One of the very best predictors used to gauge markets and demand is the Baltic Dry Index. It measures shipping and freight rates globally and is not subject to speculation in any way. As such, it is the gold standard for investors.
This current chart looks mildly ominous. With the S&P soaring and sporting a PE of 24, this doesn't bode well. It appears to be a bubble.
Article makes some good points. The trouble I forsee is that shifting the massive debt burden to government, to bail out the financial system, is that government must now either increase taxes or debase the currency, in order to pay interest. (It could repudiate debt but that's unlikely for us.) This must reduce aggregate demand -- the people lending to government have more of a propensity to save (like the Chinese), so money is transferred to non-spend-a-holics.
Ever read Robert Precther of Elliot Wave fame? Brilliant man, predicts off of socio-economic trends ie. large scale cycles of social optimism and pessimism. Has a pretty brilliant record, other than underestimating the magnitude of the last equities and commodities bubbles. He has been spot on of late. He predicts that after the current bear market rally, which should soon be over if not already, that we will move to a Super Cycle wave three of three (not good). What does this mean if he is correct? A global deflationary depression that would make the 1930's look easy. I hope he is wrong, but I got a bad feeling....
Check out Mike Shedlock's blog. He's saying the same thing.
The thing to keep in mind that all of the people telling us that we've turned the corner on this recession are the ones who were telling us everything was fine in 2006 and that we needed to get into the housing market right now. Insanity is listening to these people again and expecting better results.
I'm familiar with some of his work, but not a lot. A deflationary depression would be good for t-bonds/bills, but are the de-leveraging forces large enough to consume all the money Bernanke is printing?
There must come a point where it is simply impossible to pay the interest on all the debt. No one will vote for people who initiate the tax rates to even begin to pay the interest. Massive inflation or ruinous taxes? Either case would qualify to cause a depression.
I think the Chinese believe that every system gets two or three hundred years before it collapses. So our time may indeed be up. Military dictatorship soon to follow.
One of the guys over on the Market Oracle (where Shedlock contributes) says he found something like 12 economists out of over 15,000, who predicted the meltdown. Almost all of them had no clue. But we don't need economists to tell us that we can't spend more than we earn...forever.
Double dip recession? I can see it. I don't see a world depression coming that will rival 1930's, but I do see the actions of Obama, and the liberal Congress causing the economy to stagnate.
Regardless of what Obama does, there are a lot of smart people (outside of government) who will keep the economy chugging along in spite of what is done. (They won't get any credit.) But I do not see any "boom" time as long as he is in office.
Unless there is a big change in Congress, the plan is to let the Bush tax cuts expire in 2010. (And they are not calling that a tax increase, even though taxes will increase.) Depending on how weak the economy is then, it could slow down a recovery, turn a minor recovery into another recession, or be an economic sledgehammer to a recession.