I have us in a cyclical bull within a secular bear market (notwithstanding my very short term bearish position). I suggest people look at the increase in the national debt since the ceiling was lifted late in May, a cool $280 B thrown into the economy. That money is bound to find its way into the economy resulting in better GDP numbers for 2 to 4 quarters, and if this "priming action" restarts the economic engine, maybe a little longer. Eventually, that will not solve the intrinsic problems facing the economy, thus a return of the bear and another recession. When exactly, it is difficult to say right now, particularly since 2004 is an election year, and this administration is showing it is adept at opening the spigot for political or other reasons. The problems with that, of course, is that high budget deficits (in excess of I would say $200 B/year or about 2% of gdp) are going to bring on high interest rates (wether or not the fed raise their own rates, thus the Fed might as well oblige, and get back to more rational rates, to have the ammo next time it is really needed) from the bonds vigilante, and precipitate the next slow down.
If one was thinking like a criminal, I would say a market (not economic) peak in August, a sharp retrenchment into the first quarter of 2004 and then a strong election supporting market into late 2004. Of course, many other parameters are going to come into play, such as war with Iraq, some Asian problems,South American problems and Euro shaking in face of internal economic tensions. So take this broad base "scenario" with a pinch or two of salt. Just an opening "salvo" in the debate you are trying to start (vbg).
Zeev |
