The image says it all. I’d like to think that after 35 years of being involved with markets that I’d seen it all, but today is one for the record books.

We start out the day with “men at work” from Bernanke to Paulson. They’re an interesting pair that’s for sure. But, talk will only get you so far. Given the condition of FNM and FRE combined with Paulson’s breezy attitude you’d be right to assume that these firms will, for all practical purposes, be nationalized. Another bite in your wallet and a brush-off to Moral Hazard concerns.

Oil was up around a dollar while stocks were struggling higher most of the day. Then, out of the blue, oil shot up $3 and stocks started to cave. At their nadir indexes were sharply in the red as oil …

Source This morning we were pleased to welcome Janet Yellen, President of the Federal Reserve Bank of San Francisco, to our UCSD Economics Roundtable. She focused on three main challenges: the housing slump, financial market turmoil, and commodity prices, which she likened to the three witches from Macbeth. Her complete speech is available from the FRB SFO Here are some excerpts. Janet Yellen (photo courtesy of FRB SFO). Housing. Unfortunately, it appears to me that there are at least three reasons for thinking that housing prices have further to fall. First, the ratio of house prices to rents-- a kind of price-dividend ratio for housing-- still remains quite high by historical standards.... Second, inventories of unsold homes remain at elevated levels.... Third, the futures market for house prices predicts further declines in a number of metropolitan areas this year.... Financial markets. ...

Gets your attention, doesn’t it? The unfortunate thing though, is that most people will react negatively to this intentionally inflammatory, media-ready, title statement. Has some Wall Street virus attacked our financial experience memory chip? Bouncing around unpredictably is precisely what the markets have always done. In the last forty years, there have been no less than ten 20% or greater corrections followed by rallies that brought the markets to significantly higher levels. Volatility is not a bad thing— a non-event, even.

Ironically, it is this routine volatility (caused by hundreds of human, economic, political, and natural variables) that is the only real certainty existent in the financial markets. Would anyone be happy with market prices that didn’t change? Should anyone expect market valuations that only go up? So what’s all the anxiety, scrambling, and crying about? As absurd as this may sound at first

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Prepare yourself now.

The market is widely referred to as a discounting mechanism. However, its ability to discount anything extends only as far as the collective knowledge of its participants. And to be blunt, the vast majority of today’s investors— professional or otherwise— know little if anything about making money in the market.

With the advent of discount brokerages— E*trade, Ameritrade, etc— in the late ‘90s, a huge wave of novice investors entered the US financial markets. Between 1990 and 2000, the number of US households invested in mutual funds doubled from 25 million to 50 million. This wave of new, uninformed money supported two major trends: the Tech Bubble, and the rise of the financial media.

Regarding the latter, in 1990, stock market developments were relegated to 15 minutes of coverage on major news programs. Only ten years later, there were at …

Too severe, or not too severe; that is the question.

I’m talking about the U.S. recession that we’re already in, about to be in, or hoping to avoid.

At this point it depends a lot on how you approach the subject, but assuming for a moment that recession is inevitable, analysts and economists are asking: How much will growth contract? Can Mr. U.S. consumer muddle through, or will he stumble and fall? And how much have financial markets already discounted an official recession?

Today, I’ll answer these questions and tell you what to expect in the currency markets, namely the U.S. dollar. First, let’s address …

HOW to Identify a Recession

Unfortunately, pinpointing the magnitude and velocity of a recession before it has ended isn’t as easy as measuring the change in …

I was recently interviewed by Mert Erkal (Search for Blogging) for the April 2008 edition of Bloghology. The questions and answers are republished below.

Mert Erkal: Prieur, please tell us about an investment professional’s life especially when alarm bells are ringing for global economy.

Prieur du Plessis: The investment environment is notoriously dynamic (or, perhaps, volatile) in the sense that different political, economic and a myriad other variables are forever changing and influencing the course of financial markets – sometimes irrationally, at least on the face of it.

An investor’s unique “investment personality” plays an important role in the way he/she copes with

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