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Stock market researcher, investor
  • I'm Still an Asset Bull (Two-track inflation & the two-track economy) [Edit or Delete]0 comments
    Jun 3, 2011 12:20 PM

    Stocks are rallying off the lows today because recovery is here in terms of profits and earnings and the economic impact of job loss and falling home prices is negligible.

    (for more information about why wall st. likes job loss I recommend reading my earlier article;) 

     The PE ratio for the S&P 500 is only 15 even after a 100% rally. Earnings is what matters to wall st, not how mainstreet feels about the economy. Economics is not sociology, and leftist pundits like Krugman, Taibbi, Roubini, and Schiff confuse the two by ascribing supposed weakness in the economy to job loss or whining about government regulators not doing enough to stem surging commodity prices or putting people to work.

    Despite the recent selloff and bad news I’m still as bullish as ever about asset classes such as stocks and commodities. Furthermore, the US economy is fundamentally strong  and there will be no double dip. I’m also confident Romney or Palin will get the nomination and then beat Obama.

    Obama’s advisors are expressing no urgency to put people to work because they know that government efforts to create jobs are ineffectual in this new era of hyper-capitalism, globalism, spendism, productivity, outsourcing, and technology. Job creation won’t happen until it the cost/benefit ratio makes it viable for employees to hire and the truth is American employees are too expensive for the output they produce. Companies are clamoring for overseas workers because they DO provide better value. If a republican wins don’t expect unemployment to rise, regardless of how much ‘business experience’ he claims to have. Do expect the war in Iraq/Afghanistan/Libya to continue, more homeless security, more debt, more TSA, more wiretap, patriot act, tax cuts for rich, etc.

    Adding insult to injury for the middle class is that for the foreseeable future we will have continued surging commodity prices, surging living expenses, booming stock market, blowout profit and earnings, college & healthcare costs remain parabolic, and pain at the pump superimposed on 9% unemployment and rapidly shrinking labor pool. No COLA increases either because bond based inflation will be very mild; treasuries will either keep rallying or fall only slightly due to BRIC surpluses. This is the so called ‘two-track’ inflation that explained in the original dysecoiomics article. You have record prices for commodities, living expenses through the roof yet benign core CPI inflation.

    Even I have to admit it's BS calling gas and food prices transitory and volatile. If you plot a chart you will see that these things have been rising relentlessly for the past decade with 2008 being the only year of decline, only to have the trend resume in earnest in 2009 with no signs of slowing. 

    Even with dow 13,500, oil $130/barrel, Euro 1.55, gas $5/gallon, gold $1700/ounce, silver $60/ounce the 10-year will oscillate between only between 3-4% and the 1 year will remain at near zero, confounding the experts like Peter Shiff and others.

    I’m expecting a sudden breakout in the stock market sometime this month and talk of QE3. With the job picture worsening any hint of a rate hike is completely off the table. Interest rates may finally increase one whole quarter point by the time the dow hits 14,000. 

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