The Great Correction…Still Pending

The Daily Reckoning ^ | 4-6-2010 | Bill Bonner

[stephenjohnbanker]

By the way, I have not bought or sold any stock myself since GE went down to 6, right after the banking melt down I bought a lot of that, then flipped it a few weeks later at 12.25.

That was a looooong time ago.

I only look for shorts these days. Too many good real estate deals out here right now.

[andy58-in-nh]

That is the one chart that ought to put the fear of God into market analysts. For the most part, it will not wake them from their slumber in Rosy Scenario-land because they have convinced themselves that America can have an economic recovery without consumers, and also, without private sector jobs.

The stock market roars ahead on impulse because there is nowhere else to invest: housing prices continue to languish, bond yields are either too low or carry far too much credit risk. Additionally, after-market trades of index futures (from what sources remains an open question) continue to feed the Bulls' appetites for equities.

When the correction comes - and it will - the fall will be steep and prolonged.

[Wissa]

It has to print money. Or default. Most often, it will choose default, because it is the less painful solution.

There's more than one way to default. Cutting transfer payments to the "wealthy" is effectively a default. Then, once you establish the precedent, incrementally redefine "wealthy".