Where To From Here Uncle Iggy?

Gather 'round boys and girls and let Uncle Iggy tell you a tale...

There once was a thriving economy, booming in fact. For about a quarter century all was well. Sure there were a couple of hiccups here and there. After the turn of the century there was a downturn that worried many, but alas Americans bounced right back as usual. Another meteoric rise came and the stock market matched it's previous peak in 2007. What had gotten us to that point however is being proven to be smoke and mirrors. Banks (and individuals) over leveraged themselves by borrowing too much and expecting the good times to continue to roll forever.

We all know what happened beginning in late 2007 until March of 2009. Since that lowest of lows in March we've heard the term "green shoots" and other euphamisms to sound the alarm that the good times are coming back.

Folks, think... how can we get back to where we were if unemployment has almost doubled, there are 19 million empty houses out there and those that still have a job and a house are finally starting to pay off debt and actually add to savings?

Sure, America will claw it's way back... eventually. We're in for a few years of wild swings and overall flatness in the markets though. We saw a very serious low hit in March. We'll see a nice bounce, such as we've seen the past 2 months. An even more impressive bounce is even possible as hope springs eternal.

But... where to from here? There are two options. Up or down. Helpful huh?

Well we're due for a pullback. The question is how much? S&P at 887 right now after peaking at 930 a couple of weeks ago. 5% retracement so far. A pullback to the 800-830 range would actually be healthy for the markets and could stimulate another rally. S&P to 1100 (give or take 100 points) is an ultimate target for the current wave we're in.

But... only the market knows what it wants to do and it never tells us in advance.

I'm leaning towards my scenario above with about an 80% probability based my crystal ball guesstimate. The other 20% is clinging to the thought that we may get close to or exceed the lows we set in March (S&P 666) over the course of the next month or two..

My retirement is sitting and waiting. It's getting bored. It's angry that it missed out on a chunk of the recent rally but it's trying to be patient. It's also being cautious...

No matter what the short term does, new lows are coming. I can and will state that with total conviction. 2010 or 2011 will be very unpleasant.

A starting point of a list of things that will cause the next leg down:

1) Residential real estate (yes, it'll continue to decline in price)
2) Commercial real estate (just beginning to be a major issue)
3) City, county, state entities (tax revenues way down)
4) Unemployment, no quick turn around
5) Pension funds getting hammered, thereby affecting retirement
6) Banks far from healthy
7) Inflation... potentially massive inflation (in a couple of years)