The future is not frightening

We just experienced a once in a lifetime credit market bubble and we are clearly in a serious recession and more aggressive action is needed to turn things around. However, I am optimistic about the choices that President Obama has made for his economic team and the whole world is working together to address unemployment, possibly that we can end the recession by early 2010.

Given the economic uncertainty, it is natural to expect investors to be too worried to buy equities.

Let me it in the most simplistic way that I can of what I see as our future. Investment opportunity is always the difference between the reality and the perception. And, in my humble opinion, since many equities are priced as though a depression might be on the way, many of them are attractively priced.

Cost pressures have eased as prices of raw materials have declined sharply since hitting peak levels in mid-2008. By and large, I would say that we are in between the phases of asset reflation under fiscal stimulus and USD secular depreciation. I believe the arguments of going defensives are becoming less convincing.

My reading of the tea leaves in the investment newsletter arena suggests that we should bet on the optimists. That's because the select few market timing newsletters that have beaten a buy-and-hold over the long term are, on average, more bullish on the stock market right now than the much bigger group of newsletters whose market timing has lagged a buy-and-hold. On the theory that the past's winners are more likely to be right than the past's losers, this bodes well for the stock market.

Having said that, there are no guarantees in this business, especially when it comes to picking a bottom.

On a separate note, thanks to declining demand, airfares aren't marching higher, hotel room rates are falling and cruise lines are slashing prices. But what do all the great deals matter if you're too worried about your finances to shell out for a trip? Isn't it ironic. This is a great year to travel -- if you can afford it.

A friend recently purchased a transatlantic trip -- 14 days in an outside cabin with a balcony -- for $800 per person. And that includes the food.