You only have to look at what stocks are yielding now as compared to other times in history to understand "investor" (I hate using that term) psychology. Stocks now yield about 2.2% on the Dow and less than 1.8% on the SPX. Market TOPS are born of 3% yields!
This market is being sold hook line and sinker as the "beginning" of something. "Stocks are selling at great values" the hucksters scream. And it is apparent the call is being heard.
I noticed this week the money supply didn't budge, the previous week it was up near $57 Billion. The FEd still thinks it is the puppeteer.
Many have signalled alarm at China's holding so much of our debt, but it is Japan that holds the most almost 7 X what China has bought. WHO is going to bhite the hand that feeds?
WHAT would China have to gain by floating their currency? Exactly, they won't do it no matter what. And all Japan needs to is run their printing presses to buy our worthless paper? How long can this charade continue?
I get the feeling that consumers are falling DEEPER and DEEPER into credit card debt, and the ATM which is their house has topped in value. Expenses for everything are going up and there is no slack, room for error....no wiggle room for a financial mistep.
Job growth will NOT materialize here in this country and so FAR into so-called recovery it hasn't, why now or later? The job growth occurred overseas for $3 a day workers.
My own customers when I ask and even explain some of the "fears" of buying Chinese Imports, it doesn't faze them one iota. There is NO outcry to "BUY AMERICAN".
National PRIDE has been replaced by Fed induced CONSUMERISM, and we are all the poorer (well not the privledged and insiders) for it.
Perhaps a consumer version of TASR gun will be sold and we can zap each other senseless or just for fun, it will be the next "new thing" and maybe it's made in America, but I kind of doubt it.
Car sales and housing has slowed, the engine of recovery, and THAT TRUMP CARD has been PLAYED, leaving us with little to attack NEXT Recession. And when it comes it will come with 68% home ownership, and a good bit of those sitting with overpriced overleveredged homes......with large property tax bills due to soaring values of last 3 years, most bills rocketing some 30% or more.....the tax man cometh.
Most bubbles are followed by echo bubbles, and this time as in other echo's the bullishness has exceeded in some ways the previous. Just look at a $200 Google.
Is any of the markets New Year tentativeness due to upcoming Iraqi elections? fear of terrorist attack on BUsh inaugeration? Profit taking from 2 years of gains? Nobody knows.
According to Dow Theory, you buy when stocks are at great values and sell when they reach over valuation....and there is a cycle here and we go back and forth between under and over valuation.
The other cycle that interests me is CREDIT EXPANSION, and we every day it grows make a new record for total credit market debt, FAR surpassing the % of GDP at 1929 top. From expansion when it tops we head for CREDIT CONTRACTION, as described in KOndartief WInter and its cycle.
It happened before, it will happen again. All we can do is stick to the basics, keep debt minimal, and hope that history doesn't have to repeat.
Keep an eye for Next weeks housing data, I will be sure to post when it comes.
Duratek
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