Sunday, October 21, 2007
I still don't have a terribly clear picture other than we are doing some top building. (My big problem is that the rally off the August 16th low of 12,518 looks to be a three waves. So we are still in a correction which will end and then on to new highs.) What this means is that the high might not be in but it is getting close. IOW, as long as we stay above Dow 12,000 then you can safely bet that stocks will have their election year rally. On that note, here is some data which should scare any economist worth his salt. Consumer debt problems are spreading beyond mortgage defaults.
“What started out merely as a subprime problem has expanded more broadly in the mortgage space and problems are getting worse at a faster pace than many had expected,” said Michael Mayo, Deutsche Bank analyst.
“On top of this, there is an uptick in auto loan problems, which may or may not be seasonal, and there is more body language from the banks that the state of the consumer was somewhat less strong [than thought].”
If the credit crunch is not contained and consumer spending suffers then this slow moving recession might be worse than anyone believes.