http://www.wallstreetoasis.com/blog/dent-major-crash-coming-for-stocks
Have a look at this video. He said that this time, commodities will peak first, probably around May or June 2011, before stocks peak later in 2011.
This is entirely possible. QE is a poisonous potion. Earnings growth is more important. However, according to Dent, baby boomers starting to retire means less spending and more savings. The world could plunge into a recession.
My comment is: can the BRIC's rising consumer spending surplant the US' shrinkage? The answer is no. But infrastructure spending could replace some of the loss in US consumer splurging. Infrastructure spending spurs commodity demand.
Then there's China's property bubble, its shadow banking system which no one knows how much exposure to property the banks really have. China needs around 4.8m low cost housing per year. It's urbanisation rate is frightening. Just a decade ago, 36% of China's population lives in rural areas. This year, it is 49.5%. A decade later, it could be 60% and in 2030, 70%. There's ever more energy needs, housing needs, retail spending. But if home prices in the luxury end even drop by 30%, banks could be in trouble because they could have lent some provincial governments almost 100% financing. I'm not sure how much of it goes to these governments, but I figure it could be 30%. I'm not worried about mortgages for private individuals because the LTV is close to 50-60% unlike the US' 100%. Also, China doesn't securitise their mortgages.
My take is there's still a year left in this rally. I may be wrong. But I'll start diversifying in the second half of 2011 for my clients.
