News that the Chinese government is going to have some stimulus means squat to me. The only stimulus that matters is the big amounts thrown around by the US Treasury. At some point they are going to have to print money. That is ultimately what is going to keep asset prices like equities high. Here are the 3 D's in case you missed the 1929 lesson:
1. Delay monetary tightening and poor on more stimulus and tax cuts
2. Deny responsibility - blame business for selfish greed
We are here!
3. Diminish the USD value by printing money
3. Depression - all the time decrying this as an unprecedented event. Really?
I would suggest to you that equity asset prices are about priced at the right level for the times, though property still has a long way to fall. For this reason equities are going to be trading sideways until we see a bottom in household assets because no one is going to be doing much lending until then. I give it 4 years to absorb the property in the US. It will take time for banks to wipe their non-performing loans clean, and there will be inflation in the interim which will bring others undone as well. The inflationary phase has yet to start.
Andrew Sheldon www.sheldonthinks.com