The Five Stages of Grief

We're hearing talks of soft landings again. It's amazing how readily people will accept evidence that supports either their hopes or fears. The September data has a lot of people optimistic again. But month to month variations dont change the fundamentals that underlie the problem.

It made me think of the five stages of grief. You know: Denial. Anger. Bargaining. Depression. Acceptance.

There is a lot of denial going on right now. You can see it in the quotes that we've assembled below, or in the stories coming out of the mill. Stories that say things like, "Well, THOSE people can't afford their houses, but here in thats not the case." Unfortunately, that type of thinking no longer applies. There may not be a national housing market, but there is a national economy, and what happens in one part of it affects the rest.

There is also a lot of anger. Much of it is in the form of, "Poor Johnny and his family are facing foreclosure. Evil lenders tricked them into taking out a loan they didn't understand and couldn't afford. Now, they can't pay the note and will be out on the street. Those evil !"

But, with the recent resurgence in "soft landing" speak, and the soothing cooing tones coming out of the Fed, it appears that we have entered the bargaining phase. "Yes, yes... we had a little boo boo... but it's going to be all better, see?"

I don't buy it. You can look at all the numbers you want. I still don't believe it. I remember when I did a lot of day trading. I spent a lot of time learning technical analysis, and I was totally infatuated with numbers, charts, lines, graphs, candles, and all the rest of that stuff. I thought I had reached a decent level of proficiency, too.

Then, I read a saying by a wise old investor. "I never met a rich technical analyst." I objected. I knew lots of them! But, rich is relative. And in this guy's world, none of the people I knew even existed. He meant wealthy. And his point was that you can draw all the lines you want, and look at all the numbers you want. But at the end of the day, you can't escape the fundamental analysis. In the long term, fundamentals always win.

I didn't want to believe it at the time. But since then, I have seen that there is wisdom in his words. At the end of the day, up is up, down is down, and at some point, you have to pay the piper.

But we're not quite there yet. Remember, bubbles last longer than people think they will. The people who predicted a stock market bust had already been laughed out of a job by the time it actually hit in 1929. But crashes last longer than people think, as well. So, I would take the news of the bubbles demise with a grain of salt.