Look at the following charts. The amount of cash sitting and waiting for a home is staggering. When it decides to flow into equities, the upside could be like nothing we have ever seen.
What makes me think that? Well, the downside we have just seen is a once in a generation event (at least history tells us these are events that happen about every 90-100 years). We also have not seen cash levels this high in a generation.
Now when does this happen? Hell, I don't know and anyone who tells you they do is full of it. But, what this does tell us is that the market is becoming a coiled spring. It is pulled back about as far as it can go and the cash buildup is the building tension.
The billion dollar question is how long can it stay pulled tight before it snaps back (the big rally)? A month, 6 months, a year? If I had to guess (by the way, anyone doing something like this is guessing), I would say at least 6 months but less than a year... again, just a guess, but we are getting to levels in certain equities that imply obliteration. That just is not going to happen to whole swaths of the economy...
Now, do not get me wrong. I am not saying that everything is great and the economy is in perfect shape. Far from it -- and it will be so for years. What I am saying is equities are being priced as if -6% GDP is the given for the whole year and into next. Even if we go to just 0% growth in, say, Q3 or Q4, that is a huge improvement and will call for a recalculation of equities, fast.
We are at the point where the news flow is bad every day. A couple of good weeks for unemployment, GDP, retails sales etc. could cause the negativity to turn. Caveat: Ignore any good news from housing. We need months in a row of good news before anything here matters. The month to month variations are so extreme right now in part because of new constant monthly government "rescue" programs that until there is a clear trend in housing, a monthly number has ZERO meaning.
It may not be Mardi Gras in the market for a while but it certainly will not be a funeral for eternity either.