The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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From: UncleBigs	2/18/2006 2:01:08 PM
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West...I'm thinking we are entering stock market nirvana right now. Perception matters more than reality and right now perception is the Fed is nearing completion, long term rates are low, credit spreads are ultra low, housing slowdown won't derail the economy, and any weakening of the dollar is good for multi-national profits. Strong tax withholding data indicates a very robust jobs market and given Americans propensity to lever up their spending power, higher income results in strong consumer spending. If the long end of the curve stays inverted, look for another refi boom out of arms and into 40 yr. fixed rate mortgages with another cash out bonanza (probably the last) providing continued strength to Home Depot, home remodels and vacation/leisure sector. Higher interest rates provide a big increase in interest income for retirees and this fuels a boom in cruises and other discretionary spending for this formerly crimped segment of the population. I think the homebuilders may get another leg higher but probably not to all time highs as low long term interest rates keep the market firm and p/e's of 6 already fully discount any weakness this year. Look for the heavy shorts in this segment to get frustrated and throw in the towel as the data appears weak on the surface but the stocks move higher paradoxically. I see 2006 staying very strong and no bust in the stock market this year. I also see continued low volatility and the shorts getting completely smoked before any meaningful decline gets underway. I don't see a stock market bust coming until the charts begin to go vertical again. The end to the inflationary boom will be a bang. That means charts go straight up until the explosion occurs. All in all, I think we are entering the terminal stages of the credit boom. An inflationary crack up boom that eventually ends with a bang. This is not a time to be short the stock market.

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