time to put this post out there.... as ive been saying for the past couple months we are gonna have a tough 2006 and early 2007 in the equity markets, USD, and credit markets
The end of the 3 yr bull market... according to cycle highs/lows , wave pattern, and overall sturcture of S&P we should have 1 more high somewhere between 1310 - 1325 in S&P futures sometime in late February or early March...
on top of that the US economy has some major problems that will begin to reassert themselves in the markets and will force the market to price in a much higher risk premium...
a small list of problems w/ US economy :
- horrendous 4Q GDP and expected slowdown of growth
- weakening of corporate earnings
- increased global inflation(asset prices and no slack in wages)
- fed that is known to overshoot, and a fed funds market still prcing in more hikes even after GDP report
- massive trade deficit of about 700 billion a yr
- massive foreign holdings of US debt and assets that will be sold as yields become less favorable and foreign banks diversify away from USD holdings
- massive budget defecits from a congress that overspends, and a country spending 100's of billions on war and defense
- massive entitlement liabilities
- massive unfundended pension liabilities
- threat of democratic win in 06' elections(even though republicans arent much better right now)
- inversion of yield curve
- record low credit spreads( a sign of underpricing credit risk)
- weak MBS market = higher premium on default risk = higher probability of defualt in future
- weakening housing market(responsible for most of our GDP growth)
- no real wage growth, negative savings rates, and record debt levels for consumers
- high asset prices, gold silver platinum oil copper houses
- overextended consumption cycle(consumer should come back quickly as baby boomers and echo boomers are still in their spending cycle)
- geopolitical risk out of Iraq, Iran , Nigeria
- increasing energy costs, increasing demand from developing nations to continue
- USD weakness from fed eventually pausing and more debt/deficits
etc etc. etc.
S&P target by early 2007 - 1050 to 1115
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