“Hey, Rocky, watch me pull a rabbit out of my hat! Nothin’ up my sleeve!”
“AARRRR!!! (pulls out the Rhino) Looks like I don’t know my own strength.”
“Maybe you need another hat.”
And now here’s something you’ll really enjoy.
After all, it is part of the American optimism to believe in the unknown positive. The concept of another rabbit in the hat as investment strategy was popularized by Stan Salvigsen and Mike Aronstein back in the mid-1980s. When faced with a bearish outlook, and in the absence of any clear positives to identify to offset all the negatives, we in the financial services industry prefer to believe that there has got to be another rabbit in the hat. The concept is predicated on the fact that no one knows what the magician will do next. The hand is quicker than the eye. Mother Nature watches from the wings, though. So the magician walks on stage and his prop is a pedestal table with a small vase on it. He removes his top hat and sets it on the table. With a wave of his wand, he reaches in, pulls out a scarf and drapes it over his shoulders. Another wave of the wand, and presto! Out comes a bouquet that he places in a vase. How did he do that? Another wave of the wand and out comes the rabbit. The audience is amazed! And for all of us Baby Boomers, there’s Bullwinkle.
Today we are faced with the second recession in the Secular Credit Collapse. It has come close on the heels of the first one, the one that everyone has held their breath during, believing in the promise that the old, expansive paradigm was still in force. But the intervening recovery, the one that began in mid 2009 and is now ending, never rebuilt the household balance sheet, much less the tax base. We got back 70% of the stock market drop, but that was about it. The household didn’t have their bet there. They had it on very stylish real estate. In the words of the lame journalists on the Street, the recovery, such as it was, just kicked the smelly old can down the road. READ MORE