Originally Posted by
Slurry Pumper
I guess what I'm saying is the economy has been flushed with easy cash since back even before the 2009/09 crash with the easy mortgage stuff. Then when that fell apart, instead of taking the pain the markets were quickly inflated and we have been inflating with easy printed cash ever since. Tech stocks boomed, and easy debt all over the place. The company evaluations are way inflated. Real inflation cost were masked by the offshoring of stuff we used to make in the U.S. to a cheaper location somewhere on the globe. We didn't really see that inflation because consumers didn't have to pay, but the finding a spot to lower the cost of production was the inflation. Now the rest of the world has caught up and we don't have any places where we can make stuff cheaper anymore. These cost will manifest themselves in real cost increases to the consumer now. All of this is coming during a backdrop of the government having to come to grips with the fact that just spending money will have detrimental effects on the currency. Basically all the chickens are starting to come home to roost. The inflationary stuff from the housing bubble, QE, and out of control government spending for the last couple of decades are all here to collect on the bill. If you are an owner of assets the last couple of decades, those values have been rising, but if you where trying to work for a living those monetary gains where muted. Now it has reached a point where so many people cannot afford the assets that are out there. This all means the economic engine will be grinding to a halt.
Enter the stock market which is more or less a big casino game at this point. When the markets top, they typically come down a little bit then rally back up to or near the top that they where at before plummeting down in a horrific crash. I think we are at the point where it has come down a little bit and will start to rise to challenge the top of last November. I don't think it gets there, and I know it is all doom and gloom now, but history tells us that is what happens. So the markets will start to rise and if things line up, I can see the SPY back at the $475 spot before the election and if it starts to move in that direction, the news will reflect that, then things will build on themselves. Of course the underlying bad things will still be there so the markets will have an "event" that will send the markets down again to even lower levels than we are at now. All of this happens in the next year or so. Then a period of consolidation and eventually all of the debt gets worked out of the system. This all takes time to happen so maybe another year or so before the markets start the inflation cycle again, but the lower point will be back in the low 200s for the SPY and the climb back to $475ish will take another decade to do.