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[arbman]

I think once Obama is out, there will be a massive printing and stimulus campaign. All European defaults and problems will be also out in the next 6 months. The next Republican leadership will not mind the taxes to boost the national spending. Everyone knows the severity of the situation, but currently they must play the fiscal discipline game for political reasons. The split Congress could very well agree to work things out. But it won't happen in an election year.

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In that sense, it is highly likely that we are only making the secondary low over the 2009 bottom and the 2009 lows will not be cut even with a manufactured crisis in spring of 2012. For the maximum damage to the economy and election impact, the divided Congress must fight any stimulus over the next 6 months. It will have to be absolutely miserable, but the credit destruction is still slower than 2007-2009 period and I think the 2009 stock market lows will not be violated, I expect the low to be around 1000-1050.

So for now I will continue to short these rallies with impunity until spring of 2012 and I will be looking for the long term bottom in EARLY 2012. The momentum will play a lot about the exact timing since there used to be some indications for a bottom in 2013, but I give it now lower odds, perhaps an higher low. My primary perspective is that there should be a big rally beginning right after the elections and the market will anticipate and refuse to sell lower later in 2012. This should be the initial footing of the secular bull market, even though it won't be probably the secular bull itself.

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I expect that footing to match 2007 highs in SPX by 2014 and then an higher low down to SPX 1,340-1,370 around 2016 as the housing market will also bottom with an higher low. I expect the housing market to bottom in 2013-2014 later, but remain relatively flat until 2015-2016 due to the rising interest rates.

The secular bull should begin from there until 2030s. S&P 500 index should go to 5,600-5,900 by 2030-2035, this will be a slower growth than the previous century as the population growth will be also peaking and the resource problems are unlikely to end pressuring the profit growth permanently. However, I do expect many new technologies to utilize the resources more and more efficiently in the decade ahead and I think it will be the driver of the next bull market, we do not need to know about these yet though...