Surf's may be up, even though everything will be done to
postpone the inevitable fallout. As far as the credit bubble
goes, this is only the beginning of the fallout, which really
started to happen about a year ago, even as the DOW rallied
from 11K to 14K. The crisis is now spreading to all sorts
of debt paper. It would be amazing if the debt crisis did not
find its way to stocks as well.
While I would say a bear market in stocks is
now way overdue, but I don't believe it can proceed without a BK
meltdown first. It will happen, maybe this Fall, maybe
in January. The question is, how much time can the Fed buy for
the dollar meltdown? Who will want to hold on to MBS securities
and ANY mortgage-related debt, with rate resets looming
large over the next year, starting, you guessed it, this Fall.
A cut would not be dollar-positive, neither would a break
of the dollar below 80. So, uncle Ben may indeed cut. But
if Mr. Market responds by selling the dollar hard, his cut
will not help any. In fact, mortgage rates could then go much
higher. Got conundrum in reverse? |
