Monday, January 31, 2011

A Temporary Change?

Despite criticism, the Fed has been prudent in trying to pump up the money supply to prevent the economy from weakening further. For technical reasons, the money supply has not increased as much as they had hoped but still enough to help the economy anyway.

A consequence of pumping up the money supply faster than economic growth is inflation. Fortunately, we have seen very little of that inside the U.S. But, the rest of the world, especially the emerging nations, has not been as fortunate. This is for two reasons: First, many emerging nations link their currency to the dollar and have therefore been importing our monetary policy of "easy money." Second, those nations are more dependent on commodity prices, which has really risen strongly over the last six months.

For years, the stock markets in emerging markets have out-performed the U.S. So far this year, we are out-performing them by 4%. This is a surprising reversal but not sustainable. When commodity prices moderate, they will resume their higher growth, while the U.S. is still working on its huge debt burden, which hampers our growth. They don't have that burden!

Generational Theft

There has been much discussion recently how "The Greatest Generation" is stealing from succeeding generations with their generous government pensions, Social Security, and Medicare. There is indeed a surprising amount of resentment among young people about this.

Yet, they have lost something maybe even more important and don't even realize it.

A few months ago, I found my American Express bill laying at my front door. The envelope had been opened. Even though there is nothing embarrassing in the statement, I felt violated at the loss of privacy. Shredding what little trust remained in the Postal Service, I've since converted most of my bills to online delivery.

But, how much privacy exists online? I also feel violated by "cookies" implanted in my computer so advertisers can track my movements. Whenever my IT guy is here, I ask to have my cookies removed carefully, so as not to remove my passwords. As a young person, he cannot understand why I don't want the advertising I receive to be targeted toward my own interests.

My daughter voluntarily puts her life on Facebook . . . her whole life. Most members of that generation do the same thing. Everybody knows everything about them! I just don't understand why privacy is so unimportant.

I remember the first time I went to New York City, when I moved among throngs of people on the streets; totally invisible to them. In the midst of so many, I felt so much privacy and actually enjoyed the sense of freedom. That is a joy my daughter and her generation have lost. While focusing on the generational theft, they gave up something more fundamental.

Oh, well . . . guess I'm getting old?

Sunday, January 30, 2011

November 9, 1989

I remember watching television that night with my daughter as the Berlin Wall fell. It was truly a momentous event, ending the Cold War. The events now happening in Egypt are gravely important but not momentous. Unless it spreads . . .

Of course, nobody expected it would ever get this big. It started with a petty bureaucrat who slapped a minor street vendor in Tunisia who was humiliated enough to pour gasoline on himself and ignite the streets of that country. The government promptly fell, and the riots moved to the next despotic Islamic country, Egypt. President Mubarek cannot survive this (although we don't know what will replace him.) If the demonstrations now spread to other Islamic nations, this may turn out to be truly momentous, like the fall of the Berlin Wall.

For the markets, this promises to be a volatile week. The market was primed for a fall anyway. We have the Egyptian crises. And, by the way, the all-important Jobs Report is this Friday. We can expect another volatile Friday this week.

If you are an investor, you know this will pass and may even find some good long-time bargains to buy over the next few weeks. If you are a trader, you will be a nervous wreck for awhile, I promise!

Saturday, January 29, 2011

Even with the Suez Canal Open . . .

Long used as a proxy for the degree of globalization, the Baltic Dry Index measures the shipping rates of dry goods. As the economy heats up, more goods are shipped, and the shippers can raise their shipping rates. When the recession began, the index or BDI dropped rapidly. After a slow, bumpy partial recovery, it looks like we may be re-testing the low. If the Suez Canal is closed, we should expect a new low very quickly. Take a look at this graph:

Of course, these low shipping rates will eventually make it cheaper to ship goods between countries, and demand will increase.

In the meantime, I don't think the market price of shipping companies will benefit from this unrest. Most such companies trade on the basis of their high dividends, but those dividends may be less certain now. I'm considering whether to sell mine on Monday morning.

Friday, January 28, 2011

Friday Follies

Friday is historically the most volatile day of the week in markets. That's because traders (as opposed to investors) would rather invest in cash over the weekend, if there is any fear on the street. There was fear on the street.

In addition, the stock market has gotten too far ahead of the economy. Then, throw in a major international crisis, and it is an ugly way to start the weekend! The Dow lost 166 points today . . . ouch!

Kinda reminds you of the Greek bond crisis last year? This too will pass!

But, make no mistake, this is a bigger deal. While the fall of the America-friendly government in Egypt is probably good for the Egyptians, it is bad for the markets for two reasons. Geo-politically, it further unsettles an already unsettled part of the world that just happens to produce most of the world's oil. Close to two million barrels of oil pass thru the Suez Canal everyday.

Secondly, it increases uncertainty, and stock markets just hate uncertainty! It's as simple as that.

The stock market needs a rest . . . after such a long bull run, it deserves a rest.

Did I mention this too will pass?

Stronger GDP Than Expected?

Last week, the British government announced their preliminary estimate of their GDP growth in the fourth quarter was a negative 0.5%, instead of the positive 0.7% they were expecting. They blamed it on the weather.

The morning, the U.S. government announced their preliminary estimate of Q4 growth in GDP was a surprisingly strong 3.2%, up from 2.6% in the previous quarter. The Democrats will take credit that this is proof their policies are working, while the Republicans will claim Q4 performance would have been better without those policies.

My first thought is that this is only the preliminary estimate and will undoubtedly change when the final estimate is released next month. So, don't jump to any conclusions!

My second thought is that, if these numbers are good, it makes an interesting comparison between the British and U.S. approaches to ending the recession. In Britain, they adopted the Austrian model of draconian cuts in spending. In the U.S., we used the Keynesian model of high deficit spending.

Yet, there is no surprise in this and shows why there is a time and a place for most all economic models. Keynesian economics works well in the short run, to get the economy out of the ditch but not in the long run. The question is whether we have the political institutions to stop the Keynesian approach.

Thursday, January 27, 2011

An Original Libertarian

I've probably read a dozen books by libertarians over the last two years. When I started reading "The Day After the Dollar Crashes" by Damon Vickers, I toyed with putting it down as just another tired rendition of Glenn Beck, who endorsed the book. But, when I read "I believe that the primary source of our discontent comes from the advertising media," I knew the author was an original thinker and willing to incur the wrath of libertarians.

While he agrees with Ron Paul that the Federal Reserve system has done more harm than good, he also advocates a one-world government that would require sovereign nations to protect their environments, take the poison out of foods, and show respect for all religions. Good luck on that one!

He wants to abolish fiat money and would advocate a new currency that is backed by something, such as gold or anything. He likes investing in farmland and precious metals. And, of course, he expects inflation to rise to staggering levels after the dollar's collapse. Too bad he doesn't tell us when that will be.

The most chilling part of the book was a fictionalized account of how the world markets would react, almost minute-by-minute, on the day the dollar crashes. It was well-written, plausible and chilling.

This is not another "sky-is-falling" book. It is an easy read that delivers a different perspective on a surprising number of subjects.

Markets versus Economies

The inevitable happened yesterday, when the Congressional Budget Office announced Social Security was starting to bleed, i.e., that payments out exceeded payments in. That is not good economic news.

In addition, they announced the deficit for this year will be $1.5 TRILLION instead of $1.1 TRILLION. That is not good economic news.

And, Standard & Poor's reduced the credit rating for Japan, as their debt increases. That is not good economic news.

But, did you notice the stock market is at two and a half year highs? The Asia markets were up overnight, and the European markets are up now. So, the Dow will probably break above 12,000 today and stay there. Maybe, the markets don't listen to economic news?

Or, maybe, the stock market is looking down the road to a normalized economy. They may feel stocks are cheap, compared to 2007. Or, maybe, the stock market is about companies who are very healthy, not households who are sick but healing.

Or, maybe, the 24/7 jackrabbit economy has gotten too far ahead of the tortoise economy again and needs an old-fashioned correction, which I believe.

Wednesday, January 26, 2011

Last Night's Speech

Bond Vigilantes are arguably the most powerful people on Earth. They can topple governments without firing a shot. Apparently, they liked the President's speech last night, as the Asia and European stock markets are up and interest rates are down. Whew! I suspect their focus was on the promised cut in corporate income tax rates, which I support.

It looks like another good day in the market, partly because the foreign markets are getting us off to a good start. Plus, the Fed meeting today is unlikely to interrupt the fairly steady stream of good quarterly reports from corporations.

My thought on the speech last night is primarily disappointment, as he did not mention the word "entitlement" one time. The $400 billion spending cuts over five years proposed by the President is peanuts compared to the increasing fiscal damage from our high level of entitlements. Hopefully, there are negotiations behind the scene with Republicans to jointly announce (1) means-testing for Social Security and Medicare, (2) raising the age for Social Security, and (3) an increase in personl income taxes. If this happens, we can enjoy watching the retreat of the bond vigilantes! Interest rates will drop, and the stock market will soar!

Tuesday, January 25, 2011

A Favorite Indicator

Has anybody noticed the difference in interest rates between 30-year and 2-year Treasury bonds? It has reached a new high of 4% or 400 basis points. This is an all-time record!

One reason might be that the Chinese have stopped buying 30-year bonds. (The longer the term of a bond, the more volatile the market value of the bond.) They needed to cut back their holdings of our bonds and wisely cut back on the most volatile. With reduced demand for those bonds, the price dropped, which increases the interest rate required to sell them.

Another reason for the reduced demand for long-term bonds is that some investors legitimately question whether the United States will survive another 30 years.

The more bullish investors point to the fact that a "steep yield curve" or big difference between short-term and long-term rates is a reliable indicator of an improving economy. The logic is that buyers of bonds know demand for bonds in the future will rise, causing rates to rise and the value of bonds purchased now to fall. This suggests stocks will rise in value more than bonds.

I think the bond market is telling us that inflation is inevitable. Knowing rates are going to rise due to out-of-control government spending, i.e., entitlements, the buyers of longer term bonds demand higher rates to protect themselves from the corrosive power of inflation.

Frankly, I don't understand why anybody would buy a long-term bond when interest rates are almost certain to rise. Besides, many stocks pay much higher dividend rates than bonds.

Monday, January 24, 2011

Goring Everybody's Ox

Kudos to Virginia's Senator Mark Warner and Georgia's Republican Senator Saxby Chambliss for introducing a bill that will actually take a step toward solving America's deficit problem!

Last week, a client faxed me a Tea Party newsletter that said "revenue is not the problem; spending is the problem." While that sound bite is correct, it is less than helpful as it confuses what spending really is. If we fired every single Federal employee and eliminated every penny to foreign aid, the U.S. will still face bankruptcy if it doesn't deal with the entitlement issues of Social Security, Medicare, and Medicaid. (I watched two Tea Partiers being interviewed this weekend, and they would not even commit to "means-testing" Social Security . . . so, what are they for . . . specificially?)

The beauty of the Warner-Chambliss bill is that it is all-or-nothing. Nit-picking is too easy and provides an excuse to avoid difficult decisions. There are plenty of specific things I don't like about their bill but hope it passes anyway! Unless everybody's ox gets gored, mine included, we are lost.

2010 -- In like a lamb . . . but out like a tiger!

At this time last year, 23% of U.S. companies expected to fire workers over the next six months. Only 29% expected to hire any.

As the year ended, only 7% expect to fire workers, while 42% expect to hire more workers over the next six months.

This is the latest survey by the National Association of Business Economics, one of my favorite organizations. (I will be attending their National Policy Conference in Washington during March.)

It is clear the economy is healing. Another recession is unlikely anytime in the near future, unless there is a massive derivatives blow-out. Still, the recovery is slow . . . painstakingly slow if you don't have a job!

Saturday, January 22, 2011

The Economics of World War II

As the son of a World War II veteran on the European front, I was taught much about the war, often more than I wanted to know. As an economist, I have always wondered how anybody could have been naive enough to think Germany had the resources to win. At the beginning of the war, the U.S. economy was already twice the size of the German economy. By 1943, we were four times bigger. And, that doesn't include the allies of England or France.

I've just finished "The Wages of Destruction" by Adam Tooze, which I think is the first economic perspective on that war. It traces the huge shift in economic resources starting in 1933 from civilian use to re-armament, describing it as "the largest transfer of resources ever undertaken by a capitalist state in peacetime." Yet, Hitler had concluded by 1939 that they could never hope to win a sustained war, as our combined economies would soon overwhelm his own.

So, why did he launch the war anyway? Because he believed it was inevitable, since Jews had taken over America! The only chance for German race to survive long term was for Hitler to win a quick peace. He envied England, a small nation with a vibrant economy because they had used military force to create an empire. Hitler wanted to create "living space" for the German people, taking enough land that the German people could live without fear of the Jews.

The triggering moment in 1939 when the balance of payments for Germany became so bad that the bond vigilantes attacked, dumping German bonds. Then, nobody would export to Germany without prior payment. At that point, he could no longer import the materials needed to increase his military force. Since his military would never be any stronger, that was the time to invade Poland and launch a quick war.

The book is a ponderous read but does show the importance of economic changes on political decisions.

Stunningly Wrong . . .

Hyperbole has no place in a pedantic blog like this, but Congressman Randy Forbes' comments yesterday at the Chamber of Commerce breakfast was simply beyond silly. He takes issue with our "friendly" treatment of China. Rather than bashing our largest foreign lender and largest supplier to the millions of Walmart shoppers, he would be better served trying to understand them.

We ask China two questions. First, why have you no respect for individuals? Second, why do you keep our unemployment high by keeping your currency cheap?

They ask us two questions. First, why have you no respect for communities and the greater good? Second, why do you want us to increase unemployment in our country by making our currency expensive?

Both sides inched closer to resolving these cultural differences last week, whether Congressman Forbes understands or not. Does he really expect them to jettison centuries of culture, just to adopt ours overnight?

Oh, and one more point, the U.S. spends 18% of its budget on defense, compared to only 8% by China. While that percentage is rising faster in China than here, they are still loaning us $300 million every day of every week to fight the wars in Iraq and Afghanistan. Maybe, the Congressman is just jealous they can afford their own military expense?

Tipping Point . . . ?

After seven consecutive up weeks, this week was flat. The Dow was up less than 1%, and the S&P was down less than 1%. However, it did come out this week that retail investors may be returning to stocks, after missing this huge rally. Their inflows into equity mutual funds was $3.8 billion. This was the largest since May of 2009. That returns some of the $35 billion they pulled out last year.

Analysts used to discuss the "odd lot" rule. Most stock purchases are for 100 shares or some multiple of that. When purchases of less than 100 shares (called odd lots) increased, that indicated the smaller investors, who could not afford a full lot, were returning to the market. As they were not considered to be sophisticated investors, that was a bearish indicator, meaning the market was going down. Today, we watch mutual fund inflows for the same reason.

Does this mean we are at a tipping point before a market slide? Of course, no single rule-of-thumb proves anything. Still, I believe the market needs to take a rest until the economy catches up. I do expect market weakness over the next few months.

Monday, January 17, 2011

Late Breaking Forecast

For those who do not subscribe to "Inside Business," the regional business journal, here is the link to my latest column

Unfortunately, it omits the graph, and the formatting is awful.

Bottom Line: This should be a pretty good year in the market, as long as we don't have a heart attack from derivatives.

Sunday, January 16, 2011

Forex Illusions

"How to" books can be both entertaining and educational. However, those books can be dangerous for investing. Therefore, I seldom agree to review any "How to" books. However, I'm glad I did agree to review "The Little Book of Currency Trading", a new book by Kathy Lien.

I suspected it would be full of charts and graphs guaranteed to confuse novice investors. Instead, it was a delightfully simple and practical explanation of international economics, without all the mumble-jumble on which international organization does what.

She also recommends ETFs as the practical way to take long-term positions in currencies, avoiding the futures market. I strongly agree.

If you want to be an active trader in foreign exchange/currencies or FOREX, you need much more than this book. If you want to take a short course in international economics, it is a good read for you.

Saturday, January 15, 2011

Switching Gears

The markets enjoyed their seventh consecutive week of rising values. This hasn't happened in years. We're now back to the level of June, 2008, although that is still down about 18% from the peak in 2007.

Time to switch gears and take a break. My latest column for "Inside Business" predicts a 4-8% decline beginning sometime this quarter.

Relationships usually change when gears shift. For example, there has been a predictable relationship between the U.S. dollar and gold. As the dollar looses value, gold gains value. This week, both the dollar and gold went down.

So, get ready emotionally for a dip. While it may last a couple of quarters, the end of the year still looks great!

Friday, January 14, 2011

Differential News Coverage

At a bond conference in Paris yesterday, the two premier bond rating agencies warned the U.K., Germany, and France that their AAA credit ratings was in danger. They also clearly warned that U.S. bonds faced the same danger. Why was it big news in Europe but not in the U.S.?

As the world's only reserve currency, that is a huge deal! One analyst from S&P said "the view of markets is that the U.S. will continue to benefit from the exorbitant privilege linked to the U.S. Dollar, but that may change."

If the dollar gets downgraded, the value of outstanding bonds will drop and the cost of future interest paid by taxpayers will sky-rocket. It must not happen!

Because bond analysts are not Supply-side believers, every tax cut threatens our credit rating. The bond analysts want to see us take the "Illinois-approach," which means big tax increases. If we don't make the bond analysts happy, we will certainly make the bond vigilantes happy!

Walking such a fine line between too much and too little certainly is exhausting . . .

Wednesday, January 12, 2011

Catching up . . .

Whenever the deadline for my quarterly column in "Inside Business" comes up, my blog tends to get ignored. Yesterday, I turned in the newest column, which will appear in this weekend's edition. Thus, it is time to catch with a number of thoughts for the blog.

First, while this column is about economics and investing, sometimes political issues cannot be ignored, and the tragedy in Tucson is such a case. While it is still premature to blame political rhetoric for the tragedy, it is fair to ask if words have consequences. For someone who writes a good deal, I hope words do have consequences. But, if they do, shouldn't we also expect UN-expected consequences. And, if words do have consequences, doesn't that mean harsher words have harsher consequences?

Second, it was an ugly coincidence that China test-flew its new stealth fighter and publicized it while our Secretary of Defense was visiting. 2010 was the year that China began flexing its muscle, beginning with their capture of the Japanese fishing trawler. Ironically, we borrow $300 million from China EVERY DAY to pay for the war in Afghanistan, which is a far smaller threat to our long term future than China.

Third, back to economics, today's auction of Portuguese bonds went better than expected, suggesting the European debt crisis will not spin out of control . . . today. Normally, a slow-motion train wreck like this is painful to watch, but this works to the world's benefit. Europe has shown a much greater willingness to deal with their fiscal deficits issues that the U.S. Being the home of Austrian economics or "tough love" economics, there is no discussion of tax cuts, like there is in the home of Supply Side economics. The more time the Europeans have, the better.

Sunday, January 9, 2011

Great Brain = Great Guy?

Easily, one of the most iconoclastic thinkers today is Nassim Nicholas Taleb, who burst onto the intellectual scene with his 2007 blockbuster "The Black Swan." In that book, he describes the three characteristics of highly improbable events, i.e., the event has a massive effect, that it is unpredictable, and that it appears obvious after the fact. Published just prior to the Global Financial Crisis of 2007-09, his fame was conveniently assured.

The title of his new book is "The Bed of Procrustes" comes from a Greek tale about a man who tailored his house guests to fit the guest bed. If they were too short, they were tortured by stretching. If they were too long, their legs were cut off the right amount. Taleb thinks we make our truths fit convenient facts, rather than look beyond the facts.

This is a book of iconoclastic aphorisms such as: "Academia is to knowledge what prostitution is to love; close enough on the surface but, to the nonsucker, not exactly the right thing." The book is meant to be in-your-face, requiring you to think, and it is does! I'm glad I read it. It is like tilling the brain.

While I am grateful to live in the same world as anybody as brilliant as Taleb, I don't ever recall reading that he is a nice guy.

Saturday, January 8, 2011

2011 versus 1841

I have been following the crisis in municipal bonds, primarily at the state level, for several months and have found it helpful to compare it with the crisis of 1841.

Eight states plus the territory of Florida actually defaulted on their debts. As expected, the interest rates they had to pay soared, up to 30% at one time. We can expect the same to happen this year for the states who default, most likely California.

A difference is the reason for the debt. In 1841, there had been a binge of infrastructure improvements, like railroads and canals. They borrowed too much to build too much. In 2011, there had been a binge of promises and entitlements. They borrowed to much to consume too much.

Another difference is the solution. Supply-side economics did not exist in 1841, and the states raised taxes to "honor their obligations," as they said at the time. In 2011, I suspect the state politicians care more about their ideology than honoring the states obligations.

Even though I am comfortable with Virginia bonds, they are being "slimed" by the troubles in the overall bond market for states and cities.

So, now we know!

Will the stock market be up or down this year? There are several versions of the "January Effect". Here is the simplest one. Since the S&P was up 1.1% the first week of January, there is an 87% probability it will be even higher at year-end. Any questions?

In additon, the third year of the presidency, Republican or Democratic, has historically been the best year of their four year terms, since World War II. The average gain in those years is 17%. This is the third year. Any questions?

Seriously, such historical precedents are interesting but hardly instructive. While I do expect 2011 to be a bullish year, it is not because of these historical precedents. However, they are slightly comforting . . .

Friday, January 7, 2011

Job Report #3 . . . Muddy

Yesterday, the Street was expecting that 175 thousand new jobs were created in December. Overnight, the estimate drifted down to 150 thousand, which is a little suspicious.

This morning, it was announced that 103 thousand jobs were created. That is a lot less than either 150 or 175 thousand, and the market could be expected to drop at the open. However, it also announced that October and November saw 70 thousand more jobs created than earlier reported. So, total employment was indeed up 173 thousand, just over a different time frame. Now, the market looks only slightly weaker.

The headline from this morning's announcement is that the unemployment rate dropped from 9.8% to 9.4%, which is good news but misleading. This is clearly an anomaly, reflecting a large number of people who have either quit looking or exhausted their benefits. Whenever real job growth takes place, the unemployment rate rises, as fewer people are discouraged and re-enter the workforce. Our unemployment rate will rise soon, if not next month.

A real drop in unemployment would encourage the Fed to start letting interest rates rise. The Fed will not be fooled by today's report and will keep their foot on the accelerator.

Thursday, January 6, 2011

Jobs Report #2

Yesterday, the ADP survey indicated that private payrolls increased far more than expected in December. Today's weekly report on initial unemployment claims slightly missed expectations, coming in at 418 thousand people.

The number of people receiving regular state unemployment fell slightly to 4.1 million, which is good but not very good.

Today's report is the first of a week or so that has been disappointing. Almost all the economic data has been positive for the last month, clearly indicating an economic recovery.

As a result of yesterday's ADP, the expectation for tomorrow has increased, suspecting that 175 thousand were created in December. If it is much less, expect the market to go down somewhat. If it is much more, expect the market to go up strongly.

Wednesday, January 5, 2011

Wow . . . 297,000 jobs

Payroll processing giant, ADP releases their monthly jobs report on Wednesday, before the all-important job reports issued by the Department of Labor on first Friday of each month.

Expectations for this Friday's report were about 140,000. This morning, ADP estimated 297,000 jobs were created in December. Expectations for Friday's report are now rising rapidly.

In fairness, ADP has made some wildly wrong estimates in the past, and December is always a little difficult to estimate due to the holiday hiring and firing.

Still, this is awfully good news in a jobless recovery. (For the first time in three years, even the construction industry didn't lose jobs.) There is no question the economy is in recovery, albeit a slow one. A few more reports like this may speed it up. Tomorrow is the weekly unemployment claims, which can be volatile. Expectations are that there were 409 thousand initial claims. Keep your fingers crossed . . . and wait until the all-important Friday report.

Tuesday, January 4, 2011

Small Wonder

Yesterday, the ISM Index (Institute for Supply Management) came in stronger than expected. In other words, manufacturing is continuing to improve, four months in a row. In addition, orders are growing faster than inventories, suggesting even more future growth in manufacturing.

Also, it was announced that occupied office space increased for the first time in three years, signaling better health in commercial real estate than expected.

A few years ago, we were desperate for "green shoots" of economic hope. Now, that is almost all we can see.

Plus, after extending the tax cut and other signs of bi-partisanship, there is some faint hope that Washington is not completely impotent. As a result, the Dow was up 93points yesterday, to a 28-month high. Can you still see the market lows of March of 2009 in your rearview mirrow?

But, don't forget we are still 16% below the market highs in 2007.

Monday, January 3, 2011

Encore . . . PLEASE!

2010 was kind to investors. The Dow was up 11%, while China was down 16%. Commodities like gold, cotton, and copper did great, driven partly by the weakening dollar and partly from the incipient inflation. (The stocks of smaller companies did the best, up 26% . . . so much for that reverential regard of "Blue Chips" . . .)

Of course, it is fair to note that most of the overall market's gain came in the fourth quarter, giving us lots of momentum for 2011.

Most market strategists are predicting another good year in the market. I agree, mostly. Most strategists think the second half of the year will be better than the first half. However, the market has gotten too far ahead of the economy again, just like it did last Spring. I expect a "swoon" or 4-6% decline in the market during the first half before resuming growth in the second half. Either way, it is a pretty rosy picture for this year. Another 2010 would be just fine!