I believe it was the feds taking the punch bowl after the orgy of liquidity injected late in 1999 to avoid seizure in the financial markets due to a 2000 software problem that never materialized....Any crack that may appear her due to excessive optimism (excessive optimism often means everyone that wanted to get on is on the train), will probably be sharp but sort in duration, IMTO. But the seeds of the next bear have already been sawn, and like in 2000, it will be the taking of the punch bowl, when after very strong third and fourth quarters, and after a budding increase in employment, interest rates will rise simply due to competition for funds. When the economy improves, demand for funds also increases, and with the treasury in the market to finance a huge deficit, greater than the $425 B advertised now for this fiscal year (my guestimate is that this fiscal year ending this month, will be closer to $475/$490 B), and probably some $600/625 B next year (vs the "advertised only 500 B), the feds will have no choice, the markets will dictate the rates. As soon as rates increases will become painful (or discounting the pain of future increases), the refi business will dry and housing might take a severe hit. Auto is already suffering from a turn down, not so much because of rates, but more so because of drying up demand. I think that this will set the stage for another bear market (forecasting the next recession?). When,? Right now my best guess is a sharp hit here that will be bought, maybe another weakness from higher levels (higher than the peak in the next week or two), possibly early next year (February?), and then from a late March through another third major leg in this cyclical bull. A lot will depend on how high LT interest rates go in the next six to 12 months. I am still in the camp that has 2005 as a nasty bear market. Until then, we probably are going to have quite few stretches of "erubescent and exuberant exhilaration".
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