Whew. I’m glad that one is over.

Everything was down last quarter, well, I mean almost everything.  US stocks down 15%, emerging market stocks down 26%, basic material commodities down 26%, and international real estate down a whopping 29%!! It was very hard to make money this quarter, unless you were in a contrarian strategy, hedge fund or managed futures fund like the one I run that is now up 88% year to date (a little tooting my own horn).

Let’s go through the good and the bad, starting with the bad news.  It’s not over yet.  The S&P 500 has hit this level 6 times since April of 1998.  I don’t know about you, but it depresses me to think if you put $100,000 into the S&P 500 13 years ago, you haven’t made a penny.

The good news… we are getting close to the bottom.  I usually don’t make predictions down to a number, but if we get back to 950 on the S&P 500, that is more of a level that we can build from and frankly, where the stock market is fairly valued.

I think the housing market has hit bottom.  It will stay low for a while, but as I went around this past weekend looking for a new apartment for my mother, there is a 2-4 month waiting list for anything good and they are now charging more for 12 month leases than 6 months because rents are increasing so fast, they don’t want to be locked into lower rents.  Tell me the rental market isn’t a great place to put your money right now.  I still firmly believe it will drive the real estate market up in all areas.  Eventually, it will get cheaper to buy than to rent again that is if the banks would only start lending money again.

Precious metals have taken an incredible hit this past month albeit are up slightly for the quarter.  It’s no surprise and I’ve been predicting it for some time.  Precious metals, actually all commodities, have been in quite the bubble lately and are destined for a downturn. Especially when you look at something like gold… only 2-3% of the US population holds gold and it is mainly the big boys.  One big investor starts to peal out and boom… it drops..   Take a look at the chart below of the price of gold from 1975 and tell me we aren’t in a bubble…

I’m actually pretty excited for the next quarter.  There are going to be some shake outs, but I do believe by the end of the year we are going to see some opportunities in markets that we haven’t seen since 1998.   I am positioning the recommendations in the Refined Asset Allocation Portfolios to take advantage of these sale prices.

With all of the doomsday prophecies these days,  you would think that the United States of America has never seen days like these, that we have never been worse off.

Now, I’ll be the first to tell you that I’m a optimistic realist.  I would say that in general, most Americans are historically optimistic – as evidenced by stock prices that have always gone up. This is a good thing, a GREAT thing really.  It’s what keeps our economy rolling.

I’ve heard so many people talk the doom and gloom story and how we are destined for destruction.  I decided to run my own research project and numbers to see where we really are.

To start, let’s talk about the biggest threat to our economy – the budget deficit.  The government has spent more money in the last 10 years than almost the prior 100 hundred combined.  But, do we have the highest deficit the country has ever seen in relative terms?  No, we don’t.

Look at the following chart:

You can see that in relative terms compared to the Gross Domestic Product of the US, we had more debt back in the 1940′s.  As a matter of a fact, it was almost 25% higher in the 40′s than it is today. This was the governement throwing money at WWII. It worked that time.

Next let’s look at the stock market. We have had some bumpy times the last 3 years.  But’s it been worse – much worse.  The Price to Earnings ratio (a great measure of the overall value of the stock market) was at 30 before the infamous crash in 1929.  It fell to 6 during the Great Depression, that’s an 80% drop.  In 1998, it fell from a high of 44 to 15 in 2008, another 65% drop. However, historically the average number is 16%, and we are at 20% today.  We can still lose more in the stock market.

I can keep going and going, but not everyone is as fascinated with numbers like I am.  However, I will leave you with one last number, the unemployment rate – it was at 23.6% during the Great Depression.  The lowest it has ever been is during the 40′s, the decade where the government supplied most of the jobs. It was at 1.4% then.  Today it is at 9%, way lower than the Great Depression.

So, have we hit rock bottom in this country? Absolutely not. Is our current situation in this country totally unrecoverable?  Absolutely not. We have recovered before and I choose to believe that we will do it again.

This doesn’t mean that I am recommending investing like we are ready for the recovery – I think we have a long way to go.  There are many investments providing great returns, all you need to do is find them and buy them in the right asset allocations.

The S&P 500 gone up from October to November 13 of the last 15 years.  That is truely remarkable.

I started looking at individual months today wondering where we are headed for the rest of the year.  Lots of people are scared of September after the last few we have had, but honestly only the 6 months of September have gone down in the last 15.

So all technicalities aside and all fundamentals aside, if we strictly look at probablities, getting back in now would be a pretty safe bet based on the numbers above.

I’m not a betting woman. If I wasn I wouldn’t have created Refined Asset Allocation which is about reducing your risk in order to increase your returns and make more money.

Technically, we are still in a downtrend and I believe we will be for a while, or until the job market turns around and the politicians decide to get off of the butts and make some real ground and reducing the deficit.

Fundamentally, we are seeing Price to Earnings ratios that are getting to more sustainable levels, but we aren’t there yet. The S&P 500 historically has been around 15% on average and we are currently at 20%.  Now, this is down from 25% earlier in the year, but we have about 3-5% more to to before I would dive right back in.

I’m not taking any bets on this market right now and saying with my recommendations around the US stock market.