SNOWED IN

The major snowstorm that has converged upon the U.S. eastern seaboard overnight appears to be a sign that U.S. equity markets are far from removed from the carnage experienced YTD; March is unlikely to herald anything new and accordingly, the risk of the S$P 500 hurtling toward 600 (from 735.09 today) only increases. The signs of the apocalyse are legion: the U.S. dollar is the strongest currency in the planet (laymen would be shocked), a major financial institution requires capital injections (today, HSBC), and our Captains of industry (GE reversed it stance on a dividend cut within weeks) and a Legendary investor (Warren Buffett) plea mea culpa like its going out of style.

I even here the term depression being uttered on television to describe the current state of afffairs. I say when the three biggest economic zones (US, EU, Japan) are in a bad recession we have successfully achieved depression. All depressions need not be "Great".

All about the Benjamin. Benjamin Franklin noted long ago the inevitability of citizens confronting death and taxes. And if there is one certainty right now it is that taxes are going to be increasing. For the investor class the $200,000 annual income breakpoint is not a gigantic hurdle, let alone $250,000 for families. With the taste for equities souring and the trillions of wealth destruction that need to be recouped in order to become whole again (don't hold your breath) I strongly believe that the fixed income asset classes will be the first to recover. In particular, the municipal bond market due to its relatively favorable risk/reward profile, tax-adjusted yields, and the strong presumable support of local investment funding by the Obama administration. After all there is no more "shovel-ready" spending initiative than existing ones.

Normally I prefer to recommend specific securities, but right now I think people should be investigating bond funds because of the double discount factor. Funds own discounted to net present value (NPV) issues, which is the opportunity a value-oriented investor seek. This discount is fairly meaningful because bondholders are most interested in cash flow generation; capital appreciation is secondary. However, the demand for liquidity has caused many closed end funds (trade like stocks, not mutual funds) to trade at much steeper than normal discount to net asset value (NAV). Net asset value is a much more tangible metric than sentiment influenced ones such as price/earnings. I'm enough of an optimist to suggest that a) I do believe that normalcy will eventually return, and b) there is no reason to think successful, long-tenured fund managers have collectively become worthless so the double discount factor of NPV and NAV is the "fat pitch" a hitter is looking for. Trolling in this formerly unsexy corner of the investment universe today is appropriate for any investor. Cash is King; especially, the U.S. Dollar.