Thursday, April 05, 2012


"THE CLIFF NOTES"  A MUST read IMHO, April installment of an always good read is now available and they do a good job presenting the TRUE current environment and economic performance without seasonal adjustments or other misdirection data that skewers the truth...

We are in a deleveraging environment, after building up historic levels of debt and mortgage growth...the Consumer is still in a wind down mode. If you take out "student loan" data instead of a healthy 4% growth to loans you get yr/yr growth of 0%. What does our economic growth look like without gov't transfer payments? Gov't debt has expanded at record pace since 2009 as default gate has unfolded.

The picture going into 2013 is less certain, extended Bush tax cuts are set to expire and long with payroll tax rollbacks, and let's not forget the unemployment benefits many have gotten for up to 2 years, unprecedented. There is talk, and legislation passed that require gov't belt tightening to begin in 2013, cutting back an important stream of spending that will be made up where? Consumers???

Last go round 2003-2007 approx, we had the refi cash out gold rush, which flooded the economy with new credit and spending. In most cases, home owners flush with PAPER GAINS in home valuations, fed off of their most important asset, in many cases turning it into a liability when home valuations came crashing down....try to get cash out now.

Many are STUCK in homes worth a lot less than what they paid and owe, so more likely consumers will keep trying to pay down debt, than go on some aggressive credit expansion mode.

Think about it, we have just came from period of record credit growth, and so we fix that, heal and prepare for the next healthy expansion by piling on MORE CREDIT AND DEBT???

Savers get HOSED, earning next to NOTHING, actually NOTHING if you consider real inflation on their hard earned SAVINGS. SAVERS are REAL PEOPLE TOO, and many have flocked to stocks paying dividends with a meager 15% thank you BUSH tax rate,,,,,DUE to expire end of year. With al this talk (is it just that) of belt tightening, will a dark knight really ride into to rescue the dividend tax rate when so many other areas need addressing? with all the TALK of fiscal belt tightening?

The stock market will begin to sniff things out as much as 9 months ahead of any abrupt change....and with volatility as measured by the VIX near multi year lows, meaning not too many are worried about tomorrow......shouldn't you be?

I am rethinking the chart and my call for new highs before the end of year, though still possible, price can but doesn't have to reach the TOP of the bearish wedge I drew, a close below SPX 1300 and hold would be initial sign IMHO.

Also we keep hearing the HAIR channel and others chirp about "corporations are FLUSH with cash...a cash HORDE!!!".....what is not repeated is that corporations are also more in debt than ever before with the punch bowl of lowest rates in generation, they have borrowed like drunken sailors and in many cases used the money to BUY BACK STOCK, and not for company growth and investment.

Can you really fix an historical credit financial collapse bubble adding historic more of the same?


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