Stock Market -- 2013

The US starts the year with ample resources of physical capacity, labor and financial
capital. The country is in the midst of the most powerful liquidity cycle since the 1930s
which would normally assure both an advancing economy and stock market. Since the
inflation rate has been tame in the recovery environment, the stock market should be
trading at an elevated p/e ratio, and with $100 per share earning power, the SP 500
should be trading in a range of 1650 - 1700 and not the low 1480s.

But there are significant drag factors. The Great Recession, now more than 3 years past,
has left the private sector with a shared case of post traumatic stress syndrome. Consumers
have been spending, but have also worked to reduce debt exposure. Bankers, who threw
money at people over the 2004 - 2007 period, have just begun to slide out from hiding
under their desks and do some lending. Business as a group has been accumulating cash at
almost no return, and has been maintaining a salary policy which enriches the top guys at
firms and impoverishes the rank and file through reduced real wages for over a decade.
Even the Fed, which has greatly expanded its balance sheet as it should have during the
recovery, has instituted temporary bouts of liquidity shrinkage which have introduced
volatility into the economy and the markets and which have undermined one of the most
precious commodities in hard times -- confidence. Official Washington is meanwhile
engaged in a center vs right battle over raising taxes and cutting spending when it should
be looking at how to grow the US economy and to define its role in positioning the US
to perform well in a changing global economy. Austerity measures are for boom times,
not for times when folks are down on their luck, which they still surely are.

So, when I look at the stock market's potential for this year and next, I see strong positive
forces arrayed against large batteries of scaredy cats, corporate piggy dudes and a nation's
capital that is mired in doubts (the Fed) and political squabbles based on incorrect
perspective and destructive impulses.

Keep up your courage chairman Bernanke and maybe we can snatch victory from the jaws
of defeat.