Thursday Thoughts For the End of the Year

As you can see from Doug Short's S&P chart, we're now up 171% from our 2009 low of 666 but the mission is not yet accomplished at 1,833 – not with 1,850 so close and obtainable as a target for a 2013 finish that will put this year firmly in the history books – as well as in brochures that will be used to entice more people into the market next year.  

On an inflation-adjusted basis, we are still 11% below 2000's ridiculous highs but keep in mind those highs only seem ridiculous in retrospect – at the time, people were predicting Dow 40,000 etc.  Actually, at +115% from the lows, adjusted for inflation, Doug points out that we are still miles behind 1982-2000's epic bull rally, where the market gained a devilish 666% over 18 fabulous years.  

There was, however, no massive influx of free money and ultra-low interest rates driving the previous rallies, other than the New Deal Rally of 1932-1937 – but that one didn't end too well.  We can't expect the past to guide us when we have a Fed that is pumping the GDP of Mexico into the US Economy each year while Japan adds the GDP of the Netherlands to their economy.  Always keep in mind the charts don't show you HOW we got those results – it's only the results that matter in those index prints.

In the above charts (also Doug's), it's very clear that the actual economy is NOT improviing – in fact, it's obviously getting worse.  In fact, it's almost getting catastrophic and will be if the actual data of the 2013 Holiday Shopping Season doesn't miraculously turn around in the last two weeks of the year.  Consumer Spending is 70% of the economy and we KNOW Government Spending, which is 20%, (other than the Fed) isn't picking up the slack and Corporate Spending couldn't make up that difference – even if they wanted to. 

IN PROGRESS