Friday, March 30, 2007

A Colossal Mistake

My goal is to post one comment per day. However, today's trade sanctions against China cannot go without a response.

Let me join those condemning today's reckless act of political expediency.

Whatever the US government thinks will be the benefits of its actions are far outweighed by the downside consequences of this regrettable step toward protectionism. Clearly, this is precisely one of the key risk factors that has been noted in prior comments made here and elsewhere.

Investment Strategy Implications

The initial knee jerk reaction by the equity markets was the correct one - down in a heartbeat. With next week being a shortened trading week and the start of an uncertain earnings season, the odds of the equity markets making a new low have increased significantly.

Today's political decision and others to follow in the form of protectionistic legislation have added to the already high degree of uncertainty that far too many investors so sanguinely dismiss. However, if, for liquidity reasons and the noted "Misalignment Triangle", investors choose to ignore this real economy disaster in the making, then I believe they will join the politicians in making a truly colossal mistake.

Try to have a good weekend. Going forward, it may not be pretty.

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