The credit boom is still on schedule to collapse in early 2006, taking the economy and the stock market down with it. What's more, the stock market is starting to see that scenario as increasingly likely.
Many expected 2005 to be the year when the economy turned in a robust performance, finally putting the destabilizing factors of the past five years -- overpriced assets, erratic demand, whipsawing consumer confidence and a gaping trade deficit -- in the rearview mirror.
But for the economy to escape those things, it has to ditch its addiction to easy money in the very near future. And there is no sign of that happening as we approach the middle of this pivotal year. In fact, just the opposite has occurred. As hard as it may be to believe, nearly every key indicator shows that the dependence on credit has gotten markedly worse.
And the stock market is obtaining an increasing distaste for the credit bubble, even though it has helped shore it up since 2001. The lackluster performance of market indices -- the S&P 500 is down 4% so far -- needs to be explained.