Here is part 1 of the Van Tharp news letter with a interesting...

Here is part 1 of the Van Tharp news letter with a interesting explanation of the current scenario.

Part I: Van's Commentary?The Big Picture

I read Richard Russell?s comments on the market with some regularity, simply because he?s been in the business longer than anyone else. He?s been writing a market commentary for 56 years. This is what he had to say recently:

?My opinion is that the Bernanke Fed is becoming progressively more uncomfortable with the way the economy is going, and they are getting ready to pull out their "big anti-deflationary guns" in another attempt to pre-empt deflation. The anti-deflation "guns" that the Fed manages are zero short rates, buying longer-term bonds and speeding up the money "printing presses." I believe the stock and bond markets already sense all of the above. Thus the stock market is dancing to the money printing tunes, and the Treasury bonds are backing off. The dollar has been weak as it senses the coming avalanche of new dollars. Gold is still reacting to the late deflationary forces.?

As long as new money is being printed for the banks, and banks refuse to lend (see M1 multiplier below), then some of the money is going to flow into the stock market and we probably won?t see big declines. The 2008-09 big declines occurred as derivatives became worthless and everyone had to sell anything liquid to get cash. That could still happen, but not right now.