OK this guy is actually making some hard predictions. Which is a very rare thing, so it will be interesting to watch what happens over the next few weeks to months.
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Warning Signs For The U.S. Stock Market

By Toby Connor on January 16, 2011 | More Posts By Toby Connor | Author's Website Humans, for whatever reason, tend to project the past into the future. It is an emotional flaw in our genetic makeup. It is also the reason why so many otherwise intelligent people miss the big turning points in the economy and stock market.

A classic example occurred in the summer of `07. The sub-prime market was just starting to implode. With the benefit of hindsight we now know that was the beginning of the end for not only the stock market but the global economy.

Unfortunately because we couldn’t read the writing on the wall we trusted that the Fed would “fix” this minor blip but cutting rates aggressively and spewing out an avalanche of freshly counterfeited dollar bills. It did not fix the credit markets and instead spiked the price of oil to $147 a barrel. That turned out to be the final straw that broke the camels back and sent the global economy spiraling down into the worst recession since the Great Depression. The stock market rolled over into the second worst bear market in history.

Amazingly enough we are ready to repeat this process all over again. The writing is on the wall and virtually no one can see it.

I’m now going to lay out the the series of events that will ultimately lead to the next leg down in the secular bear market and the reaction by the Federal reserve that will end up pushing the economy over the edge into the next depression.

It is going to start in the municipal and state bond markets. I should say it’s already started.


So far the stock market is ignoring the cancer growing in the city and state bond markets… just like it ignored the initial stages of the sub-prime implosion in the autumn of `07.

At some point it is going to dawn on the market that there may be a serious problem developing. I expect that recognition to come as the market starts to drop down into the next intermediate cycle correction (which I expect to begin next week). If so, then what should start out as just a profit taking correction will turn into a much more serious decline, possibly even erasing all of the fall rally.

We’ve already seen big warning signs that smart money has been exiting this market for a couple of months now, basically since the first signs of stress in the muni markets appeared in November. Big money has used the QE driven rally to unload stock on the clueless public over the last several months.

It will begin as the first cities and states start to default. That will correspond with massive layoffs as cities and states will no longer be able to borrow to meet payrolls. Their only option will be to make drastic cuts any and everywhere they can.

The Fed will panic and start running the printing presses in overdrive just like they did in `08 and just like in `08 that will spike the price of energy and food (it’s already starting. Gasoline is back above $3.00 a gallon and a loaf of bread is pushing $4.50-$5.00).

Spiking inflation in a very high unemployment environment will understandably destroy the fragile economy just like it did in `08. (I have no idea why Bernanke thinks rising prices along with 20% unemployment is a good thing.)

This will be the period when gold will enter the final leg up in its ongoing C-wave advance and the dollar will collapse down into the 3 year cycle low unleashing the currency crisis we’ve been expecting.

I fully expect by fall the economy will be heading back into recession/depression and the global stock markets will have rolled over into the next leg down in the secular bear market that began in 2000 with the bursting of the tech bubble.

__________________
"Patriotism means being loyal to your country all the time and to its government when it deserves it."-- Mark Twain

"Inter arma silent Musae"--when the weapons speak, the muses fall silent.

An't nanum hearm deth, doth hwaet ye willath.

It is forbidden to kill; therefore all murderers are punished
unless they kill in large numbers and to the sound of trumpets. -Voltaire

Economic Left/Right: -3.88
Authoritarian/Libertarian: -4.36

Why this market rally will end in tears
DAVID ROSENBERG | Columnist profile
From Wednesday's Globe and Mail
Published Tuesday, Jan. 18, 2011 5:52PM EST
Last updated Tuesday, Jan. 18, 2011 5:59PM EST
Why this market rally will end in tears - The Globe and Mail

We have an incredible bear market rally on our hands. History shows that these spasms can go further than anyone thinks. But after the U.S. market staged a monstrous 80-per-cent-plus rally from its March, 2009, lows (the most pronounced bounce in such a short time since 1955), it has become seriously overextended. Meanwhile, practically every pundit is extrapolating the recent trend into the future because that is the easy thing to do.

Most investors see only the recent returns; they do not see the nearly invisible risks. But the risks are there. I recall all too well the 2003-07 bear market rally – yes, that is what it was. It was no long-term bull run such as 1949-1966 or 1982-2000. It was a classic bear market rally, and it ended in tears because what drove the market upward was phony wealth generated by a non-productive asset called housing alongside widespread financial engineering, which triggered a wave of artificial paper profits.

‪Remember, returns only count if they aren’t ultimately reversed by excessive greed. Right now, I believe clients are well served by equity strategies that focus on stocks of high quality companies and by investments in both hard assets and income-producing securities. Also good are long-short strategies (vital in controlling risk in the portfolio) and a concentration on fixed-income products (outside of commodities, deflation in the developed world remains the primary trend – against such a backdrop, searching for yield makes perfect sense).‪

‪ As far as equities are concerned, the current bear market rally is likely at the very late stage. Few people will know to get out at the peak and as we saw in late 2007 and into 2008, many investors will be trapped in a falling market. Bear market rallies are not the same as secular, or long-term, bull markets – the former are to be rented, the latter are to be owned.

‪This is not the 1949-66 secular bull market, which was underpinned by troops coming home and spurring on a baby boom that would unleash years of tremendously strong domestic demand growth. The demographics in the U.S. are now downright poor – just look at the dwindling ratio of the working age population to the total population.

Nor is this the 1982-2000 secular bull market that began when the U.S. Federal Reserve ushered in years of disinflation. (The current Fed is trying desperately to create inflation.) That market floated higher on a wave of innovation that saw the mainframe, the personal computer, the Internet and then the cellphone transform many businesses. At the same time, a boom in the capital stock enhanced productivity growth and led to sustained gains in private sector economic activity, which by the end of that bull run allowed the government to actually start to record budget surpluses.

What is the major innovation today? The iPod? The iPad? Facebook? These may be fun, but they don’t do much to promote the growth rate in capital stock or productivity. ‬

‪What we have on our hands is an economic revival and market bounce premised on unprecedented monetary and fiscal stimulus. How the Fed and the U.S. federal government will manage to redress their swollen balance sheets without creating a major disturbance for the overall economy is a legitimate question. Under such conditions, the market does not deserve to trade at a double-digit multiple of earnings. ‬

‪Just as the 2003-07 bear market rally was built on a shaky foundation of unsustainable credit and house price appreciation, the current bear market rally has been built on even shakier ground of surreal public sector intervention. This may well have “saved the system” or “prevented a depression” back in the opening months of 2009, as many like to believe. However, the reality (and even former Communist regimes figured this out a few decades ago) is that there is no such thing as a free lunch. ‬

__________________
"Patriotism means being loyal to your country all the time and to its government when it deserves it."-- Mark Twain

"Inter arma silent Musae"--when the weapons speak, the muses fall silent.

An't nanum hearm deth, doth hwaet ye willath.

It is forbidden to kill; therefore all murderers are punished
unless they kill in large numbers and to the sound of trumpets. -Voltaire

Economic Left/Right: -3.88
Authoritarian/Libertarian: -4.36