If you take out the financial sector, the stock market has recovered all of its losses - and then some.
You can HATE and gnash your TEETH... but I gotta take my hat of to a number of very unpopular fellows. Yea, their activities caused some negative consequences... but nothing like what we were looking at just 2 years ago.
The financial and political system has survived - and it almost didn't. From here on in it is all about the rate of change - even the end of the Oil age can be handled if it happens slowly enough.
That means that clothes will need to washed, teeth brushed, and the commodity bubble will have to be unwound (just look at the consumer staples sector - it is above its 2008 high and I think will lead the market higher). The end of resource constraints this is not - this is merely the "pause the refreshes", one that, I THINK, will provide the entry point for commodities that stocks gave back in 2009. The unwinding will likely take things down further in that space than you thought possible - do NOT try to catch a falling knife, me thinks.
Some things that have surprised me:
1. $125 Oil did not kill retail (forget WTI... it doesn't really exist... average world Oil prices are in the mid $120's).
2. Interest rates around the world did not take off (and I doubt they will).
3. Technology companies still command outrageous multiples.
4. Silver/Gold ratio as low as it is.
5. That the U.S. government could get away with its vast budget deficits for so long (there is NO INFLATION in housing or wages - what you are seeing in commodities is a mirage. A GOOD mirage if you are long, but a mirage non the less.
What I think it means:
A: Commodities futures contracts will need to be unwound. This will be the story of this decade.
B: High quality corporate bonds and Treasuries will do well to well enough.
C: High dividend sectors like consumer staples and utilities will do well to well enough.
D: Commodity equites are going to get murdered.
E: Real Estate will not be coming back anytime soon.
What we don't know: How Oil will be rationed amongst the industrialized powers. How the markets will react to the end of QE2.
What I think I am going to do: Buy the dips in consumer staples, utilities, and other big dividend names. Sell any rally in the commodity equities. Sell dips, too. Buy quality bonds, sell commercial real estate. Buy residential apartments and mobile home parks. Sell precious metals. Even Gold. There will be a better entry point.
It is all back to Oil. The housing crisis has happened. It is not going to get better, but not a whole lot worse for CREDIT reasons. That does not mean that an energy shock cannot make it much, much worse.
It is all about Oil. And unless there is another political crisis in a big oil exporter, my bet is Oil will come in with the rest of the commodity complex.
As always, I reserve the right to change my mind on a freaking dime.