George- fine post.
I'd like to underscore one point you made, as it has been a source of considerable controversy:
<<3)Further, there really is no bear market outside the NAZ, as the Wilshire 5000, the VLE (an unweighted index), the unweighted NYSE and the S&P 500 are all at or near record highs. For the week ended 05/17, AMG reports 7.9 billions of mutual fund inflows. This is a staggeringly large number for this time of year, and calls into question whether the mania has reached a much more intense level of belief on the part of Joe Sixpack and a much greater committment of resources to mutual fund purchases than at any time in the recent past.>>
I think this "greater commitment" on the part of J6P is reflected particularly well by the skyrocketing personal indebtedness of the average American. He is borrowing (still) to finance not only his home but in particular, his investments (particularly stocks). An important consequence of this is that when the market declines sharply against him, the "cash" generated does not end up on the sideline. It ends up attempting to cover Joe's debt (i.e., in "money heaven"). As the bubble unwinds, we have already seen glimpses of this in the form of reduced margin indebtedness (albeit slight, IMO), and reduced trading volume (which has "trapped" the managers of tech laden funds, reduced IPO activity (no money for it...it all went to heaven to "meet it's maker"...the illustrious Fed Chairman!). Whether this unwinding will be fast or slow is hard to say, but lower prices for paper assets will surely be seen. |
