We have seen some statistically significant results from very wise stock market pundits where anyone would be foolish not to be cognizant of the results. These results are important, but not nearly as important as what is taking place in the macro picture with the accumulation and/or liquidation of U.S. debt both public and private. It is our opinion that the accumulation of debt (usually accompanied by inflation) and the liquidation of debt (usually accompanied by deflation) are the most important statistics we should monitor for the direction of the economy and ultimately the stock market.
We believe the private debt decline that has already started will continue, and be led by the consumers who are reigning in their spending habits, saving more, and paying off (or defaulting on) their enormous debt. Although that might seem that deleveraging would be beneficial for our economy, we can assure you that from the present debt levels there will be no “orderly” deleveraging, and consumer demand will contract sharply.