2006 Guesses

...Okay I'll weigh in with my two cents, since everybody else does and nobody knows what's going to happen anyway. It's just for fun.
...I think it is going to be a rough ride for the markets next year. I suspect that all three major averages will be trading lower at this time next year than they are now. If you've read the past entries in this blog, some of my reasons will be familiar: debt, debt and more debt, both consumer and government; budget deficits; trade deficits; elected officials who are more concerned with staying in office than they are in fixing what ails us; the increased possibility of foreign nations, who have been paying for our profligacy, cutting back on their willingness to take our dollar, something that even Mr. Greenspan has admitted is a possibility; and then there's other possibilities in this modern world we live in that I don't even want to consider, that could hurt the markets severely.
...Using trailing PE ratios, the market is overvalued, and averages tend to revert to the mean over a period of time. I don't subscribe to the modern theory of using future PEs as if they are fact. It puts me into position of trusting those sell side brokerage house analysts. How often are they right? Also, we are going into the 2nd year of the Presidential cycle. It is historically the weakest of the four years, from what I hear. I have read that most of the gains in the second year of the cycle come in the last quarter of the year. The first nine months are often rough.
...Most folks expect the Fed to stop tightening at some point this year. Don't know if they will or not. But I read recently on John Hussman's site (can't find the article right now), interesting results that followed the last in a series of Fed tightenings. The market doesn't always go straight up like most folks expect. In fact, Mr. Hussman found that when the PE is above average, which it is now, the market can easily go down. I haven't sensed much genuine buying enthusiasm in the late year rally we just had, and the market internals that I look at seem to be weakening.
...And you may think that our fine representative in CONgress rushed the new bankruptcy laws through last year for the benefit of common folk, but I don't.
...I'm looking for folks to start cutting back on the extra spending, and getting concerned about how they are going to pay for those heating bills, etc. The economy needs the excess spending, and that may start slowing. Have you ever noticed about how the PTB have set up the system in the last several years to penalize savers? For example, if you have a savings account in a bank, you are getting an interest rate below the rate of inflation. And then to add insult to injury, you pay tax on the less-than-inflation rate of return you did earn!
...Last but certainly not least, I think that we have entered the last days before the return of Jesus Christ. I go into that more on my other blogs, but thought I'd mention it here because I think we have entered a point of time different from any other in the history of our nation. There have always been folks in this country who have been against God, and there always will be, but now for the first time we are saying officially that we are not a nation under God. And in so doing, I believe we are setting ourselves up for judgments, some of which may have already started in the recent past. So, there it is. I have more to say about those kinds of things in my other blogs. I try to keep this one market related as much as possible, but I do think that our decisions as a nation are going to have a major effect on the markets in the days and years to come. I pray the Lord's continued mercy on our nation.