BULL VS BEAR

I sometime contemplate the unknown, and the unknown for me is "am I right about market? do I have the right strategy?" and to this I can only surmise, "with the knowledge I have gained and my filtering of the data and stock market activity, I can only follow what I believe to be true and logical outcome and I won't know for sure if I am right until some place in the future!"

When you consider the market is lower than it was 5 years ago, even with a 2.5 yr cyclical bull, where the last 7 years the 3 month Treasury Bill outperformed market returns, I would say yes.

DOW selling for 18.5 X and SPX 19.5 X. Dividend yields near 2%. EVERY MAJOR BEAR MARKET HAS ENDED WITH STOCKS SELLING BELOW KNOWN VALUES, PE'S IN THE SINGLE DIGITS.

We also know that we are witnessing the topping of the greatest credit expansion/ debt expansion in the history fo the economy.

Longest running bullsih % of over 50% bulls.

Lowest savings rate in history. Highest spending as % of household income. Highest level of total credit market debt as % of GDP. Highest level of PROGRAM TRADING.

8,000 plus Hedge Funds. $Trillions of derivitives to hedge. 45 year lows in interest rates achieved a Real Estate BOOM. BUBBLING in many States.

PAST TENSE we had Record Fiscal Stimulus in Tax cuts and rebates from the BUsh ADM.

We has record Cash Out REFI'S stimulate spending, the importance to COnsumer Spending is that it barely SLOWED during the OFFICIAL 2001 Recession, instead of healing, adding to savings from WHICH Investment could have been drawn adding to earnings from depreciation. of capital equipment.

Instead we saw a historic WEAKENING of our manufacturing Sector and a horrendous loss of jobs which to this day has not reversed. INSTEAD we saw money flow to Asian countries building them into MAnufacturing powerhouses.

I have read where the Banking, FInancial situation in China is at crisis levels, inflation is brewing.....as the Gov subsidizes the economy.

We get stern talk from the Treasury over China to get off $$$ peg, this is LIP service, it would not accomplish much, shift would go to oTHER impoverished countries....Malaysia Viet Nam etc, or just make ALL our goods very expensive setting Inflation in this country on fire as prices rise......if costs cannot be passed thru, profits would PLUMMET.

MZM, AGGREGATE Money supply has leveled off. It gets harder as we along, to get a bang for the buck printed! As the BLACK HOLE of deflation sucks in these dollars.

While you may be able to afford a more expensive home because of rates, you STILL OWE MORE MONEY, and paying less towards or nothing to principle.

Energy costs, health care, tuition, many other expenses, incl State Property asessments MUCH HIGHER making it more difficult to pay off debt or the need for more credit.

SPECULATION in Real Estate has replaced the NAZ as everyone thinks that's the place to be....making prices rise even faster, more imbalanced.

GOV mistates the CPI data showing inflation is TAME. RISING cost of housing not even counted.

BIG Investment HOuses buying SPX futures at PIVOTAL moments of the stock market, this manipulation will not change the future, just delay it.

SO this is a market to trade if you are nimble, one to watch if you are not, IMHO.

Commodity prices have shown a slowing, Bond prices (lower yields) are showing a slowing.......as I think the general public is oblvious of the basic facts, the challenges and the potential danger which may lie somehwere dead ahead.

You can't avoid repeating history if you don;t KNOW what IT is.

Duratek