2009 is now being called the turnaround of the “great recession.” For the sake of the world, I suppose this is better than the “Second Great Depression.” However, one must ask, what has really been changed?

Easy money was, and remains to be the cause of every boom and bust. Now, let’s examine the current scenario and see how it stacks up. It could be said that the $8000 first time home buyers tax credit is easy money. Then isn’t the recent $4500 cash for clunkers deal also easy money? What about the greatest coordinated global stimulus package the world has ever seen, isn’t this more easy money? Accompany this with the greatest bailout in world history of the “too big to fail” banks and you are left with an insurmountable amount of easy money – believe it or not, this is only the beginning. So, what has really changed? The answer is simple, absolutely nothing.  Aside from the feverish printing of further ill-considered, easy money dollars, foreclosures, delinquent mortgages, lack of savings by U.S. Citizens, and poor job creation will be around for the next 7-10 years.

2010 should behold one very similar trait to other zero years of a decade, and that is down. It is very possible to see a retest of the 2009 lows and possibly a move lower. This market is not going much further for years to come. Repeating what brought this economy to its current state will only perpetuate the current problems, and prolong a cure. Consider this, if an individual maxes out their credit lines, they cannot simply wipe their hands clean and obtain new lines in an effort to bail itself out. Well that is exactly what the U.S. Government and most other governments including China have done. Regardless of political standpoint, be it democrat or republican both are as guilty as the other. Stimulus plans have been taking place since the beginning of the George W. Bush administration in 2001 and have actually grown with the Obama administration in 2009. Has spending been cut? The answer is NO! Both parties have spent like drunken sailors back at port from a year at sea.

This market has rallied on a bombardment of money printing and liquidity being thrown into the system, it’s that simple. 2010 will undoubtedly be a reality check for the public. However, the odds stack up high in favor of the government printing and throwing more money at the problem. In fact, if Las Vegas put odds on this event occurring it would most likely be an even money bet right now. Currently, this can all be seen as an attempt to re-inflate this flat tire. The question remains, how many patches can someone put on a tire before they need a whole new wheel? Going forward the powers that be better hope the flat tire doesn’t cause the car (economy) to drive off a cliff, or hit a brick wall, where it is beyond repair.

Nicholas Santiago,
The Leader In Market Technical Guidance