The US GDP grew 3.3 percent in the second quarter. Boo fucking hoo. Take a good look at the S&P over the past month or two and you’ll see that this has already been priced in. What worries me is that 12 months month to month income adjusted by PCE is in the negative territory for the first time since 05/06. Except this time around, we won’t have a ridiculous Bush taxcut to keep consumer spending afloat. Don’t get me wrong, I absolutely believe that the Bush tax cuts kept us out of a recession in 2006, however, it was done at the expensive of future spending. We’re seeing our national deficit skyrocket. Like a home owner who over-borrows, America will now have to pay a higher price to keep borrowing. We’ve seen that through the collapse of the US dollar since 2001. USDX dropped from around 120 in 2001 to 78 now. $1 in 2001 is now worth $.65 in the global market. This progression almost exactly negatively mirrors the increase in US debt over the past 8 years.
This newfound optimism of the past couple of months does not make sense. The reason the market has picked back up is closely related to oil prices. Oil prices on the other hand is closely related to the Dollar. The Dollar has been rising, thus oil prices have been lowering, thus the stock market has been rising. I, however, do not understand the rise in the dollar. Is the market forecasting more government stability or less government spending in the near future? Will the new administration offer better fiscal management? Does anyone really know? Does anyone even know who will be the new president, or their policies? I say the Dollar is rising because the economies of the rest of the world is falling faster than America’s. Thus market makers are forecasting lower interest rates for the rest of the world. This, however, does not add value to the American markets in absolute terms, it merely distorts it. If you can’t tell by now, I remain bearish on the market. Due to the uncertainties surrounding the new president, I will remain bearish until June of 2009. Give the market some time to figure out what the new pres is going to do.
Oh, did I mention I studied finance in college? Did I also mention I’m unemployed?
