Extreme Blackness = Extreme Euphoria

The senses peak at major turning points. In order for markets to reach extreme levels, up or down, sentiment on both sides of the market has to be at an extreme.  Otherwise no one would sell in the current environment where everything is going so good, unemployment is decreasing, car sales are booming, commodity prices are screaming upward, all the major Wall Street pundits are bullish, why would there be one seller this morning.

Yet when one walks around in the real world there is creeping blackness.  No one wants to talk or listen to you if you say anything bleak.  Even my wife doesn’t want to hear about it.  Yet I see a world economy based on the American consumer who is tapped out and yet still hopeful.  How far does hopeful get you?  I don’t know but the biggest elephant in the room in terms of a consumer that cannot move is the part that no one talks about.  The effects of the real estate bubble are not even close to being behind us.  You hear about all the foreclosures and how the country is trying to get out from under them.  That is about 10 percent of the problem.  The real problem, the 90 percent problem, is all the home owners who refinanced during the boom and are sitting on a mountain of debt based on old expectations of rising home prices.  They are staying current on their payments but they are crying inside trying to make everything look ok.  Yet I don’t think is is going to happen, sometime in the next four years, the next leg of home price declines are going to trigger and that will be the cleanout of all this insaneness that started in 1982. 

The true sign that we hit uncle will be if the next recovery sees no Wall Street and banking sector bonuses.  That would mean success was complete.

My goal is to have a group of readers who do not get caught in the next wave down. 

6:30 AM CDT