Getting Comfy

It's officially the fall season, as the temperatures outside confirm, and so in keeping in line with warm hoodies and extra layers, I think its time that we take a minute to think about America's temperment as a whole.

And I think that America really just needs to get comfortable with the "new normal".

Some say that markets reflect the economy. I believe that the consumer reflects the economy and that markets tend to be a bit sporatic. But that yes, somewhere in between the highs and the lows of the market, there is some accuracy taking place. Today, the consumer is telling us that he's nervous. That he's a bigger saver now. That Christmas 2007 isn't coming back - and probably shouldn't from a prudence standpoint. The consumer is telling us that many of those jobs that were lost aren't coming back and that its going to take time to develop new industry structures to replace those jobs. All in all, I think the consumer and the business world has settled down into the "new normal". Cost cutting is slowing. Sales are stabilizing. And the engine of the economy - consumers and small businesses - are making due. True, housing is far from recovery. Small businesses continue to suffer from lack of credit. But in truth, the economy is growing (barely) and can continue this rate without falling back into a double dip recession.

The confusion comes from the markets - that see this reality but price-in a "V" shaped recovery as if this were the early 2000s. The market hasn't fully accepted the "new normal" and just isn't comfortable with the current situation. Its anxious - anxious about missing another rally; anxious about the dollar's demise; hopeful that everything will pick right back up and with steam again. And because of that, the markets bounced off of March's lows (rescued by federal liquidity and stabilization) and has marched to today's highs. The reality is somewhere in the middle. And the reality is that the growth from that middle point is very subdued over the next few years. Sexy isn't coming back for a little while, but more importantly, its not a recession. And at some point, the markets need to get comfortable with the boring flannel pajama pants and just be content to be warm.