[QUOTE=Happy John;36522]People say that the stock market is a leading indicator, and that it anticipates news well in advance, but that really isn't the case. Real estate topped in the summer of 2005, yet the market continued to rally straight into the fall of 2007. In fact, according to (government manipulated) statistics, the recession officially began before the market even topped! The market also rallied its largest two day rally ever in September 2008, right before the mega-crash one month later. What about in 2000? Stocks that were trading over $600 were only $2 less than one year later!
In truth, the market is simply a reflection of the sum of the sentiment out there. Because of all human nature, sometimes the market is cautious, sometimes irrational, sometimes euphoric, and sometimes overly pessimistic.
I do think that it is overly optimistic now though, with the underlying false belief that everything is getting better and that the Fed can and will fix everything. I believe both of these are false.
This is not a typical recession. We just experienced the greatest bubble in debt that the world has ever seen. Debt levels everywhere (personal, corporate, and government) reached staggering levels. Much of this is still unresolved. To think that the popping of the greatest debt bubble ever will be fully healed and resolved in less than three years in my opinion is incorrect and slightly naive.
Remember, the Nikkei index in Japan is 75% below its bubble peak even now 20 years later after it topped. It has rallied 50-75% over six times in those twenty years, but every rally was eventually fully given back. I'm sure that every rally was led by a chorus of bulls (often from Wall Street houses proclaiming that the market never goes down!).
Good luck to everyone,
John[/QUOTE]
As a volatility trader, it's much more to my benefit that the fears and anxiety you have do play out and come to fruition. However, it's extremely easy to be bearish this market from an outside observers perspective b/c so much of what you say makes sense. However, a declining dollar, revenue composition by most S and P companies that is now spread out internationally, as well as growth metrics in non US, European markets, are drivers for continued bullishness that you are not accounting for. The components and factors we put into the equation are different now than in the last 10-30 years and you are only looking at a few variables when talking about the debt bubble not reflating again. Some can reasonable argue that S and P companies are much more efficient now than they were two years ago as they have had a legit catalyst to purge their firms of a lot of dead weight. We all know and understand that people are a companies biggest expense and biggest asset. So while your angle on how fast we reflate from the popping of the debt bubble is viable, it's also important that in terms of purchasing power parity, a rally to 1420 in the S and P is not very impressive b/c the dollars you make off of an investment are worth 30% less than what they were five years ago.
