Clearly the Street would love a year end rally...
...to show that stocks are still "the place to be" and that the 401ks are not just a sham to allow the multinationals to scoot out from under their pension plans...
But alas, there is a problem...REALITY!
The realities of 2006 are that it will be a year of disasterous consequences...even if you don't believe the BIBLE CODE that the end of days will occur in 2006!
Interest rates are rising...and they ain't gonna stop rising until the 10 year bond hits 7%...now we can do that the slow way or the fast way.
And naturally, the Euro never misses an opportunity to "plunge" against the dollar...now it's the riots in France which may spread to other nations in the Euro Zone.
But still, the US Kongress keeps spending money like mad...and it has a quagmire war to finance...even as the Boomers are looking toward retirement...and the rich want their promised tax cuts.
My hunch is that rates in the US go up for all of next year...and the dollar thus stays "strong" against the Euro...but NOT against commodities like oil, gas and gold!
Basically, higher rates may save the dollar vis-a-vis OTHER PAPER ASSETS, but it won't help the dollar against commodities which can't be "made" on a printing press!
INDEED, 2006 COULD THE YEAR WHERE THERE IS A MARKET WIDE REACTION AGAINST ALL PAPER ASSETS...CURRENCIES, BONDS, AND STOCKS...EVEN WHILE COMMODITY PRICES CONTINUE TO SOAR...AND INFLATION OF RAW MATERIALS WASHES PRICE INFLATION INTO THE REAL ECONOMY...
SO GOLD AND OIL WILL BE THE CANARIES IN THE MINESHAFT NEXT YEAR...IF THEY CONTINUE TO STAY STRONG EVEN AS RATES RISE...THE END OF THE FED INTEREST RATE HIKES WILL BE NO WHERE IN SIGHT!
P.S. I THINK THEY USED TO CALL THIS PHENOMENON: "STAGFLATION."
