Current mood: bullish, bearish, and worried
This is an interesting time to be in the stock market. Three trend changes are occurring at once. All three are equally important.
-Bullish. The US "economy" (quatation marks) is emerging out of the recession and undergoing a V-shaped recovery. The strength of the recovery is going to be a complete surprise to the bears
-Bearish. China is crashing, dragging with it the three other "bricks". "B" is going to have a hard landing, the future of "R" is uncertain, "I" should survive it and remain the same mess it is now. The Euro is tanking to 90 cents and its future looks ugly. There are some very dangerous domino effects that could bring down seemingly stable countries.
-Worried. We are still in the disinflation mode, but this is just calm before the storm. In the future, the second half of 2010 will be looked back upon as the time when the battle against inflation was lost. The next 6-9 months will be critical. We can well afford to ignore inflation until 2011. Staying in cash past 2011 will be like picking coins in front of a bulldozer. By the New Year we must estimate the likely rate of inflation and the inflation-adjusted returns of the stock market.