John, I believe that David Roche underestimate the power of a whiff of defaltion (I hope everyone remember the definition of defaltion) on the bond market. This will be enough to keep the bull alive for the next year. Problems associated with declining profitability will not be important, IMHO, until the middle of next year. The first impact on our economy will be a strong dollar, stable prices and interest rate that may decline under 5.5% by the end of the year. The impact of our declining export will be balanced by more internal growth at home and of course low interest rates.
Yesterday I have just gone back to almost 50% equity, and I would have gone higher if I did not feel that we might have another shake out in Autumn. Right now apart of few minor bumps (I expect a bunch of earning warnings in the next two to three weeks, causing weakness until early July, but nothing very dramatic), I expect the market to reach new highs on the Dow by mid August. I am not sure if the Naz will, and it it does not, then, the possible Autumn weakness will become more probable, IMHO.
Zeev |
