Tuesday, October 28, 2014


So, I will admit that bearishness is probably a chronic condition with myself.

But it has served me well by enabling a honed sense of skepticism regarding what the herd is doing. The timing is the key of course.

Lately I have not been able to shake the feeling that something is wrong with the stock market and it's relationship to economic conditions. In the very long term, it seems to me that the expansion of credit must continue to contract.

We saw a huge expansion of credit several years ago in the housing area. That area has been trying to contract to reasonable housing prices for years despite a concerted effort to keep homes unaffordable for new buyers.

The expansion of credit in the student loan area must be at a peak. The ability of newcomers to the labor market to pay off their student loans with the wages that prevail in the marketplace will need to change in order to keep the student loan sphere aloft. And these new workplace entrants cannot afford the aforementioned homes.

The car market rebounded after the '08 crash on the back of low interest rates. Cyclically, the auto industry must be near a turn for the worse. And the questions about the quality of auto loans are the same as the questions of the quality of student loans. All are vulnerable to a rise in interest rates, should that come.

The talk on the financial channels in the past few years has gone from manufacturing to finance to what the latest social network stocks are doing. Along with the latest gadget that is selling. My point here is that the size of credit purchases has gone from large housing purchases to smaller car loans and student loans and now the hot sellers seem to be gadgets. Will we figure out how to buy the gadgets on credit?

One after another over the last couple months I wake to see the latest high flier stock down dramatically. Usually crushed by a disappointing earnings report or projection. I will not list them here. Volatility is up. (Down today :( ...)

The rest of the world is having problems that persist since the big crash of a few years ago. The only reason the markets in this country are able to resist the downturn seems to be just a case of the best of a bad lot. And the USD being the worlds reserve currency, still.  And fundamental conditions as a function of the effect of credit on the economy must prevail. Some day. Or currencies must adjust.

Timing of course is everything. But the latest in the stock market is surreal to me.



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