This blog post originally appeared on RealMoney Silver on Jan. 20 at 8:25 a.m. EST.
To believe, suspend disbelief. We have been through this before, the flags and fine speeches, the brass donkey paperweight, the glass elephant, the rise and fall of administrations, the coming and going of figures great and small. It's good to put that aside for a few days, to remove yourself from politics, partisanship and faction, to suspend your disbelief, to be grateful that the signs and symbols endure, as does the republic, and raise a toast: "To the President of the United States."
-- Peggy Noonan, The Wall Street Journal
The state of affairs is sad, when over the last 12 months, amid the slippery slope of credit and of the weakening economy, the pain has become increasingly palpable for the average American. The storm clouds have been gathering for a longer period of time, however, not in the grand halls of finance but in the confidence and pocketbook of the average American. In reality, the lot of the U.S. consumer was worsening well before the more conspicuous signs of credit contraction and economic slowdown and even before the world's stock markets and the value of the U.S. housing stock began to plummet. Indeed, the foundation of the speculative growth in credit, which ended in 2007, was weak and cracking well ahead of any evidence that the first toxic derivative had begun to poison the world's financial intermediaries.( Photo gallery: Obama Takes Office) As I have written, in so many ways, the current cycle is far different than from anything seen in the past 50 years. It likely holds an uncertain impact (in timing and magnitude) to household wealth and on our social condition. It follows that we must be realistic in our expectations of corporate profit and economic stabilization/recovery and that investors must be prepared to be patient with regard to a sustained stock market lift. Our accumulated economic and credit problems are secular, not cyclical, and their impact have been heightened by policymakers who have misinterpreted the magnitude of the risks accumulating in the credit arena and the emerging weakness (especially of a housing kind) in domestic economic growth as recently as six months ago.