I have to say that I am amazed by the House voting down the Paulson Plan. My cynicism got the best of me, and I fully expected it to go through – regardless of its merit or lack thereof – and to be packed with as much additional pork as the congresscritters could amend into it. Color me surprised. From the looks of things, I wasn’t the only one.

Economically speaking, this “downturn” is milquetoast.

Am I the only one that remembers when unemployment, year over year CPI, and the yield of a 10-year Treasury were all in the double-digits at the same time? I must be. You pussies. Wait ’til it gets worse before you wet the bed.

Banks are afraid to lend to each other because they worry about not getting their money back, but the last time I checked, which was last week, they wouldn’t have any problem lending to ME for home improvements. I’m also getting CC offers on a regular basis and didn’t have any trouble just now with the “pay at the pump” using my existing CC. Probably because my balance sheet holds no derivatives …

Some others in the Street or City can’t get money; do you know what their leverage ratios are right now? That might have something to do with that lack of available credit. Of course banks won’t lend to other banks! Why should they? It’s about the debt to equity, the terms of refinancing, and the interest coverage.

This is a good time to be just plain old un- or low-levered and with a long-term outlook, whether you’re a business or an individual. Businesses that built on a stack of credit may fare badly, but lots of the grass-roots economy goes on without big revolving hunks of variable-rate, constantly-refinanced credit.

I can name lots of companies in my area that won’t have any problems meeting payroll, thank you very much, the “Cash Gash” – oops, “Money Honey” be damned. Matter of fact, anyone whose debt is fixed-rate and non-balloon, with payments within their means, should make out just swimmingly.

So just relax about “the economy.” This is primarily a Street thing. Since they own the media, of course you’re hearing it’s the end of the world. If it were you and you owned the media, you’d be vamping up the “everyman” angle, too, wouldn’t you?

Let’s assume for the sake of argument you believe there’s a hyperinflation coming; what do you do?

Buy lots of the following items: beer, liquor, chocolate bars, toilet paper, cigarettes, guns, and bullets, and keep as much paper cash on hand as you can afford. Forget about buying gold unless you intend to deal only with rich people, the liquor and cigs will be better barter items for getting your mechanic or plumber to do work than gold will be, and toilet paper will probably be better for bribing border guards than gold will be – they won’t be seeing too many rich people, either, and don’t think for a second that the “government” will be capable of consistently putting TP in the border guards’ port-o-lets, if they even provide them. Charmin and Marlboro will get you over the border, my friends.

You ##$%%^$ see any ^(**&)&^ gold pieces changing hands in Rhodesia recently? You get the point???

If you really feel it’s a hyperinflation coming, now’s the time to take out as much fixed-rate debt as you possifriggingly can. Don’t prepay jack. Pay later with bucks that are worth less. Holders of real estate and of equity shares in the financially strongest companies made out very well, provided they held for the interim, in the German hyperinflation of last century. Gold is good for holding until the crisis is OVER, not for spending DURING the crisis. Oddly, it was the bond-holders that made out the worst during hyperinflation. But don’t forget to buy the barter-ables for the stretch between!

Do I really think it’s going to go down that way? No. There’s a slim chance, but there’s always a slim chance.

Remember that Rome didn’t collapse in a day, and even though the U.S. Empire is definitely in decline, it’ll outlive both you and me. That’s either sad or comforting, depending on your perspective.

My plan?

Heck, we’re frugal and in good fiscal shape. My debt is fixed rate and is less than my equity. Your financial house should be in just as good an order, too, or you have no business speculating in the markets. It’s called “risk capital” for a reason. No worries with the “economy” as we’ll do better than 90%+ based on simple preparedness.

My STOCK MARKET plan is pretty simple; I will keep executing my lazy mechanical trading using EOD data.

Speaking of mechanical trading …

Of the various mechanical portfolios, the Timing one is now doing the best YTD, with half in cash and one-fourth in Ts. I don’t think it’ll hit a Fear/Greed signal anytime soon, based on the extreme index volatility over the last few months. The VIX would have to hit unprecedented highs, 50+, in order to trigger that shift right now. Later, after things calm down, perhaps. On the other hand, perhaps the VIX model is broken, given the explosion in options “volatility” in industry-specific names and the newly widespread usage of inverse ETFs. On the third hand (!?!), how broken could it be, since it’s been mostly in cash for 2008 to date? The Timing model certainly did better than my intuition would have done this year.

Rotational held up second-best in today’s action, with it being pretty heavy into a variety of bonds since the last update.

The Aggressive portfolio fell quite a bit less than the overall market, but will probably still hand me the worst calendar month since the pre-mechanical days of May 2006 and the overly long gold, copper, steel portfolio. Since the backtest on Aggressive was run on transactions every fourth week, and it’s already closed out a period, the last four-week segment stands as only the sixth-worst in test, and today’s performance goes on the next four-week segment.

Fundamental’s performance was about in the middle of the pack for the group of portfolios.

Only the Value portfolio had a drop coming anywhere close to the move that the S&P 500 took.

It certainly will be an interesting market going forward.