Man in the Mirror

I go away for a week and come back to a broken technical support level (1040, which proved to be a ceiling today and pushed the market back down) and revised GDP projections by economists, GS, JPM, and others for the US, Eurozone and China. It's a calamity. But you know what its NOT?

A recession. It's not a double dip and its not going there. Does that mean the market should stop falling? Not necessarily. What if the market over-exaggerated when it hit 666, but then equally over-exaggerated its 80% rise back up to 1215? The proper level could be anywhere in the middle really. 1040? 950? 875? 666 even? All could be reasonable valuations I think. And don't tell me stock p/e and valuations are cheap right now compared to history because I just don't think history applies here unless you're talking 1929-1938 type history. Valuations may need to be rethought if average US growth is going to be 2% and Euro is going to flirt with sub 1% growth.

I truly believe that the economy is just revealing what we already knew - the recovery is muted by too much public debt, consumer debt, and continued weakness in housing (which is guaranteed to double dip and already has started). Stimulus works and its kept us afloat but its not a long term solution and it can't promise long term growth. Meanwhile, it does produce long term consequences and demands long term austerity measures mind you. Look at almost every econ report (minus housing) and you'll see that growth is slowing... but its still growth and its still expansionary, or at least status quo. So while minimal growth isn't good, its not a market collapse either. And that is what we have to accept when we look in the mirror for the near term...2010 and 2011. Muted market returns. Random Eurozone banking scares. An inevitable Chinese property bubble in a year. Essentialy, a new (and deserved) normal.