Marking Time While the Zombie Regroups

In our April 14 letter, we suggested that "The disconnect separating Main Street and Washington from Wall Street persists." Since then, reported first quarter U.S. economic growth (GDP) numbers have confirmed that despite the Federal Reserve Boardâ??s continued attempt to stimulate consumer demand (QE2), our struggling economy has yet to achieve a self-sustained footing and move into a more robust recovery mode. The dreary housing market, although less than 5% of U.S. aggregate economic activity, continues to be a damper on consumer (investor) sentiment; and this could linger near term. All this, plus the obvious global geopolitical economic concerns and financial market malaise, plus the inability of our political class to break the Federal debt-entitlement-fiscal-deficit impasse begs the questions: why havenâ??t the equity markets broken down entirely?