bobcor,
thank you for sharing your thoughts and the eloquence in which you state them. i agree with you in principle but do differ in certain areas.
i too, have been early at times in my response to economic events. two things i have learned are that macro counter-events NEVER happen as fast as you think. also, NEVER underestimate the Fed's ability to overstimulate and overreact.
that being said, i view your thoughts within the framework of a broader gestalt. i use the DJIA monthly dating back to 1920 with a 50 and 200 period moving average. if you extrapolate that chart, mean growth would target roughly 4800 as the point of sustainable, normalized expansion. this also coincides with the 200 month moving average of the chart. it also roughly coincides with a 62% of the Dow off the 1932 bottom.
in addition, i think historical P/E's are pertinent here. the excess in asset valuations are fully represented here:
decisionpoint.com
needless to say, a regression to the mean MUST occur. and given the magnitude of disproportion, this is something that will take years to work off. conversely, a substantial crash could rapidly correct valuations, but i think that type of crash goes well beyond the imagination of even the most vociferous of bears.
my point is simply that an appreciation of the time necessary to cause a macro trend to shift is needed. this perhaps will prevent us from jumping the gun too early. we have had 5 secular trends since 1920 and currently are in the beginning of the sixth major move.
1920-1929...bull market
1929-1949...bear market
1949-1965...bull market
1965-1982...bear market
1982-2000...bull market
2000-????...bear market
personally, those that see a resumption of a macro-bull here make no sense to me. that basically negates the 18 month recent bear market as a cyclical process within a secular trend dating back to 1982. there really is no historical basis for a continuation of any macro bull here particularly given the monetary excess, asset bubble, consumer and corporate debt issues that overhang us. i think we, as bears, need to honor the timeframe that has been placed before us.
with regards to the money supply, i have tried to understand how money LEAVES the economy since i too, am puzzled by the lack of appreciable inflation given the 4 trillion dollar expansion in M3. i agree 100% that money has been concentrated in the hands of the wealthy and your reasoning is as good as any i have seen. the only thing i would add is that the government itself is probably the primary entity responsible for monetary destruction. the conflicts, wars and subterfuge in recent history cost an awful lot of money. perhaps those on the CFZ and E threads with more of an economic back ground can expand or refute those statements.
perhaps the overliquification is somewhat exaggerated; however, the overcapacity and debt load as they relate to natural cyclicality and historical mean growth are indisputable. we have years of downside action ahead of us in order to work off this massive, 20 year move to the upside. that being said, greenspan's printing press has always given us some parabolic liquidity based moves that have been sustained far longer than we have expected. his latest move following sept 11, is immense compared to his other follies of 1998 and Y2K1999. how long does this one last? |
