The bears vs the bulls

After some research, I think now almost a year late (which caused me money!), my thinking of a bear market is near us. Here is the bear market case vs the bull market case.

Bear market case:

1. Credit crunch is spreading into real economy. I thought the market would take it seriously in March, and then in July. But I was wrong! But the credit crunch issue originated from sub prime is not going away anytime soon.
2. The world economy is still coupled, not decoupled--as some argued: therefore the US slow down won't affect the stock market. I think China and most of developing countries are still depending on US. So a slowdown in US will drag down the world growth.
3. Inflation is going higher, you can find it in energy, food, and all over other industries (any one purchased airline tickets recently?). China is the main deflationary force in the world, but the inflation in China is growing more than 10% in food, and the cost for imported goods into US is growing. Therefore, I think in the long term, like from now up to 5 years, we'll see a real inflation that can't be contained any more.
4. Dollar is heading lower (Thanks Fed's cutting rates and our twin deficits), all these are inflationary forces, around the world. Lower dollar will force foreign money to flow out of US stock markets.
5. Fed's "balanced" argument is fundamentally flawed. They said the inflation pressure and the slowing growth balanced each other out. The argument is saying, if we have two bad news, then we have good news. And most people totally discount another opposite possibility: higher inflation and slower growth, even a recession.
6. Over the history of economic cycles, central governments and central banks can delay a recession, but can't achieve real soft landing. If the soft landing is achieved, it's not due to policy, it's due to higher productivity and new economic activities originated from new technology. Therefore, we should not rely on Fed's policy to think the stock market will push higher.
7. Even from trading perspective, we didn't have the usually rally from Thanksgiving to Christmas (now still early, I don't know if we'll have a late rally soon), but the fact that Fed started cutting, and market had not performed very well, telling me the 5 year of bull market is near over.
8. Overall bullish tone all over the world in the last two years. If you check all the markets around the world, we had a great bull market in Asia (China), and very extended rally in US (more than 5 years). The bulls are tired, to say the least.
9. Global warming will cost us big time! More and more governments and people realize that we need to deal with this problem NOW! and there will be a huge price tag, this won't be good for energy price, food price in the short term. So I think within the next 20 to 50 years, mankind will pay a heavy price for our mistake! Even though in the long run, 50 to 100 years, dealing with the problem now will save us big time in the future(100 years away).
10. Any hot spots around the world will have negative impacts to the stock market. For example, Taiwan's president ignored both China and US, continued to push his own agenda, if this goes out of control, we'll have a global crisis if China invades Taiwan. Taiwan's president hijacked the whole island and thought China won't do before Olympics, I think that's playing fire. Even though, I think it will play out peacefully, but there will be lot of stress and scary moments, and market won't like that.
11. Middle east, Iraq and Iran. Even though we have a relative calm period recently, the long term perspective is not good, unless miracle happens.

The bull market case:

1. New technology greatly improves productivity around the world, the Internet and mobile phone are two examples. And new technology will continue to emerge to make our life better. Bio tech is one area that I think will have the next break through, even though this has been said for the last 10 years!
2. The "rich" developing countries (China, middle east oil countries) have money to invest in US. Even though the lower dollar will force them to buy hard assets (oil, metals, mining) rather than stock markets.
3. Even though the decoupled theory is wrong at this point, there is evidence that we're decoupling now, 10 years ago, a crisis like this in US will cause world stock market to crash, today, the strength of China, Euro Zone and other countries helped world absorb the negative waves.
4. China's Olympics in 2008, it forced China to absorb lot of bad stuff around the world, continues to keep inflation in check and tolerates Taiwan's Independence push! As a matter of fact, Chinese stock markets and housing markets already show some weakness, smart people will exit before the it crashes, so don't wait the Olympic is over to sell your shares, it's wise to keep the profit than to catch the last push higher.

All things considered, I think the correct investment idea right now is following:

1. Keep enough cash.
2. Buy ETFs link to hard assets (against inflation), like PM, energy and agriculture.
3. Buy ETFs benefit from the falling of the dollar.
4. Buy ETFs benefit from new technology, and the awareness of global warming.