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Stocks headed lower as deficit reduction becomes the new mantra

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Uploaded by on Jan 22, 2010

Back in August I said that stocks would trade higher. My rationale at the time was that deficit spending would continue to support aggregate demand and incomes at least at some level and stocks were still cheap. The reverse is true now. There will be a policy shift toward deficit reduction (listen to Obama's State of the Union Speech on Jan 27) and that will kill the stock market rally and quite possibly, send the economy back into recession.

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