Wednesday, January 17, 2007

The Permanent Income Hypothesis / henry to / safe haven

great charts. but fundamental different views on the interpretation.

super chart. aber ne komplett andere interpretation.

One of our premises for the continuation of the bull market in the United States and for the economy to reaccelerate early this year is our belief that the U.S. consumer is not close to being tapped out. The perma-bears would claim that much of the "mortgage equity withdrawal" over the last few years went directly into consumption - but as I have discussed many times before, a significant chunk of the MEW actually went towards paying off (higher-yielding) debt, not consumption. Another chunk of it went towards home improvements or starting businesses - both activities that could be classified as investments or capital spending (which is good for future economic growth). (capital spending.....really, the home improvements.? many of the new businesses are dependend on the mew and the housingbubble...?/wirklich? hausverschönerungen...wieviele dieser neuen geschäftsgründungen basieren auf einer weiter steigenden immoblase?)

The reduction in higher-yielding consumer debt is directly reflected in the consumer credit growth numbers over the last few years, as shown in the following chart:

wow! he views it bullish that with almost $2 trillion of mew in the years 2004-2006 the consumer credit growth(excluding real estate debt) slowed a little bit.... if this is his thesis for a strong consumer going forward and the continuation of the bull market....... good luck!
mal ehrlich. über 2 billion$ an mew in den jahren 2004-2006 und das konsumentenkreditwachtum (ohne immobilien) hat sich lediglich leicht abgeschwächt. das wird hier als zeichen für einen weiter starken us konsumenten und einen bullishen aktienmarkt gesehen. viel glück!
the following chart showing the ratio between U.S. money market assets (both retail and institutional) and the market capitalization of the S&P 500

The ratio between money market fund assets and the market cap of the S&P 500 is probably not a great timing indicator - but what it does show is the amount of "cushion" that we have in order to insure against a significant market decline. While this indicator is telling us that we are closer to the end of the bull market than the beginning of one, it is also telling us that we are not close to exhaustion just yet. Based on historical experience, this author will not be too concerned until this ratio hits a reading of 15% or below.
Assuming that the amount of money market funds remains the same going forward, the market cap of the S&P 500 has to rise a further 13% before we see such a ratio. Based on the above study, we will remain 100% long in our DJIA Timing System.
here is another view from minyanville " Margin Debt, Cash and Bull Market Peaks"

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