There’s a rather deliberate effort to reengineer a bull market for housing, in an effort to fix the banking system’s balance sheet problem and to provide asset stability and a source of credit to the average consumer. (I could editorialize on the alternative that I would have preferred, but I’ll stick to being pragmatic.)

So I would say that housing deflation is highly unlikely over the medium term. Housing is already putting in a bottom in certain markets, and that bottom will take hold throughout most of the country over the next year or so. While skyrocketing prices aren’t in our near future, price stability is being created, and confidence and credit will create more demand in time.

Stocks are another matter. We may be entering a new phase in which recovery means lower GDP growth than what we’ve seen previously, as well as a higher structural unemployment rate. 2% growth and 6% unemployment may become the new normal, and if that occurs, earnings might reflect that in the form of lower growth rates.

I hear you. My guess is that the unemployment is a positive surprise(the pattern lately) and we continue to trade the channel:

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3186525&cmd=shows159825753&disp=P

Marc Faber doesn’t have a clue where the market is going next. He always hedges both ways. He is the same as everyone else.

The correlation to the dollar is clear, but the direction of the dollar is not.

I have been starting to think that if the unemployment report tomorrow surprises to the downside that it could send the stock market up sharply since it may send the dollar down. I assume the dollar weakness would be based on the assumption that the Fed would extend monetary easing. Both treasuries and stocks might rise. Usually they go in opposite directions. Something similar happened on the day of the Q2 GDP report. (But then the markets seemed confused, good headline number but horrible details.)

A stronger unemployment report might actually have the opposite effect.

Ben and his central banking buddies should stop printing money and just let the damn bubble deflate once and for all.

Those who took on debt they couldn’t afford and those who irresponsibly underwrote the loans should be the ones who suffer. Instead Ben and his friends are rewarding those responsible for the debt bubble and its bursting and in turn letting the fiscally responsible suffer.

US consumers are in no shape to borrow and spend like they used to due to high unemployment and close to record high consumer indebtedness. Which leaves everyone who has cash without any productive use for that cash. The interest rates are so low that the so called safe investments aren’t worthwhile anymore. And this leaves only the financial markets to gamble in and try to profit from.

Perhaps that’s what all these wild up and down rides in commodities and stock markets are all about. There is too much monetary liquidity in the system. And it’s sloshing around wildly from one market to another, instead of trickling down to consumers and employers and stimulating sustainable economic growth. That drain that goes to consumers is plugged up by too much debt. And no monetary liquidity can go to consumers until they pay off a substantial part of their debts and unplug the drain so to speak.

Hyperinflation can result if the common people all of a sudden lay their hands on a lot of free money. Which isn’t likely to happen. And in absence of that, wild, speculative, up and down rides in various financial markets probably will continue rather than outright inflation that permanently raises prices for some assets.

Asset prices cannot stay high for long, when these assets don’t produce much income for those who own them. In speculative trading, people buy assets in order to sell them at a higher price to someone else. And that’s what makes the speculative markets so unstable. There are no long-term investors to provide stability. Everybody is trading short-term using various technical analysis signals. Which leads to herd behavior. Because everybody uses the same signals to buy all at the same time. And every body uses the same signals to sell all at the same time.

This inflation scheme is for alliance of Corporate America, Wall street and government to rob wealth from public, when there is no more place to grow their greed. This game can be played over and over again until 1. there is no more wealth left 2. People rebel to overthrow the alliance. Otherwise, they can reflate 10 more times and dollar lost 95% value, guess what? Most American still have a job and feel so good because they live better than most African.

Oil and commodities crashed hard, emerging market stock markets took the biggest fall. But none of these hit real fundamentally low levels. In previous recessions, oil prices adjusted today’s prices using CPI were in the low 20s. Commodities were much lower. Either the weak dollar prevented (and will prevent) further decline or a correction in commodity prices has not yet fully played out. Demand is at multiyear lows and supply at multiyear highs.

I have recently read predictions for oil prices that range from $20 to $95 per barrel.

Last year everyone seemed convinced that oil would not decline below $80 a barrel for a long time. Now even with speculation and dollar hedging oil has struggled to get back above $70.

If the secular trend is credit deflation, won’t that ultimately counteract the current short-term trend to rising commodities prices and rising stock markets? But at the same time, with lots of slack in employment market and very low capacity utilization one would think that there would be little upward wage pressure and therefore consumer price inflation would be muted.