It’s been an interesting week so far and one that may very well herald a major turning point in the U.S. financial climate. Stocks got battered after failing to penetrate the cyclical bull market high, copper surged to a new 14-year high, gold had its largest one-day advance in some time. And flying well below the mainstream radar, the CRB Index of commodity prices broke out to a new bull market high, its highest in decades.

Fascinatingly enough, while the prices of just about everything continued to surge into the stratosphere, the dingbat mainstream financial press worked overtime to assure everyone that prices aren’t actually rising. The “tame” CPI report “edged up a TINY 0.1%” we’re told. Energy costs “went down significantly” (someone ought to tell $51 crude oil which apparently doesn’t read the CPI data). According to official reports, it was merely a “small increase” and inflation “remained very much under control.” Tame tame tame!

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In case you haven’t noticed, the stock market hasn’t done all that much this year. After a very promising late-2004 rally petered out right from the opening bell at the first crack of 2005, we’ve mostly been working our way back to even. It hasn’t exactly been an awe-inspiring market and if January is any indication, (some say it is), the rest of the year doesn’t promise to be much better.

We’ve talked ad-nauseum about the imbalances in the market and the U.S. economy. We’ve talked about the overpricing of stocks, the record deficits, the lack of savings, the credit bubble, the trade deficit. And yet despite all of our talking, the market obviously isn’t all that convinced of the potential threats. Does the market know better?

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With the stock market poised to extend its cyclical bull trend, we have to wonder: “Shall we buy the hype? Is the Big Bear over and a new secular bull market emerging?” As usual, the so-called experts are not much divided on this issue: Stocks have always been a “buy”, are a “buy” now and will always be a “buy.” Few, among them your editor, have the courage and remarkable foresight to stand above & beyond and issue a resounding and definitive “Ummmm, I don’t think so.”

Secular bull markets result from the happy marriage of sound economic conditions and mounting optimism that give birth to a self-reinforcing cycle of increasing growth and genuine value-appreciation in the asset markets. Often that happy marriage is the outcome of years of “belt-tightening”, sweeping away of excesses, consumers, business and government getting their financial houses in order.

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