Monday, May 16, 2011

Stock Market warning signs -- is a crash or crisis imminent?

It is been my belief that stocks and the economy have been locked in a secular bear market since March of 2000. During that period we've had two recessions and two cyclical bear markets. One of those recessions was the worst since the Great Depression and the last bear market in stocks was the second worst in history.

I've said all along that printing money will not cure the problem we've gotten ourselves into. It's never worked in history and it's not going to work this time either. We can't solve a problem of too much debt with more debt. All we will accomplish is to make the problem bigger.


We are now fast approaching the period when the next crisis should arrive.


On average the stock market suffers a major correction about every four years. In a secular bear market that cyclical trough arrives as the economy sinks into recession and a stock market bear bottoms out.


The last four year cycle bottom formed in March of `09. That just happened to be the longest four year cycle in history. I've noted before that long cycles are often followed by a short cycle that compensates for the extended nature or the prior cycle. If that's the case then the next four year cycle low is due sometime in 2012. (My best guess is in the fall).
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