Monday, April 4, 2011

Ho Hum

I don’t know about you but I’m bored.

Stocks are locked into their upward drift waiting for what will almost certainly be an earnings season right around expectations (MERI data). And since we have 2 more months of monetary alcohol (that’s supposed to find its way into the real economy but is actually is stuck swirling around risk assets) to finally see if it has worked its magic and produce a private sector led sustainable economic expansion, the predictive dynamics of equity investing has been reduced to the investment equivalent of waiting for Godot. And therein lies the real rub for stocks.

The central issue for stocks is not whether earnings and guidance will exceed or (more likely) meet expectations. Nor is it a 15 multiple on a $90 S&P 500 operating number (which results in a 1400 target) that is at the top of the investment decision-making to do list. Rather, it is what happens after the monetary steroids have stopped being pumped into the sub par US economy? Which brings us to when things will start to get more lively – the third quarter of this year. For it is in 3Q11, when Chairman and head drink mixer Bernanke is set to stop (but not withdraw) the flow of monetary alcohol that we will see just what $4 to 6 trillion dollars has gotten us: a private sector led sustainable economic expansion or the early stages of the next economic crisis?

Until then, a plentiful supply of No-Doz is in order.

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