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9:00 AM EST, Tuesday, April 7, 2009. The biggest causalities of this awful economy are threefold:

1. Diversification and alternative assets. The theory that if you invested widely -- from commodities to biotech, from tech to real estate, from private equity to hedge funds -- one downturn in one area would not influence the other. Wrong. They all went down together. Since I got back I've been reading financial reports about my broad array of brilliant investments. They're all doing awfully -- including those run by Citigroup, Goldman Sachs, Broadway Partners and other sundry managers who profess competence.

2. Money managers. I'm disillusioned with them. So, apparently, is everyone else. From the latest Economist.

There is now fairly widespread dissatisfaction with the industry. “The old wealth-management universe is not just broken, it’s been broken and tossed away,” says Russ Prince of Prince & Associates, a market-research firm. “Nobody believes anything anybody is saying any more.” A survey by his company showed that 15% of the wealthy had left their main adviser last year and a further 70% had pulled some of their money away.

A survey of rich Americans by Harrison Group found that 63% had lost faith in financial institutions. And Caroline Garnham of Lawrence Graham, a London law firm, says that half of her clients do not use private wealth management at all, and half of the remainder are dissatisfied with the advice they received.

3. Confidence that things will work out long-term. Everyone says we cannot sustain our life style. See below.

Consistency is not one of my strengths. One day up, the next day down. My best strategy remains "When in doubt, stay out. Cash remains king." But the strategy is frustrating when you feel you're a total idiot because you missed March's 20% rally. Will this rally continue? And the answer is... Probably no. This piece from today's Bloomberg is fascinating:

April 7 (Bloomberg) -- Marc Faber, the investor who recommended buying U.S. stocks before the steepest rally in more than 70 years, said the Standard & Poor’s 500 Index may drop as much as 10 percent before resuming gains.

The measure may decline to about 750 and rebound after July, Faber, 63, said in a Bloomberg Television interview in Singapore. Global stock markets are unlikely to fall below their October and November lows, he said.

“We need some kind of correction, maybe around 5 to 10 percent, and after that we can maybe rally more into July,” said Faber, the publisher of the Gloom, Boom & Doom report. “The economic news, while it won’t be good, the rate of getting worse will slow down.”

The S&P has rallied 25 percent from a 12-year low since March 9, when Faber advised investors to buy U.S. stocks, saying government actions will boost shares. Asian equities are among the best bets for global investors because they are attractively valued and will benefit the most from a global economic rebound, Faber said.

He told investors to abandon U.S. stocks a week before 1987’s so-called Black Monday crash and said in August 2007 that U.S. shares were entering a bear market. The S&P 500 peaked two months later before retreating as much as 57 percent.

Commodities, Banks

Faber said he bought some commodity producers in November and is now less “interested” in these companies after some stocks more than doubled. He is also buying some bank stocks and predicted that Citigroup Inc. shares could “easily rebound” to around $5 from $2.72 currently.

“The rebound potential for some of these banks and financial institutions is quite high,” Faber said.

George Soros, the billionaire hedge-fund manager who made money last year while most peers suffered losses, is less optimistic, saying the banking system is “seriously underwater” with banks on “life support.”

The four-week rally in U.S. stocks isn’t the start of a bull market because the economy is still contracting and there’s a risk the U.S. falls into a depression, Soros also said in a Bloomberg Television interview yesterday.

Citigroup lowered its rating on U.S. equities to “underweight” from “neutral,” saying the rally is set to end and the market’s valuations are less attractive, strategists led by London-based Robert Buckland said in a report yesterday.

S&P 500 futures expiring in June were unchanged at 830.40 at 12:35 p.m. in Singapore.

‘Better Value’

In Asia, stocks offer “much better value” than U.S. shares, and investors should seize the opportunity to buy the region’s equities on “every setback,” Faber said. Japanese stocks also “look interesting,” he added.

“If you buy Asian equities in the next three months, over the next five to 10 years, for sure you will make money,” he said. “Asian exporting countries will benefit the most from an expansion when it happens.”

Faber is less favorable on bonds, saying they are entering a “long-term bear market” that can last for the next 15 years to 20 years.

Investors should also diversify into the currencies of Canada, Australia and Singapore because in the U.S. dollar “may weaken somewhat,” he added. The dollar has strengthened against all of the so-called Group of 10 currencies except the yen in the last 12 months, according to data tracked by Bloomberg.

Faber still advises investors to buy gold even though the precious metal is going to be “dead money” in the next three to six months. He plans to buy more gold if prices drop to between $750 and $800 an ounce, he added. Prices retreated yesterday to $872.8, the lowest in more than two months.

What Richard Russell of Dow Theory Letters would have done.

One visitor asked me what I'd do if I was running the country now? I answered, "I wouldn't do a thing. I'd allow the bear market to run its course." To my surprise, the crowd applauded wildly. Obviously, a lot of people disagree with the current policy of bailing out everything that looks sick. I think this is a policy that is going to fail, and it's a policy that's going to strap the US with almost uncontrollable debt and interest on the debt for years to come.

The policy is: "Spend whatever it takes now, and as for the trillions of dollars in new debt, let the politicians of tomorrow deal with the 'impossible debts' and let our kids and grandkids pay with rising taxes."

There are two things I will say about the situation with certainty. The standard of living in the US is sure to decline. And the international power of the US will decline. To put it bluntly, the US will not be the undisputed leader of the world, as it has been since World War II.

The US cannot lead the world and at the same time be the world's biggest debtor. The marvelous US life-style of recent decades depends on our creditors sending us their goods and their savings (over $2 billion a day). This is unsustainable. That which is unsustainable will end.

No one likes the banks any longer. Meredith Whitney and others have talked about toxic assets in recent days. But now FASB changed the mark-to- market rule, banks ratios and earnings may look -- temporarily -- better, as banks mark up the value of their lousy loans. I don't make this stuff up. I don't even want to discuss it. I'm disgusted with FASB.

How stupid is the IRS? Another wasted hour, another 342 pages of printing, another visit to the Post Office for certified mail. And the IRS gets yet another copy of my 2007 return. I'm not unique. Reader Pat Long writes:

The IRS lost one our returns, too.

Got the check, but lost the return.

Had to resend it at least six times over three years.

You might as well make extra copies now and have them ready for mailing, so when you get the semi-annual notice you can just drop the return in the mail.

Alternatively, you could offer them carbon credits if they make the effort to find the first one you sent.

Three travel ideas: Travel gets your mind off the gloom. Travel today is cheap and easy. Upgrades are plentiful, too.

+ Burning Man. "Once a year, tens of thousands of participants gather to create Black Rock City in Nevada's Black Rock Desert, dedicated to community, art, self-expression, and self-reliance. They depart one week later, having left no trace whatsoever." Click here.

+ Mont Blanc to the Mediterranean. From the Mountains to the Sea Across France’s Most Beautiful National Parks. 14 days of hiking. Click here.

+ Grand Canyon rafting. "This is North America's ultimate river trip, through one of the Seven Wonders of the World. What few people realize is that because the water releases are controlled, the early and late-seasons of April or September and October offer the Canyon at its best." This is a trip Michael, my son, and I are taking in June. (It's probably the wrong time, but it's his only time.) Click here.

Life does go on: As we were leaving early last Saturday morning, I photographed our two Hummingbird babies for the last time. They've grown enormously. Most fascinating: as they've grown, so their nest has expanded. Wouldn't it be nice to have your house expand each time you had a baby?

I took this photo with my trusty Canon G10. It has manual focusing, which is critical for closeups.

Yust a Nice Lurefisk Yoke!
Ole goes into a store and asks the clerk for some "Lutefisk."

The clerk looked at him and asked, "Are you Norwegian?"

Ole, clearly offended and angry, says, "Well, yes I am. But, let me ask you something. If I asked you for Italian Sausage, would you ask me if I was Italian? Or, if I asked you for German Bratwurst, would you ask me if I was German? Or, if I asked for a Kosher Hot Dog, would you ask me if I was Jewish? Or, if I asked you for a Taco, would you ask me if I was Mexican? Would ya,huh? Would ya?"

The clerk says, "Well, no...."

"And," Ole continues, "if I asked you for some Irish Whiskey, would you ask me if I was Irish? What about Canadian Bacon. Would you ask me if I was Canadian?"

"Well, I probably wouldn't," agrees the clerk.

With self-indignation and more angry, Ole says, "Well, all right then. Why did you ask me if I'm Norwegian just because I asked for Lutefisk?"

The clerk replies, "Because you're at Home Depot."

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads on this site. Thus I cannot endorse, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Michael's business school tuition. Read more about Google AdSense, click here and here.