Although advances in the Dow and S&P may seem positive, are bulls really just marching into a slaughter head on?
Chris Thornberg of Beacon Economics sure thinks so.
He believes the state of the economy is far too precarious to support the market at its current levels.
In a presentation available on BusinessInsider.com, Thornberg says there are just too many negative catalysts lurking right now. They include:
- high unemployment
- anemic housing market
- commercial real estate woes
- weak consumer
At any given moment, one of these potential problems could explode and send stocks into a spiral lower.
Thornberg is particularly concerned about that last one - the weak consumer. And he joined us on Fast Money to explain.
"We all know about the credit boom and credit bust... but I'm talking about the other part of the bubble, consumer spending and consumer savings," he says.
Very low tax rates have kept the consumer afloat, according to Thornberg. "Over the last 18 months Americans saw the greatest tax cut in US history. In Q4 of last year, taxes were 8.8% of total income. We've never seen taxes that low."
But that's about to change. "Over the next two years taxes will have to go back up," he says, to offset the blossoming debt.
"That will leave Americans at a deficit and they'll have to pull back on spending."
The market however is not factoring it in. According to Thornberg the bulls are wearing blinders and “it goes on until (they're) slapped on the side of the head by reality.”
So when does that happen?
”I think that comes next year,” replies Thornberg. "At some point in time consumers will pull back, we haven't solved this part of the problem."
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Trader disclosure: On March 17th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman's Firm Is Short (SPY), (IWM), (MDY), (IJR), (SPY), (USO); Finerman's Firm Owns (IYR) Puts; Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm And Finerman Own (GOOG); Finerman's Firm And Finerman Own (JPM); Finerman's Firm And Finerman Own (WFC) Preferred; Finerman's Firm Owns (TJX); Seymour Owns (AAPL), (BAC), (BX), (F), (GE), (TSO), (XOM), (SSL); Najarian Owns (AA) Calls; Najarian Owns (BAC) Call Spread; Najarian Owns (C); Najarian Owns (F) Calls; Najarian Owns (GE) Calls; Najarian Owns (TSO) Calls; Najarian Owns (YHOO) Call Spread; Terranova Owns (QCOM) April Calls; Terranova Owns (TER); Terranova Is Short (AMR); Terranova Is Short (UAUA); Terranova Is Short (CAL); Terranova Is Long Dec. 2010 Crude Oil Futures; Edwards Owns (AAPL) For Clients; Edwards Owns (BAC) For Clients; Edwards Owns (CVX) For Clients; Edwards Owns (GS) For Clients; Edwards Owns (GE) For Clients; Edwards Owns (JPM) For Clients; Edwards Owns (MSFT) For Clients; Edwards Owns (NKE) For Clients; Edwards Owns (PG) For Clients; Edwards Owns (QQQQ) For Clients; Edwards Owns (SPY) For Clients; Edwards Owns (SNE) For Clients; Edwards Owns (WFC) For Clients; Edwards Owns (XOM) For Clients
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