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Wednesday, January 6, 2010
Re: market thoughts
dow 60,000 by 2030.
clearly the most difficult period to get a handle on that i have seen in 40 years.
US economy will need more stimulation by the summer. i will be very surprised if we do not see a healthy 20% correction by the summer. commercial real estate problems low demand oversupply, weak consumer credit, no housing recovery. jobs, underemployment etc..however, one of the fed's only choices will be to do what it can to encourage the stock market and maintain stability. they cannot buy all the world's long term debt (quantitative easing) so some increased level of inflation will be very necessary. historically that is generally viewed as bad for stocks because the fed will have to raise interest rates to slow the economy. but this time around it looks like the stock market is looking over the valley to the repricing of all physical assets or else the fed understands that the best way to stimulate the economy is to encourage the ongoing bull market in whatever way it can. oddly enough the US is in a superior position relative to the other developed industrial economies and thus dollar should be strong against their currencies. which leaves commodity dependent currencies as one of the places to be. the only thing that seems clear to me is not to own long term bonds or simply be short the bond market and everything else will take care of itself! the remarkable thing is the ongoing rise in many commodities from oil to copper to sugar to... no supply shortages on the horizon. thus further support for the heavy inflation argument just around the corner. this will be a very peculiar asset inflation because every element from jobs to industrial capacity to materials are all abundant.
the real global economy story IMHO (in my humble opinion) is much deeper. we are in a major transition period in which human labor will not be necessary to provide all the goods and services that people need. therefore, a new model for distribution of the wealth created by the new age must replace the old work ethic.... but that for another time. after all machines can do billions of functions with little or no human intervention.
at the same time there are 3 billion people living on our planet at the moment without proper sanitation and all the other amenities we are accustomed to. you stumble over some of them going to work every day. but most are unseen. ISLAM and obama will not solve those problems.
clearly the most difficult period to get a handle on that i have seen in 40 years.
US economy will need more stimulation by the summer. i will be very surprised if we do not see a healthy 20% correction by the summer. commercial real estate problems low demand oversupply, weak consumer credit, no housing recovery. jobs, underemployment etc..however, one of the fed's only choices will be to do what it can to encourage the stock market and maintain stability. they cannot buy all the world's long term debt (quantitative easing) so some increased level of inflation will be very necessary. historically that is generally viewed as bad for stocks because the fed will have to raise interest rates to slow the economy. but this time around it looks like the stock market is looking over the valley to the repricing of all physical assets or else the fed understands that the best way to stimulate the economy is to encourage the ongoing bull market in whatever way it can. oddly enough the US is in a superior position relative to the other developed industrial economies and thus dollar should be strong against their currencies. which leaves commodity dependent currencies as one of the places to be. the only thing that seems clear to me is not to own long term bonds or simply be short the bond market and everything else will take care of itself! the remarkable thing is the ongoing rise in many commodities from oil to copper to sugar to... no supply shortages on the horizon. thus further support for the heavy inflation argument just around the corner. this will be a very peculiar asset inflation because every element from jobs to industrial capacity to materials are all abundant.
the real global economy story IMHO (in my humble opinion) is much deeper. we are in a major transition period in which human labor will not be necessary to provide all the goods and services that people need. therefore, a new model for distribution of the wealth created by the new age must replace the old work ethic.... but that for another time. after all machines can do billions of functions with little or no human intervention.
at the same time there are 3 billion people living on our planet at the moment without proper sanitation and all the other amenities we are accustomed to. you stumble over some of them going to work every day. but most are unseen. ISLAM and obama will not solve those problems.
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