There is a lot of talk these days that the tough times are behind us, and good times are sure to come. After all, the Dow has breached the 10,000 mark and analyst are issuing rosy reports on all sorts of undervalued stocks. One analyst trumpeted that “there has never been a better time to buy equities.”
Note: I thought that analyst statement a bit bombastic, after all, surely there has been a better time to buy than now, like, say, right in the middle of a roaring bull market. But an analyst gets paid to pump stock and issue buys….not spread gloom and doom.
Anyway, I have been thinking about this run up in equities of late and wondering just exactly is the root cause of all this stock buying euphoria? I would also note that the volume on the run up has not always been overly impressive, and further, trading in the financial stocks has been much heavier than the norm. Then again, when a company is being wholly subsidized by the government, who wouldn’t invest in that stock? But I digress….
You see, I keep thinking about these darn unemployment numbers. There are a lot of people out of work, and people out of work don’t spend much money. We are a consumer driven economy and common sense tells me we need robust consumer spending to really emerge from the recession. The unemployment number are horrifying…the market got all excited last week because the economy only jettisoned half a million jobs, which is better than past months.
Half a million jobs is good news? It’s horrible news.
I look at the housing inventory and foreclosure rates and I am not very excited either, especially with a new round of resets on the Alt-A mortgages. That might not be a pretty thing, and the projected defaults on the resets is alarmingly high, depending on which economist you care to follow.
On and on it goes, with the government in full spin cycle trying to convince me that things are honky-dory. They don’t seem all that good to me. I worry that this latest rally my be short lived and a nasty correction may ensue. Look at 1933, they thought they had the depression whipped, so the government tightened monetary and economic policy and the depression started all over again.
No, we are still walking on a very slippery slope and I am not very comfortable with the level the market is sitting on, and the the underlying cause of the run up….which is pure speculation. Speculation doesn’t make for a bull market rally.
Then again, maybe I’m all wet and things will be just fine. I just am having a difficult time swallowing the “everything is great” pill right now.
