This was my forecast 6 months ago. Although the market rallied from the lows it fell short of the 1400 level I was anticipating. However, I think the rally will continue in 2012 but not because the US economy is improving... far from it. There will be the odd piece of ‘positive’ data here and there but they belie the fundamental problems that politicians have failed to correct and whose policies continue to undermine any real chance of recovery. This is US Presidential election year (Vote RON PAUL!!) so IMO there will be a herculean effort to fool the public into believing everything is O.K and the market will react accordingly. I’ve seen many people in this forum buy into the ‘positive’ NEWS so if allegedly intelligent operators can be so easily fooled by politicians then so can the uninformed public.
IMO: The USA is in a great depression and all the weak economic data supports this, but the market has been propped up by the FED's cheap money or 'stimulus' which is now wearing off and also coming to an end. However, Osama Ben Bernanke will not let his Wall Street buddies down, nor will he allow the President to be embarrassed in front of his woman. This is the beauty of fiat money, it allows Politics to 'triumph' over economics...but only in the short run.
To answer the question, the downtrend in real terms will continue, but in nominal terms, the sky is the limit! In S&P500 terms, I would be mildly surprised if it broke below 1250, but by the year's end I think it will be closer to 1400. There is nothing I'm seeing (yet) which makes me think this market is being liquidated so I have been adding to my portfolio on these 'dips' but I am picking my stocks wisely and in a currency that is gaining strength against the $US and £UK.
If I have read the market correctly (and there is always a chance I haven't) I figure it will be higher by the end of the year. This doesn't mean it won't go down further first, but I think there will be more stimulus if it does, you can almost Bernank on it!
Lawrence Reed in his essay, "Great Myths of the Great Depression," argued that destructive government policies produced America's Great Depression. He set out to debunk what he called the 20th century's greatest myth: free markets caused the depression and government intervention brought about economic recovery.
Dr. Edwin Vieira, Jr., who has argued successfully in the Supreme Court and is the holder of four degrees from Harvard, discusses money, inflation, and a plan for an alternative, Constitutional currency for the United States.
Ron Paul, the gold standard in politics and economics, debates Paul Krugman.
Some Paul Krugman errors:
1) Barter – The IRS will NOT allow a simple barter exchange to take place. If you exchange gold for a good or service, the IRS treats the exchange as a sale ie/ You must inform the IRS or the price you originally paid for the gold and the value of the good or service exchanged and pay Capital gains tax on the difference.
2) Krugman claims an unmanaged economy is subject to extreme volatility and downturns – The Federal Reserve was created in 1913 and it presided over the crash of 1929 and the Great depression. Recently it presided over the dot.com bubble, the housing bubble and the Global financial crisis. The track record of the Federal Reserve since its creation is abysmal and hasn’t in any way eliminated volatility and downturns from the market, quite the opposite in fact.
It comes as no surprise that President François Hollande and President Obama are now best friends. There is an election coming up and Obama is desperate to win with his socialist policies and rhetoric. Expect more of it.
Nothing is more calculated to make a demagogue popular than a constantly reiterated demand for heavy taxes on the rich. Capital levies and high income taxes on the larger incomes are extraordinarily popular with the masses, who do not have to pay them.
-Ludwig von Mises