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Strategies & Market Trends : Classic TA Workplace -- Ignore unavailable to you. Want to Upgrade?

To: Perspective who wrote (126578)	12/1/2005 1:26:03 AM
From: mishedlo	Read Replies (2) \| Respond to of 209892

BC I have to agree with you. Look at it from a different perspective however. How about the economic perspective. Consumers never stopped spending. Well OK perhaps for 1 year if that. Never before have debt levels been so high, never before has a stock market bull started with PEs this high and dividends so low, and never before have real wages and jobs been so anemic 3 years into a recovery, and never before has a new bull market started without wiping out the excesses of the last one. I suppose it could be different this time but I am not inclined to buy it. The entire key to this mess is consumer spending financed by cash out refis on forever rising home prices. Furthermore some 40-50% (43% by Northern Trust) jobs created in this recovery have been directly related to housing. Given that a full 75% of GDP now is consumer spending and consumers have a negatibe 1.6% savings rate and given that national housing affordability is something like 15%, I say the odds of substantial gains here are minimal. There is no telling when the party ends but it will end. The question is will it end in a big ABC monster C down or looking on a monthy chart are we in some sort of 2 up with a huge 3 of 3 down to come. I think I favor a ABC scenario but that could go on for years more before it finally breaks down. We could know soon enough. There is a strong chance we have a recession next year lead by a collapse in housing and a collapse in housing jobs. I think the FED will be cutting soon enough (as in about a year). I just do not think the bulls have it both ways. ie...Stocks rise with rising rates because the economy is strong and stocks rise because the fed is cutting. There is a mammoth amount of consumer debt that is going to go to debt heaven and mammoth repricing of house prices yet to come. Again, unless it's different this time, that can not be bullish. The yield curve looks like it is ready to invert and in fact the 2 and 3 both crossed the 5 over the last couple days. The Eurodollar curve has been inverted for quite some time and again, unless it's different this time that should be negative for stocks. Junk bond spreads have been widening for a month or so and that too is usually not good for equities. On the positive side you have corporations flush with cash hell bent on stock buybacks at what I think are absurd prices. Perhaps they have to stupidly spend it on buybacks and mergers before a serious decline starts. There are other factors but I am tired of typing. ng On balance many major things are lined up against equities but only a few positive ones (corpoarte cash and sentiment) but the latter can change on a dime. We can easily go sideways for years or crash. Other than an EOY run which we may or may not get, I think the party is over. Mish