The bad news continue to roll out with Lehman filing for bankruptcy and Merrill being bought out by Bank of America. Freddie Mac and Fannie Mae in trouble and government intervention required? Should we fear for the worse? What is worse? Oil prices at $200 a barrel? There seem to be no safe haven in the stock market these days. Financials are in distress. Commodities are plunging. Tech ... well we know what happened and it never really recovered. Is this the end of the world?

Hahaha ... you got to be kidding. Oil was never meant to stay at $140 let alone where it is at today. I think the spike in the oil prices is akin to a great analogy I heard over dinner about frogs and hot water. A frog will die in a pot of hot water if you turn the heat up really slowly. But if you turn the heat up high fast, the frog will jump out of the pot and run away. That is a good analogy to potential oil consumer behaviour in the future. Thank you Andy for such an elegant example. Oil shooting up 300% over a short period of time will change consumer behaviour ... they are going to jump out of that hot pot. GM knows this as all the hybird cars have been sold out and GM has no such product but gladly tell you, the potential hybrid car owner, that they are working on it and you should see it at your local GM dealer in 2010 (as advertised ad nauseously during the Olympics 2008). Cars is one of the largest consumer of oil and that is going to change. Some oil gurus see oil around $45 to $65 on along term basis. I would subscribe to that view.

Financials? A once though to be the ultimate safe haven is now in distress. The sub-prime is taking its toll. So, who do you think these guys are at Lehman? God? yeah, they are normal people smarter than the average person but still prone to mistakes as its our human condition. I have never been a big fan of financial engineered products like Income Trust. I remembered a CEO whispering to me at his AGM about what I thought about becoming an Income Trust as my competitors at that AGM were seeking an audience with him to pitch converting to an Income Trust. I asked the CEO if he is growing? He said "Yes." I asked if he needed capital to grow? he said "Yes." Than, why an Income Trust pitch? Exactly ... there is a herd mentality in investment banking and true thinkers are rare. We now know what happened to Income Trust right? The government gives the government takes. The first mortgage backed asset (MBAs) was a great idea. But, after the eleven thousandth MBAs, the quality goes down. But, bankers know how to do it now and it makes them money so keep going until .... Stay tune as I expect more news to come and the situation to get worse. AIG was once the best investment in the portfolio management industry and just about every fund holds the stock. I remember my old boss faithfully attend all their meetings when they are in town. How times have changed ....

The other market sector has been overshadowed by these broader problems. I think what we are seeing here are extraordinary events some say happens once every 100 years. I have a friend who believes he is cursed because everything he does goes against him. He called me up one day and told me he bought some shares in Carnival Cruise Line and said watch something bad is now going to happen. Within a week one of the Carnival ships caught on fire. He published a report on a company and the company had a flood that happens once every 100 years that badly impaired operations. So, 100 year events may happen more frequently?

I don't know about you. But when the blood is gushing out on the streets, I get very very excited. It is a time to buy! The question is what to buy? Next installment ....