The Yen and Dow 12,000

Well friends we are on our way to 12,000 and perhaps 11,500 for the DJIA. I see a good year long bear market coming on. First to take note of is the unwinding of the yen carry trade, notice the Yen's appreciation against the dollar from 122 Yen/$ to 113 Yen/$. Unemployment has creeped up to 4.6% and should rise as the US economy continues to be weighed down by the fall out of the sub prime fall out. While the immediate market turmoil is more of a result of the lack of liquidity in CDO's and CLO's the more important long term note is that it speaks to the slowing of the US consumer. Warnings from Walmart and Home Depot should give us a fairly good clue as to where we are headed in the coming months. And for those of you who think the world economy can withstand a slowing US economy and still keeping on chugging I remind you that we are the world's primary end market, and as our dollar weakens against the Euro, the Pound and the Yen (as it must with the level of deficits but fiscal and trade that we routinely run)coupled with a Fed that will have to cut rates within the next six months, our purchasing power will further erode and conjunction with lower demand and hence the beginning of a global slowdown. My advice keep your money in cash or money markets for the next few months, let stock drift down, then when everyone is saying the only place to stow your money is in large and mega cap stocks, buy as many shares of IWM as possible and just sit back and wait for the fun to start.