as enough people believe it.

As I think how the stock market can turn so suddenly, one must step out of one's own shoes and realize so many people were drinking the Kool Aid and this "wash of reality" we've experienced the past few months must be such a shocker to them. They were still living in a cocoon of "everything will be fine by the back half of 2008 and this will at worst be a short, shallow recession if a recession at all" In that vein, I can understand why the market has turned so suddenly and without relent. The critical mass of investors has finally woken up to ideas a very few (hand raised) have been preaching. One tends to believe most everyone has similar views as yourself, or at least you extrapolate that onto the market - that was not the case as the "market" had much more of a benign outlook and someone like myself sounded like a mad man alarmist ;) I wrote over and over, most everyone running the "big money" in America in their hot shot levered "new age" hedge funds had never lived through a consumer led recession. The stock jockeys in their 30s (20s??!) and 40s - for them the 1970s to early 80s is when they were born or went to elementary school. Not traded. Apparently none of them read about history (because we are apt to repeat it eh?) So all they were conditioned to was the short and sweet corporate led recessions of early 90s and early 00s - while we went on a 25 year of binge spending as consumers. Hence they were using the wrong playbook entirely - a consumer led recession is a very different think - especially in a country where 70% of GDP is consumerism. I'm only peeved at myself for watching the stock action and not sticking to my convictions longer - when the masses move stocks in completely opposite direction than you believe for months on end, it does lead to some doubts. In April 2008 I wrote

I cannot continue to stress enough how wrong analysts are on 2008 estimates and any company with focus on the US consumer is simply going to be blown apart in due time - if not this earnings season - then in the future. We are told daily how "cheap" these stocks are; this is based on the fictional body of work called "analysts 2008 estimates". Don't believe the hype. The subprime nation (us) is in trouble. Consumers make 70% of GDP. Its a consumption culture where the consumer is being drowned in negative wealth effect from housing, inflation from the Federal Reserve/global forces, and underemployment if not outright unemployment.