Weren’t we out of the woods regarding the downside to Stocks a few weeks ago?  What are you kidding me?

This past week simply served as a reality check to what is transpiring in the real economy and not in the world of smoke and mirrors, or should we say GoldiLocks.  In fact, many investors are shocked at the horrendous losses posted by the US Equity market in just a few trading sessions, as they thought that we were “Out of the Woods” regarding credit issues, sub-prime issues, real estate issues and the like. 

The bottom line is that we are simply not near being out of the woods regarding the potential negative ramifications on the economy as a whole resulting from the nonsensical factors that led to the economic bubble the US has experienced over the last five years or so.  Remember, growth was robust since 2003.  However a majority of this rested on over consumption driven by a real estate bubble and inappropriate monetary policy.  What we’re seeing now is a return to a more real economic scenario…where the bubble forces and spin engines are now in collapse.

GOLDI LOCKS?  Does that imply negative real interest rates in the realm of -400 basis points and Equities posting double digit losses on the year?  Perhaps if policy makers didn’t rely on bubbles to remedy problems in the system in the past, things wouldn’t be so turbulent now.