Tuesday, January 5, 2010


I frequently see bears forecasting the next crash. Folks we've only really had three of them in the last 100 years. The most recent being last year. What do you think the odds are of another one happening this quickly? I'll tell you what they are...slim.

This obsession with an impending market crash is nothing more than wishful thinking by bears who made a lot of money last year and are now in the process of giving it all back because they can't read the tea leaves.

Folks we are now in another cyclical bull market. The credit markets aren't even close to signaling any kind of dislocation in the near future. Sure we are going to have corrections. We are due for one anytime now. But they are going to be just that, a correction in an ongoing bull market and they should be bought.

The next bear market isn't going to be started by the same catalyst that caused the last one. Housing has already crashed. We aren't making anymore subprime loans. The market is in the process of cleaning up this mess (although it's being hindered by the actions of the Fed and the new administration).

The catalyst for the next leg down in the secular bear is going to come from an entirely different direction, one no one is expecting right now. Personally I think it's going to originate in an inflationary storm and possibly a currency crisis. That is the one area of true excess as every central bank in the world is madly printing, printing, printing!

Bear markets come when the excesses created during the previous bull market come back to bite you in the ass. If Bernanke thinks that all the trillions of dollars he printed to halt the credit crisis aren't going to cause problems, big problems, then he's sorely mistaken. Just like Greenspan was mistaken when he thought he could print our way out of the tech implosion with no consequences.