The model is broken. Inflation should have happened already. I will agree that we will crawl up from here, but I don't see any real pressure. We have years to go. Credit, borrowing, bank loosening is started but not anywhere near that it would take to have inflation concerns.
The proof of my position is the fact that after 5 years of huge Fed intervention we are still seeing deflationary signs, and modest growth.
Most likely valuations will cause the next bear to emerge. it should happen in 2014. Watch the 10 year note. it has to break above and stay above 3 percent. if 3.5 percent is seen this year the market will fall. Perception can be greater than reality on inflation fears. For now we have all components except wages and housing moving higher in regards to inflation. We would need both to start worrying about inflation.
I expect a 20 percent drop from peak by end of this year. I do not however expect the end of this bull run. My target for SPX is 1950 for the top followed by a 20 percent haircut.
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