Have We Hit Bottom Yet?

Those of you that follow my writing know that I am an eternal optimist. I have been consistent in my recommended thoughts and actions in these challenging times.

During the last 6 weeks, the dazzling bear market rally has been over 25%, so my natural tendency is to think that we have hit bottom. While we may have, I feel compelled to balance potential enthusiasm with a reality check.

A week ago Friday, there was an interesting article in the Wall Street Journal. While there is no shortage of those who think we may be poised to be led out by the recent success of the financial sector, including one of President Obama's top advisors, there are also warning signs that should get their due.

The current crisis is unprecedented in 75 years; so do we really think that we could recover so relatively quickly? Perhaps, perhaps not. Skeptics point to another possible correction before the real recovery where more jobs will be lost & consumers will "hunker down." Job loss could create another round of contracted spending & lower corporate profits. Thomas Lee of JPMorgan Chase thinks there will be another 8 to 10% drop in the market.

Another line of thought has the non-financial sector falling off through lower earnings, and since the financial segment is not out of the woods yet, we could be dragged down. All the trauma we've been through has many in a very conservative, cautious mode. Who can say they're wrong?

Finally, Howard Atkins, Wells Fargo's finance chief said that while they had adequate reserves, and he was "very comfortable" they had already taken appropriate write-offs, he would not rule out taking more in the future. It seems everyone has a disclaimer.

Accordingly, I will not be any different. I believe that we DID hit bottom, and that a slow but steady recovery is at hand. The disclaimer is that we don't experience another "911" sort of experience, and that government spending somehow gets under control.