Wall Street spent much of 2004 eating it's seed corn. And, as any Red State farmer will tell you, that's bad news.
The Macro Economic environment could not be worse! There's the twin deficits, the punk jobs market, which seems permanently damaged by rampant off shoring and out sourcing to China, etal and now the weak dollar and high oil and gold prices.
Still oddly the market has survived and had an OK year. Why?
PROBABLY BECAUSE OF THE ASIAN CENTRAL BANKS PLAYING THE ROLE OF ENABLER IN THE BOND MARKET.
There was a massive anomaly this year when the Fed started raising rates, AND BONDS ROSE AND YEILDS WENT DOWN!
THAT IS NOT SUPPOSED TO HAPPEN.
Essentially, the Bank of China took away what Greenspan was trying to give the US economy: HIGHER INTEREST RATES!
Greenspan's bizzaro attempt to "save the bubble" or at least the options scams of the Wall Street Elites has damaged the US economy in ways we are only now starting to see.
Yet the push-pull between the Fed and the Bank of China was unpredicted. Everyone thought that Bonds would "crash" this spring. Remember the big May Debacle in "income instruments?" CHINA DIDN'T LET IT HAPPEN......!
THE STREET TOOK ADVANTAGE OF THE BIG CHINA SURPLUS AND GREENSPAN'S RATE HIKES WERE MARGINALIZED.....FOR NOW.
Still at some point the Fed's control over US rates will kick in again.
Maybe not at an HISTORICALLY LOW 2% or 3%, but for sure at a VERY NORMAL 5% or even 6%!
And, with the Dollar plunging ominously: IN 2005, GREENSPAN HAS NO CHOICE BUT TO KEEP RAISING RATES .
Japan is now a net seller of US Bonds. That's news.
Gold is up big, and THIS TIME it's not "cyclical" as some unrepentant Bubblemaniacs are still saddly hoping.
THE US ECONOMY HAS BEEN SO "TOXIC" FOR THE LAST FEW YEARS THAT TOXIC HAS NOW STARTED TO SEEM "NORMAL!"
THAT'S REALLY THE PROBLEM ISN'T IT?
WALL STREET HAS BECOME A HAPPY DYSTOPIA WERE STRANGE THINKING IS NOW ACCEPTED. Just take the old fashion issue of P/E ratios, remember them? In the bubble of 1929 a P/E of over 20 was considered to be
WILDLY EXCESSIVE! IN 1929!! AT THE TOP OF THE MANIA!
NOWADAYS? A 20 P/E ALMOST SEEMS LIKE A "BUYING OPPORTUNITY!"
SEE THE POINT?
THE BEST WAY TO LOOK AT 2005 IS, PERHAPS~~ AS A LONG DELAYED RETURN TO NORMALCY FOR THE GLOBAL ECONOMY AND IN THE US MARKETS.
BECAUSE, ALAS, IN THE END, THE "TEXTBOOKS" ALWAYS WIN.
SADDLY, WALL STREET DID NOT HAVE TO FIGHT THE FED THIS TIME.
BUT THE STREET HAS BEEN FIGHTING AGAINST THE MACRO~ECONOMIC TEXTBOOKS, AND ESTABLISHED ECONOMIC THEORY FOR A LONG, LONG TIME.
THAT WILL END IN 2005.
