Winners and Losers

The turmoil within the markets over the past year has put Washington in the position of picking winners and losers. Much has been written about those institutions that in one way or another are deemed "too big to fail". If an entity is really too big to fail then it is just too big. If we don't have losers in our capitalistic system then we very soon won't have winners either. Much of what is transpiring in Washington today seems to be aimed at "leveling" the range between winners and losers so that everyone wins. This has never worked ...anywhere. Remember one of the precepts of our philosophy is that risk and return are related. This is a fundamental rule of capitalism and cannot be abrogated except by fiat which is what may be transpiring now.

A quick observation- without question we are enjoying a very nice 7 month rally from the March 9 market lows. About two-thirds of the S&P 500 entities are beating analysts estimates of earnings. It is important, however, to recall that even with these better than expected earnings, the average company is reporting a 19% decline from the same period last year.