Idle Speculator Piece: Now What???

We’ve posted a new Idle Speculator piece on the recent week long stock market thrashing, and some potential contributing factors. We still believe that the safest and surest way out of this crisis, beyond a smart strategy for supporting recapitalization of the financial sector, is to optimize the policy mix. Unfortunately, that idea is getting precious little play at the moment, seemingly because so few policymakers understand it; instead, the political logjam still centers around philosophical differences over the ownership of income and allocation of capital.

The basic idea behind an optimal policy mix is that the federal government must ease up on the private sector thru smarter taxes and regulations, so that (1) the economy can return to a growth path, and (2) the Federal Reserve can put its focus where it belongs, on keeping the purchasing power of the dollar reasonably stable, and the interests of debtors and creditors in balance. Until something like that is on the horizon, broad stock markets will have to fall a good bit further for us to become bullish on them for anything beyond a trading range bounce. To reiterate, we do see a historic number of compelling values lying around – but the broad U.S. stock markets, although more attractively priced than a year ago, are still not among them, even now.

http://symmetrycapital.net/idlespeculation/20090224_What_Now.pdf