Generals fighting the last war.

...... The saying in the military is that the generals are always fighting the last war... We saw that with Iraq this time, assuming that it would be just a few month pushover.

...... Economists say that "History doesn't' repeat itself, but it does Rhyme."

Even assuming the mistakes with the kurds, Dubja... and Cheney were even fighting that war, by assuming that if we supported iraq, the people would topple the regime, which they may have in 1990... not so much in 2003.

... But I digress...

the conversation with the Admirable Grudge... Who very much could be right, we could just pop up back to 2007 levels like we did after the 1990 recession.

This is a possibility, but I'm thinking not a probability.

I offer these things....

• 1990 was both a consumer lead, and Housing Recession... BUT greenspan and most economists..(who are usually wrong), and rick Santelli are talking a period of time that will be similar to the 1930's/1970's... What this would hint at is that the Recovery is going to come off like a foul ball.... Also instead of a 2 quarter recession... without the stimulus package we are probably looking at a 4 quarter recession... Giving us a slight pop in the middle... this gives some credence to people who have a near term(this and next month) target of 1430 or so.
• Brian Westbury, who draws 1970's parallels.... Using that model... Which he says.. the loose money of the 60's(fill in 2000's), lead to the inflation and the series of recessions of the 70's-83... so maybe we can say that this could "Rhyme" with the market pull back in the 1969-1971 period.... It may Rhyme.
• Crisis trade... The 1990 recession Crisis was the S&L, crisis... and what happens is we have a "Credit crunch" which leads to a recession.... after the crisis, the market Spikes because the crisis is over, and the theory is that things are fine.. Until 6 months or a year later we start losing jobs..... This happened but in August... And the weird thing is that it has happened AGAIN... which furthers the possibility that this new credit crunch, will create another "economic" slowdown in 6 months... think October November....
• I've been a believer in a pop into the 1450's for a long time... and still do... but maybe we pull back to 12200 or 12300 or 12000 or 11300. and then Bounce Back up..... All the high commodities prices do have an upward bias on the market, but a downward bias on the economy.... Same thing for inflation, Stocks with increased inflation have an upward bias, but a downward bias on the Economy... Think stagflation.
• Money..... We need it..... We need Credit. Ask.... Where are we going to get it. Imagine Europe and Asia as our former Bank... Why would they loan us money, after we have been defaulting on what we have already borrowed, at best we can hope for some "Reorganizing our Debt" and they won't foreclose... The question is... Where do we get the next line of Credit..... Americana's don't save... why would you when you get negative return on bonds, and savings.... so, we can; get Americans to save by increasing the Fed funds Rate, or increase the reserve ratio to 20/1, or just flat print money... or Helo drop.... This market goes nowhere till we find some new Cash.... maybe more regional banks, maybe more Credit Unions.

So, in a good Secular bear, Moving down 20% in the first move, then a 10% bounce... then another 20% drop.... roughly a 40% drop in the indexes... is... probable... maybe we drop the 15% we did, bounce 10%, then pull back to a Net 20%, then bounce 10 again... Then back down.

I'm wondering if the bounce from the stimulus package will be more muted.. since traders aren't Net Stupid, and know that it will give a small bounce to earnings... in Q3.

Let me just Qualify.... this is all Speculation.... these are just thoughts.... I don't Know.... I'm just throwing out a million possibilities.... I think the secret is to wade through all the posiblities, and look at what is happening and figure out what model it's following.....

Seems aparent that the "Stagflation" trade is "in the money" untill commodites get cheaper and/or the dollar gets stronger.