Bill Fleckenstein again discussed the risks embedded in the current price level fo the stock market. He wrote:
"However, today there are many clouds. In no particular order:
- Jobs are still difficult to come by as the bubble's aftermath makes a self-sustaining recovery less likely.
- The economy’s weakness has translated to empty coffers for many state and local municipalities.
- We recently saw personal bankruptcies hit a record.
- The dollar has lost more value in the last two years than it did in 1986 or 1987. This year, in fact, it has lost more than it did in 1987, even after the crash. This matters, because as a country, we are a net debtor to the rest of the world.
- Domestic debt has piled up to the tune of $35 trillion -- the highest ever, at 3.5 times GDP.
- Likewise, we have bubblelike conditions in housing. The risk there is not so much in prices themselves but in the leverage folks have assumed in trying to live beyond their means, as they have tried to deal with the aftermath of the previously mentioned bubble.
- Further, we have learned that much of corporate America is not to be trusted, nor is Wall Street, and we are now learning about new problems with mutual funds. On top of that, it turns out that maybe the Securities and Exchange Commission doesn't have a staff big enough to police everything."
I concur. A major correction is long overdue and when it comes sometime in the next two years it will be super nasty.