Today's WSJ was rather cautious about the outlook for stocks in 2006.
The NYT was a bit more "cautiously optimistic" and everyone seems a bit worried that the party and THE ANOMALY may be over...
Essentially the US economy is BI-POLAR...corporations are flush with cash...so much that they can hardly raise CEO compensation packages fast enough...and then there is the M&A activity too!
The consumer on the other hand is flush with debt...and false hopes about the value of his house...and the stability of his job. But he won't be able to go bankrupt unless he actually loses his jobs... Under the new Bankruptcy Law it's all about Debts vs. Wages...not Debts vs. Assets...as it was in the good old days; a few months ago.
What is really amazing and perhaps unnoticed is the MASSIVE LIQUIDITY that has been provided to corporations and "the rich"...indeed, many of the rich seem to be able to find nothing to invest in EXCEPT Bonds! And this while the FED is raising rates every month...and will CONTINUE TO DO SO well into 2006 to "absorb" the massive liquidity bubble of the last years of Greenspan's Global Bubblenomic Economy.
LIQUIDITY SIMPLY MUST BE REMOVED FROM THE SYSTEM...THAT VERY LIQUIDITY IS CAUSING THE INFLATION IN GOLD, OIL, HOUSING...AND ALAS PARADOXICALLY---IN BONDS!
Greenspan was Hell Bent to print money like there was no tomorrow, just as long as "ordinary people" could only get access to it through banks or credit cards or home equity loans. But the corporate sector was more or less given a blank check...and the corporate sector filled in some pretty big numbers...giving us the current asset inflation.
Curiously Bernanke will have to continue raising rates UNTIL the bond market recognizes the liquidity draw-down and accepts it as real.... Right now the bond market is saying: If something can't go on forever...it will!
Perhaps stocks can levitate through 2006...but bonds won't. Higher rates will "normalize" the economy. Protect the dollar and reduce gold and oil longer term.
This year will be all about scaring the pants off bond holders who have been hiding their Greenspan Hyper-Dollars in bonds for far too long...
So stop the presses ( at the FED)...it's time to write an obituary for Wall Street Bubble Years!
