Bear Market Looming
It is a bear market rally. We have borrowed and spent to sustain our unsustainable life style. Debt has reached it's levels. First it was private borrowing that has stopped. After we ran out of prime borrowers, we pushed for sub-prime. When they were done, deflation hit us. To keep the money supply expanding the government employs many tricks. They borrow and spend. Fannie, Freddie loosing tax payer money just to keep the mortgage market alive. Now there is talk of second stimulus. We already have 1.5 trillion a year deficit. If we increase that it is doubtful we can continue to borrow at low rates. If rates start moving up, not only it will cost more to borrow new money, but it will cost more to rotate our old short term debt. And most of our tax payments will go into paying interest.
Today 60% of homes in America have a mortgage. These people need to be able to earn enough just to pay the debt. After that they need to pay the tax. After that what will be left to spend?
The government's deficit spending is hiding the fact that our businesses are not competitive. Jobs are still being outsourced. Soon innovation will come from China and India. We are on our way to becoming a third world country and America is in denial.
Stock market is valued based on a borrowed money supply. Demographics do not help the situation. When boomers sell, new generation will not have the means to buy the stocks at these prices. A terrible stock market crash is on schedule.
http://www.tradingstocks.net/html/deflationary_crash_ahead.html