This blog post originally appeared on RealMoney Silver on Jan. 22 at 7:49 a.m. EST.Notwithstanding the attempts by many to marginalize the role of the U.S. economy on worldwide economic growth, most of the world's economies will soon feel our pain. That bullish cabal (especially of a Ben Stein kind) will recognize the existence of the downturn only after the fall in equity values (and after digesting the conclusive economic evidence that is forthcoming) -- in other words, after it is too late to prepare investors. Note: I am hard on the permabulls because they were hard on me over the last 12 months. I will continue to take the high road, however, by not mentioning any of the names of that dogmatic constituency -- with the exception of the Bens, Stein and Bernanke -- whose economic heads and market "wisdom" have been firmly implanted in sand. The short-term economic outlook is now practically cast in stone, and the sharp downturn in equities will only serve to exacerbate the growing economic weakness and loss of confidence on the part of consumers and businesses. Expect market assumptions for retail sales, business spending and, most importantly, corporate profits to be ratcheted down in the weeks ahead. In order to properly navigate the investment terrain, investors must answer the following five critical questions:
- 1. How long will the recession last? 2. How deep will the recession be? 3. How will corporate profits be affected? 4. What will the response be in the capital markets? 5. What wild cards could change the economic and capital market backdrop?