For the last week or so, we have looked ahead at the new year and done some looking back at the disaster that was the old one. Now, 2009 is here, and it is time to deal with the reality, not the perceptions, hopes and fears that make up our guesses.

My views are fairly well known. I believe the year ahead is going to be tough, particularly the first half of the year. I believe earnings estimates are simply wild guesses at this point, and for the most part skewed to the high side of reality. I do not believe the stock market can even think about a broad recovery until the real estate market stabilizes. That simply cannot happen as long as thousands of new homes go into foreclosure every month.

A lot of stocks are cheap right now, but many others are rather optimistically priced as well. I believe that far too many people are calling the bottom for the bottom to actually be in place for the long term.

One of my favorite Charlie Munger sayings is "Invert, always invert." I have read that legendary investor Julian Robertson was also big on learning the opposite argument to your ideas and making sure yours was the better argument. Both of these people are far more successful and smarter than I, so I started off the year by considering the bullish position and why my cautious view could be wrong.

One of the biggest arguments for a new bull market is all the cash on the sidelines. The Leuthold report form last week is being widely quoted on Wall Street right now. The level of cash on the sidelines as a ratio of total market cap is one of the highest ever. The theory says that all that cash will get tired of sitting on the sidelines, earning a near-zero return, and will come into the stock market. It might, and that would be an enormous positive. The question in my mind is how much of that cash will come in and when. Near zero can feel pretty good compared with down 40%. The cash argument was around after the Internet bubble popped as well, and it took a while for a significant portion of that cash to come back into stocks.

The enormous amount of fiscal stimulus is supposed to fuel an economic recovery that helps stocks rally. This may be true, depending what form the package takes when it is passed. The money injected so far has not accomplished anything, and other than keeping alive some institutions that should have been allowed to die, I do not believe it will.

Does anyone really believe that General Motors and Ford will not be back for more money before spring? Will Bank of America really be able to digest Merrill and Countrywide without additional federal guarantees and loans? Can we really unwind a credit debacle that was 10 years in the making in less than two, simply by throwing taxpayer money at the problem?

We have seen infrastructure stocks such as Fluor, Foster Wheeler and my favorite, L.B. Foster, rally on news of planned massive spending. The ambitious plan to rebuild infrastructure is probably going to create jobs and put some money back into the economy.

A lot of people have compared this plan to the New Deal and pointed out that FDR's program did not work very well. I would compare it more to Eisenhower's enormous highway spending in the 1950s, which did work very well. I believe that this will be very good for some companies and that infrastructure stocks are probably the next bubble. However, the turnaround will take longer than most people expect, and I still have not heard a reasonable discussion of how to pay for it all. The U.S. balance sheet is going to come under a lot of strain this year, and with the exception of this select group of companies, that is not favorable for the stock market

Retail is going to be a disaster this year. Companies that specialize in discount pricing, such as Wal-Mart, are probably going to do OK in 2009. In the specialty retail and department store arena, there is going to be a massive restructuring. We will see a lot of closures, bankruptcies and reorganizations. As Jonathan Heller very correctly pointed out in his year-end wrap-up, this will be positive for the survivors. It is going to take several quarters for this to play out, so we have no reason to be bullish now.

After considering the bullish view, I find it hard to shift my posture. I believe we need to be very skeptical of any stock market rally or prediction of an early economic return. Buying the very cheap stocks, I find, will always make sense to me from a long-term point of view, but as we enter 2009, my mantra continues to be "Stay small and move slow." I do not believe the bottom is in place yet, and I want to be alive and flush with cash when it happens. I believe that will be late in the year.

There will be some very tradable moves on the way to a bottom. Hopefully we can catch a few of those with a portion of our capital, but I would remain under-committed to long-term positions.