The Bear Case...

Before you bitch, this post hurts. It hurts because it is true. I am long nearly 100 percent and have no shorts positions.

The best thing about this market has been that it has survived. It’s really not important in hindisght, just how. It just has. Hooray. The next best thing is David Tice and Bill Fleckenstein are back in the press calling for the crash. Shit, even Cole from Blackstar (long only) and the Fly are talking about the FXP (double leverage short China ETF). Furthermore, every 401k holder now has an emerging market and china exposure allocation. Ask 10 people you will see.

If you don’t think the Chinese have been cooking the books worse than our banker friends at Bear Stearns, Merril and Goldman, you are delusional and will one day get wiped out. That day looks to be sooner than later after the meteoric rise of this year.

I am not changing my portfolio based on this rant because I am only 30 percent exposed to equities and it’s designed to be long stocks in strong uptrends. I don’t think I was ever good enough on my best days to time these things and fight the trend. Knowing that helps.

On the homefront, the homebuilders are about to implode once again. If they were going to rally off their 70-80 percent plunges, they would have. Guess what, it’s getting worse. I thought these would become a value trap for years all the way back in March , but they are not. It’s worse. There is nothing there but bad book value, getting worse. Unless my friends (who have been in the real estate business 30 years) are lying to me.

I am sitting on a pile of cash as are others in Phoenix ready to prey on the newbie builders that will be in ultimate pain by next summer. After the February ratchet in ARM mortgages, consumers will have enough fight to get them to the summer at best. They shpuld reach ultimate pain as well.

If I am right and the market discounts this 6-8 month, we could be tipping into a mess for a while.

Thoughts?