With all the money that has been pumped into the system and still is being pumped in, eventually there will be a nice rise in EPS when the velocity picks up.

@ George, it’s true that consumer spending could go up because it has been depressed for about a year, but when you realize that overall market levels are currently at pre-crash levels even without the consumer spending and overall economic activity to back it up, you kind of have to wonder what the heck is going on and who is going to keep buying equities under this scenario.

Private equity looks to be trying to cash in on a lot of their positions right about now, which is certainly not a bullish sign.

I don’t have the answers either but those are some of my thoughts.

I wrote two long posts on the stock market that you may find interesting. I was wrong on September but am willing to bet a nice steak dinner (cooked on my backyard grill) that the market will be lower in a year than it is now.

http://www.askthewealthsquad.com/blog/stock-market-prediction-year-2009/

http://www.askthewealthsquad.com/blog/why-you-should-get-out-of-the-stock-market-now/

Leveraged muni bond funds may not be a bad idea to invest in. I have been in and out of BFK over the past couple of years. Pays a nice tax free yield. They have others that are specific for states with high tax as well.

I have too few years left on my mortgage to make refinancing economically feasible even though my interest rate is 6.625%. Since I’m at the 15% marginal income tax rate (in a state with no state income tax), that’s an effective mortgage interest rate of 5.63%. (I’m pretty sure that my property taxes plus charitable contributions now exceed the standard deduction. My state has high property taxes.)

Of course that means I can’t really get at that money for 3 years. Another idea is to use the money to make renovations earlier (at possibly still recession/panic prices).

On the other hand, prognosticators have said that unemployment is expected to decrease in the next quarter, thus if it does not, then the market won’t be very happy. My own opinion is that it will not decrease since 1st quarter is traditionally not a hiring time.

Second quarter is as soon as I foresee an uptick in employment and, if that happens, the market will respond very favorably in March as “people on the inside” get to see their own company’s actions and forecasts regarding new hires.

HSpencer: I, personally, do not buy bonds except when Fed-directed interest rates are sky-high. Bonds are “cheapest” when interest rates are very high; they become fully valued when interest rates approach zero. Since interest rates are at historic lows, the value of the bonds cannot but decrease. Short-term bonds (maturing before the Fed raises interest rates again) may be a different story. This is an American perspective; substitute your central bank of choice.

As an inflation hedge, I prefer timber; I own stock in PCL (Plum Creek Timber). Plum Creek sells lumber, mineral rights, and usage rights (power lines and wind turbines) associated with its land. It also has an attractive dividend.

Dividend Growth Investor: I agree; there’s an opportunity cost associated with not owning stocks. I also hope the market drops from here, though the dip may be more shallow than March 09; the people who are kicking themselves for not buying JNJ at $45 (me) will pile in.

Fixed income delivers lower yields than most high quality stocks, even after the run up in March. Gold doesn’t deliver any yield at all..

Of course when stocks are moving up, it feels great to own them.. When they were at awfuly low valuations in early 2009 noone believed in stocks. I am finding few attractively valued companies now.. It’s mainly been the same stocks being undervalued for about 2-3 months now. If I keep adding to those same positions I would be exposing myself to a high degree of risk….
I really hope the market goes down 20% from here