This past week, some reality set in on a global level that especially the U.S. economy is not all it was cracked up to be. Of course, to readers of this blog, this should come as no surprise as I have repeatedly pointed out that the alleged economic recovery has been simply a mirage supported by reckless government stimulus programs.
It defies common sense and logic to assume that artificially created demand can be anything but ephemeral. Short of invoking Stimulus 2.0, we have reached the moment of truth where the real economy needs to stand up and be recognized.
To my way of thinking, this recognition will be in form of utter disappointment during the second half of this year, as GDP numbers are sure to disappoint. When even the #1 cheerleader, Fed chief Bernanke, talks in the most optimistic language that things are “unusually uncertain,” it should serve as a wake-up call that reality may be somewhat different than what was being assumed.
Take a look at what Harry Dent has to say on the subject. His view of the economy matches mine and is spot on. Where I am not as sure is on the numbers he presents as to where the stock market may end up. Hat tip goes to reader Larry for sending in this link to Harry’s July video:
http://www.hsdent.com/july2010update/
If the scenario of a lower stock market comes to pass, bonds/bond funds will continue to be the investment of choice. Eventually, once bear market territory has been entered, and the domestic TTI (Trend Tracking Index) has been broken, some short positions via the major indexes will be a definite possibility.