Tide Changed; Don't Get Swept Under

The market's direction is changing. The rally that began earlier this Spring has risen to high levels and have recently become unstable. Traders and investors coming back from summer vacation are once again smelling blood. These are the same folks who brought Mr. Market to his knees and subsequently allowed him to get up a little. Dumb money then wanted him to learn to walk again. He took his first step and then they thought he was in running shape. LOL.

There currently are too many traditional and non-traditional headwinds to have a sustainable economic recovery. It may be true that the financial crisis is subsiding but it is not true that the economic crisis is as well. Not at all. For a real economic recovery we will need growth in three major areas: income, wealth, and credit. We have none of these yet. My best guess right now is that it'll be another 2-3 years before we see any meaningful growth in these categories.

On top of that, what's really bothering me as of late is the upcoming tax regime changes. Of course, I don't know what type of changes will go thru but from all the talks so far we know that high earners will be affected the most. Contrary to popular belief, these folks are not the Bill Gates, Warren Buffett types. No, they are the multitude of small business owners that have put their entrepreneurial hands at work and have put in sweat and blood to grow their ventures to fruition. These are the same folks who offer employment opportunities across America and provide the backbone to every neighborhood. A hit to them is a hit to the Real America.

We'll also have increasing consumption taxes across the board. State and municipalities are equally struggling to acquire funds. We've already seen "bottled water" taxes, "major tourist area" taxes, "candy" taxes, "liquor" taxes, "fast food" taxes...the creativity is boundless. Oh, and what about the "Internet" tax. Ask Amazon if they care.

Property taxes will be revalued...downwards. Governments will be losing another source of revenue stream that's been increasing yearly over the past couple of decades. Anyway, the tax mess is just getting started. Some may say that it's always been a mess, but I would contend that the messy implications are far greater today given the multi-faceted bubble bursts.

Stay awake for this.