This post is dedicated to Buddy Larsen's marvelous commentary.
Housing is down (after several years of double digit returns!), retail is weak, oil is bound to go back up, inflation is high-ish, the deficit continues to grow, is it the End of Capitalism As We Know It? Or are we perhaps in a mini-boom, doomed to failure and dissolution as surely as the Great Tech Crash of 2000-2002? Are the Chinese about to destroy the currency, just in time for us to witness the final fall of Social Security?
I have a different view. There's a lot of private money sloshing around (demand = HIGH) and the supply of stock in the US equity markets is diminishing as companies consolidate, buying up rivals, and continue to buy up their own stock at a record pace (supply = LOW).
The stock market is headed higher.
P.S. Remember the cardinal rule of predictions: you can make a prediction or pick a timeframe, but never both at the same time.
4 comments:
Well, if you're right about there being a lot of money with nowhere to go, how come the housing market (at certain price ranges anyway) does not continue to absorb money?
Truepeers--Different markets. Steve Jobs is making a ton of money right now at Disney and Apple, and so are all his shareholders. These are not people buying their first house, or even looking for an upgrade to their house. As they take their profits they have to move them somewhere. Statistically, there's a huge amount of cash out there. It's just that the first-home crowd is tapped out for now. Even that has probably bottomed.
TP,
The new home market actually had a nice bump in September with builders cutting prices to clear inventory. IOW - there were plenty of buyers available at the right price.
AS to MHA's remark on liquidity - there is $14 trillion currently invested in private pension funds in the US. Using a fairly conservative 5% annual return that means $2 billion dollars per day in earnings that need to be reinvested, not counting new money flowing into the plans. That's another reason why it is difficult to get terribly concerned about the Chinese holding $850 billion in US debt.
The deficit is not continuing to grow, in fact it is falling.
And the housing market needed to come down. Those prices were too high.
Buddy's commentary really was good.
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