A guest on Bloomberg TV yesterday was looking forward to earnings season as a potential catalyst for a market rally.  Well, that comment got me thinking and the first thought was this man is crazy.  The second thought was who in this contracting economy would benefit?

The guest detailed those industries and characteristics of those companies that you might want to consider owning, given the current economic situation. 

First, what is the current economic situation? 

• Rising food and energy prices
  
• Decreasing employment
• Highly leveraged Governments, Businesses and Individuals
• Lack of transparency in bond market
• No trust of rating agencies or regulators
• Falling asset prices (homes, retirements, and portfolios)
• It is an election year
• Weather is strange and is creating economic problems

The rise in energy costs in the second quarter of 2008 was dramatic and unpredicted.  Businesses were for the most part unable to pass the cost increases on or did so at the expense of total revenue.  It is my contention that the rapid, unexpected rise in energy costs will cleave earnings of nearly every publicly traded company.  The bigger the company, the more it will cleave earnings.  Why?  For the same reasons a speed boat can zip around a cruise ship.

Before the earning warning season starts in earnest, give yourself a winning hand, a globally diverse pile of CASH!