Musings a Month Later

Thirty days since the last minor retreat and stocks have again resumed their upward trend. What's most interesting is the real bullish commentary that has started to become consensus for Q4 and 2011 US growth. 2011 S&P projections range from 1350 all the way up to 1550! A few thoughts to keep in mind along the way and during what should continue to be a positive trend:

(1) Easy money from the Fed, increased corporate/consumer confidence and moderate economic growth are the things bubbles are made of. But even so - why not enjoy the reinflating of the bubble while its occuring! Sure, I would never try to catch a falling knife and perfectly time a market, but it appears that Congress and the Fed are on the path of keeping taxes low, not yet restricting spending, keeping interest rates low and easy money flowing.

The consequences will surely be high inflation, a weak dollar and high interest rates - but not for awhile.

(2) Sovereign debt issues continued to be handled with enough caution that markets aren't freaking out. Spanish yields are increasing and frustrating rates after bond vigilanties have worked through Greece and Ireland, but each country gets reassured by IMF and EU emergency fund support and the concerns have remained relatively contained.

Eventually, all of the PIIGS and even the US will be forced to address their sovereign debt issues - but not for awhile.

(3) Housing starts remain very depressed and foreclosures have continued to be managable, relatively speaking. Add it up and you have a more stable housing market that can slowly....slllllowly work through all this excess inventory.

Plus, real estate is local - so if you're not in Florida, Nevada or California, you may feel quite positive about housing over the next 3-5 years.

(4) Unemployment is moderating and coming down. Technically, the % number will remain high or rise, but the true number - the "underemployment number" - is coming down as companies are slightly hiring, government stops laying people off due to budget cuts and part-time workers become full time employees.

It remains that the US may need to adjust to a higher level of long term unemployment. That provides a drain on the economy in the form of aid and less consumer spending. But that impact is less noticed for the time being - so why not continue the trend of not worrying about it right now.

Overall -- the current environment is as "pro-growth" as it gets. When austerity, bond vigilanties and inflation hit, there will be new concerns - but all things considered, those don't appear on the radar just yet - and if we can get the economy growing fast enough now, we may have some adequate tools to fight those battles in a responsible way later.