Volcker Brings Some Balance to the Equation

Obama is being forced by political reality to bring Paul Volcker back into view.  No doubt this is to keep the little bubble that has been created in the past year by Bernanke from bursting if he is not approved by Congress.  This is a short-term solution for an election year economy and reinforces our view that the market will be a sideways to down affair in 2010.  The mini-bubble will not get bigger but will probably not burst.  Our forecasts presented last week follow that logic, a 20 percent top to bottom range for the S&P, no 60 % drops for 2 or 3 years are anticipated.  Watch gold for a sign that a different scenario is in play, our projected low for the year is only 4 percent lower than the current price, if it trades under $ 1000, all bets are off, deflation would be back in play.

In the long-run nothing has been accomplished.  The Republicans have kept any meaningful big ventures ( a trillion or 2 dollars)  into alternative energy from occurring, so unemployment is not improving.  Now in the election year the deficit will be attacked by both sides before the underlying economic issues have been addressed.  Bottom-line the Depression is still waiting in the wings for a trigger, we continue to look for 2013 as a probable period.