I am always leery of a market that goes up basically everyday and is obviously becoming disconnected from fundamentals. That does suggest this is a momentum play and IMO this is not exactly the perfect time to have that occur in the stock market. Why? I think the FED, many economist and Wall Street are really underestimating the housing slumps drag on GDP. The market is factoring in a .5% to 1% drag on GDP. As we get into the meat of the ARM resets and feel the full brunt of the housing downturn the drag will probably be over 2%. Reference the Credit Suisse Arm Reset schedule and you can see we have not experienced the worst of these loans. If the drag on GDP is greater than the .5% to 1% they are forecasting there will be an Uh Oh! moment on Wall Street and the market will correct.
Liquidity is driving the market right now. We are all talking about the weak US dollar, but we need to look at the YEN. The Yen is weaker than the dollar right now so the Carry Trades are charging ahead. The markets look crazy right now because there is too much money chasing too few assets. I do anticipate a stock market correction this year. When you got me.
