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Strategies & Market Trends : SiliconInvestor All Stars Forum

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To: blazenzim who wrote (1643)	3/31/2008 8:27:08 PM
From: SouthFloridaGuy	Read Replies (1) of 1718

Bear market and bull market is too black and white. There are shades of grey, especially right now. Dissecting current profits one will see that while financials are certainly being killed, non-financial is flatlining and exports are on an absolute tear. We cannot discount the importance of a weak dollar or a steep yield curve. The stock market in Zimbabwe or Weimar went up everyday. Everyday is/was a bull market for commodities in those societies. None of the above means we aren't getting poorer as a country. We are in "real" terms. But it has very little to do with the trajectory of stock prices because those are nominal and the discounting factor is absurdly low. I do think the Fed is once again attempting to thwart deflation. And I think they will be successful in the short run. But each "success" is yielding worse and worse results. I believe the elephant in the room is an inflationary spike that will force the Fed's hand. It can occur in many ways, but depegging is the most likely. This may be the final move that gets us the inevitable deflation, dollar appreciation, and commodities crash which you and others believe. It will also give us the horrific profits collapse which I believe we are 1/3 of the way through. However, as a trader, one has to be flexible. I think you'll find ample opportunities on the short-side. Contrary to what people think there were shorting opportunities in 1999 - they just weren't in technology. In the same way I think those attempting to short commodities plays right now will get crushed. I firmly believe rates have to go up before this game is done - probably to about 4%. And even then, it will take MUCH higher rates to kill commodities in the same way Volker did. There is no free lunch as Bernanke and the US Govt will soon see. I suspect the magic number is about a 3-4% real interest rate for a sustained period of time.

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