OT: CNBC - US economic recovery finally taking hold

I think the stock market might continue going up through 2015 and then take a big dive late in the year. If it coincides with a Republican victory it would all make sense from a historical perspective. Easy money over, get back to reality. Of course if Hillary got elected, it would make sense too, unsustainable debt would either lead eventually to high inflation or big spending cuts. I would say gas and food prices going from $1 something a gallon up to over $4 something a gallon and food prices jumping etc were all signs of inflation taking off in spite of whatever the official numbers are reported as.

Up to a point, I believe the people prefer inflation over spending cuts. I say that because Obama was elected twice. I do wonder what the breaking point is. $8 a gallon gas? and triple today's food prices I think would exceed the breaking point. Some say $4 a gallon gas but that was a few years ago. With inflation that number might be 4.50. If our GDP grows at 7% annually, no spending cuts will be needed. It will be party time.

@shark: I'm thinking 5.5-6.5% GDP growth next year.

I'm curious about the models you cite that suggest we need 7% growth. Do they take into account that with improving medicine and the recent push toward healthier lifestyles people will be able to work productively later in life?

I guess my view is the exact opposite of what most people on TUSCL believe. I believe our economy is now on solid footing and ready to rocket. I am more concerned with the stock market, however. (Meanwhile the TUSCL view is that economy weak and the market has just rallied because it doesn't realize this.) Not all sectors in the market and long term people certainly have nothing to worry about, but, short term, I am actually treading very cautiously at the moment.

The reason for my market concerns are that the reality of economic boom is becoming pretty obvious now. Even long term skeptics are converting. Finding a bear is hard these days, although there are still some out there. The market prefers to rip when everyone is skeptical. Market skepticism exists now but is becoming scarcer these days. :-)

My other concern is how low treasury yields are and how the market is positioning massively short them and how CNBC is broadcasting that (the media never broadcasts a move in the correct direction before hand, they only realize what happened once it is 90-95% complete). I've discussed this idea with some colleagues at work and some on TUSCL behind the scenes, but maybe the bond market is not wrong and the lower energy prices are here to stay and what is behind it. Lower energy prices could mean lower prices of everything across the board. Which would explain the mysterious rally in bonds all these years.

That's just a concern of mine though. So far, in equities, I don't see evidence large funds are concerned - but their time frame is very far out so they might be thinking a correction will be short term enough that they don't care. OTOH, they aren't accumulating like mad right now either. They are being very judicious about it.

Also the Fed is clearly expecting the dips in energy to be transitory and not altering its language about rate hikes much, other than to bring them in if anything.

So I think that at some point soon there is going to be a significant correction in the markets on the theme of deflation. It could happen any day but will probably be on some very good economic news which wins more skeptics over. No evidence of it in equities yet, but something I keep in mind.

I would be quite surprised if such a correction didn't happen until the end of 2015 but that's possible. Right now my favorite play is one that would benefit either on rising rates or a backing off in Fed determination to start normalizing as long as their is continued volatility in currencies. If and when we do get a significant correction it will be a great buying opportunity. And I think we will get it next year. Not going to give you an exact date right now, but, hopefully, I'll know it when I see it. (Opinion here on TUSCL - but doing the contra will also be helpful in determining this.)

If there is a boom, Pres. Obama will never get the credit. If there is a bust, he will get the blame.

Keep saying it Dougster, keeping saying it as many times as you can, and the bubble might last a bit longer. We are almost to 2015.

SJG