Tim, i agree by and large with your arguments, except that i have a few caveats...one is that the liquidity seems to be immediately overwhelmed by fresh paper coming to market lately (admittedly i'm criticizing trimtabs for its backward looking analysis in another post, LOL) and corporate insiders keep selling like there's no tomorrow.
imo the best the market can hope for is one more upwave, and it might well be a short-lived one. usually the summer is a good time for the market though, so my attention for the next really big dump has actually shifted to autumn...i don't think we'll have to wait till next year.
re. energy prices, yes, they are very likely to keep coming down near term. demand seems to finally be falling even faster than OPEC & Iraq can curtail supply. however, recall that the last deflationary crisis in '98 was accompanied by $10/bbl.
low oil prices do NOT guarantee equity market rallies, not if they are symptomatic of an ongoing deflationary collapse. Russia's economy would collapse completely if oil goes back to $10 for instance. Mexico would join the LatAm countries in crisis...Venezuela's crisis would become unmanageable...the Mid East would become an even more uncomfortable place if the operetta state regimes see their income go down the well. i can guarantee you the IMF would be VERY busy, and it's already busy.
in fact, i expect the Argentine/Brazilian crisis to really come to a head later this year, perhaps even accompanied by a wash-out panic in Japan. Japan's banking system is teetering on the brink. contrary to past slowdowns, the current one is truly global in scope...there's no offsetting strength in sight anywhere. there's a good reason why the Fed got panicked into the fastest rate cutting exercise since Greenboink presides. both the remnants of the Japanese credit bubble and the still extant US one are now in danger of getting into trouble concurrently - too big to bail if it happens.
any stock market rally from here is like the final dance on the Titanic imo. note, normally one would be inclined to say that all this bad news and potential for crisis is a sort of contrarian buy signal. but unfortunately, no-body seems in the least worried! WS strategists have their equity allocations at an all time high...only very few mainstream economists even acknowledge the possibility of a recession. everybody's bullish, including the bears...it's downright frightening. |
