There's that sideline cash nonsense again. Sideline cash does not come into the market except at IPO time. Otherwise there is a seller for every buyer. If someone buys $50 million of Microsoft with "sideline cash" someone else will have $50 million in "sideline cash" to buy stocks with. I remain amazed at the number of people who manage money that do not know how the stock market even works.
* The period from 2003 to 2008 was the biggest credit bubble in history, not just in the US but worldwide. It is unrealistic to expect the bust to be anything other than the biggest credit bust in history.
* Unemployment is 6.1% and rising. My unemployment target is 8% for 2009 and continuing higher into 2010.Think what rising unemployment will do to foreclosures, defaults on credit cards, bankruptcies, commercial real estate, and corporate earnings.
* Banks and brokerages made immense profits being leveraged 30-1 to 50-1. However, brokerages are now under control of the Fed. Leverage is still unwinding and will be lowered to 10-1 or possibly lower. Reduced leveraged means less risk, but also reduced lower profit opportunity.
* Boomers are heading into retirement, and a portion of their retirement plan (rising home prices) has been wiped out. Another portion of boomer retirement plans are being wiped out in the stock market crash.
* As a result of the above, those boomers will be doing less spending and more savings. Don't expect retail sales or store profits to come soaring back anytime soon.
* Peak Credit has been reached and a secular shift to frugality and risk aversion has begun.
* Stock markets returning from extreme conditions do not just drop to the trendline, they overshoot it.
* Children who have seen their parents wiped out in bankruptcy or foreclosed on are going to have a completely different attitude towards debt than their reckless parents did. Expect to see more frugality from parents and their children alike.