Aside from the first post, no one mentioned the possibility of another Flash Crash... Issues in Europe, Capital Controls in Asia.. among some of the more obvious political issues that people like David Rosenberg has brought up recently - "The 99ers".... If the Market is in a knot, I can't wait for it to unravel. Oh, one more thing: What happens if and when the dollar rallies? There is this extremely ugly situation of extreme correlation in assets right now.
As I mentioned earlier, if the S&P 500 falls below 1180, then it's reasonable to expect additional monetary stimulus from the Fed. With regards to a "dollar rally", well the "US Dollar" is up today against EUR, JPY and GBP. But it is still down against a real currency: gold.
You're right. At some point in the future the bubble will likely burst. The stock market can continue to rally, but if economy doesn't turn around then at some point it's going to be a tremendous, ugly crash.
Crash in real terms - absolutely. But in nominal terms, maybe not. As many other people have pointed out in this thread and others, Zimbabwe's stockmarket performed very well during its period of hyperinflation. Yet the standard of living in Zimbabwe fell because of the reduced purchasing power of the currency.
There are 3 bubbles created by the easy money. Commodities, stock and bonds In my mind the bonds are running out of space. The bubble could sit there for a long time. Only a prolonged slump will keep this bubble up. The commodities can also grow if the usd keeps loosing ground and there is demand from other big economies. A long slump of the USA and an independent growth of the rest of the world will keep this bubble up and even expanding. But is the world ready to expand without the USA? The stock bubble seems the least inflated to me. For one it seems that the data has no were to go but up. Also many of the to 500 companies are international so they should grow even if the USA is tagalong as long a the rest of the world expands. But can the world expand without the USA market? Assuming there won't be new econ surprise or war etc... In the next 1-3 years the most likely scenarios is an improvement of the econ. data. Growth of the usd burst of the bond bubble and the gold.
Right on point. So many equate rising stock prices with economic health. In recent years that has definitely been the case but now there is a huge disconnect between the stock market and the economy. Most people have missed the majority, if not all of this rally. I know a number of folks who moved all their 401(k) money to bond funds near the bottom or shortly after the initial bounce and haven't moved it back to stock funds so when Bernanke speaks to the "wealth effect" he is failing to realize that a very small percentage of the population is really feeling that effect and if they are it's in retirement funds, which can't be touched for quite some time depending on your age. Bottom line...my neighbor is still unemployed after almost 2 years and he has actually looked for work pretty damn hard and has been willing to accept low paying jobs. His bennies run out in February unless there's an extension. It will be the welfare office for him if no extension comes thru. There are many millions just like him.
You sound like me in '06-'07. I started liquidating all my long stock "investments" in IRA/brokerage accounts somewhere during that time frame, probably 15-20% from the top. Then I just stewed as I watched the market grind up for weeks at a time.
Which data? http://hussmanfunds.com/wmc/wmc101101.htm I respect Dr. Hussman's work. It's rare to find a Ph.D. economist who has also managed to outperform the indexes convincingly for 10 years: http://hussmanfunds.com/pdf/hsgperf.pdf I trust him over 1 million market cheerleaders.