Market Currents
More upside surprises lie ahead for the "new normal" crowd, Brian Wesbury and Robert Stein say....
-
Tuesday, March 16, 2010, 3:23 PM ETMore upside surprises lie ahead for the "new normal" crowd, Brian Wesbury and Robert Stein say. The consensus still underestimates the resilience and robustness of the U.S. economy, but productivity is strong, monetary policy is (and will continue to be) easy, inventories are razor-thin and corporate profits are growing rapidly.
Other date
Latest Articles
This news story has 33 comments:
Sure, all's great...just ask the middle class, the increasing unemployed, the rapidly growing foreclosure crowd and all those other folks that see an "undervalued economy".
let's do some fact checking...
productivity is strong TRUE,
monetary policy is (and will continue to be) easy TRUE,
inventories are razor-thin TRUE and
corporate profits are growing rapidly TRUE
add in low inflation and low expectations and you have the recipe for upside surprises.
Indeed a lot of folks have been complaining about the "not as bad as it could have been bounce" well expect that refrain to continue...until you stop believing what you believe or we have a month without Bill Gross or El Erian on CNBC ...you pretty well are the consensus...if you want to make money you will have to check your premises as Francisco says...I see we have an Ayn Rand fan here...overrated and overlong in my opinion.
E
Actual Dow by March 2009 - 6,500
Cased closed. Wesbury is a paid Wall St. shill
They ARE "rebounding" nicely, but off lows.
positive job growth....
really telling Sarah palin now....
Predicting the future is hard...all you can do is look at the facts act accordingly.
also harsh to call them shills when the majority of the SA authors and posters are selling something or have a website or blog or something...as a matter of fact don't you have one of these Quinn? I could say something banal about glass houses but I will leave the banalities to you old boy.
E
Just wondering what you are seeing.
Sorry to be presumptuous but it might be helpful if you invest in some books - read Peter Bernstein - Against the Gods, read anything by William Bernstein - the doctor, read Burton Malkiel, if you can find them - they are no longer in print read the Money Game and Papermoney by Adam Smith (a pseudonym) - I reread each about once every 2 years - Papermoney especially will resonate with the current timeframe. Niall Ferguson's Ascent of Money is a pretty good read. Subscribe to the The Economist.
If you have done all that and you are still confused and afraid then I am sorry. But if you do all of that you should have a good working framework to move ahead.
E
There is always a wall of worry that investors fret over, now we seem to have a strong political reasons also.
Do what you want, but this middle class guy is putting more into earnings supported dividends, why earn less than 2% on CD's?
Politician's do what they do, but don't fight the market-you lose.
Ferguson isn't the only expert around. I liked his book but cannot take what he says as gospel. The article was highly speculative - his statements about public debt crowding out is not entirely supported under all circumstances and especially in the sort of deflationary panic we have just been through - his reference to Moody's downgrading the US is as Ferguson well knows really an empty threat - most of his thesis rests on the assumption that rising real rates will kill recovery and thereby reduce the capacity for debt. Maybe. Maybe not.
Let me start simply. The US is not Greece.
Greece cannot print money the US can. The USD is the world reserve currency. PERIOD. Greece is a small country the US is large. Economically they are chalk and cheese - productivity, growth, exports, the texture and make-up of their corporate sectors, numbers of patents, number of PhD's you name it on many other factors the US is highly advantaged. No I am not concerned or pessimistic.
Now to the more complex. We had a recession that started in Oct 2007 - in response to a tightening cycle - this snowballed into a crisis of confidence between counterparties - potential defaults - complete stop of lending - financial collapse, asset price collapse then the economy ground to a halt in Nov 2008.
The policy response was to flood money into the system - with deflation real rates were far to high - they went to zero. The Fed acting as lender of last resort backstopped a number of entities - QE supported the zero rate policy. Add to this a fiscal response slightly delayed and probably somewhat misguided but all entirely appropriate.
Where are we today? Strong productivity, low inflation, economic growth, strong corporate profits, the economy has a pulse, the crowding out does not seem to be happening - we'll see, real rates remain low. There is a lot to be happy about - given what happened in 2008 and where we were in late 2009. Sure housing is slow but the good news is that it can only get better from here, the death of commercial real estate is grossly exaggerated. There are still lots of risks but they are mostly political we really don't want our legislators to panic and go protectionist and it would be good to see some increasing fiscal restraint and hopefully that will come before the Fed starts to really tighten although I am not betting on it. Yes we are not out of the woods yet but the Chairman is a smart one and he has some pretty decent advisers.
E
Pill makers got theirs with the Prescription Drug Benefit Gift that the Bushies gave them in 2006
I still have my doubts it will get up. Maybe the Dems have the numbers we'll see.
It must be a huge burden, realizing that only a few know the "truth," and all those other "dummies" out there just keep engaging in stupid behavior that's making the the companies report improving numbers and making the markets advance.
Some of the threads bear a passing resemblance to the lower circles of Hell.
E
Moving above 1150 - I am not a market technician but a friend who does that for a living tells me that the signs are all very good - I never listen to him - we agree to disagree on the value of AD lines and 10 day moving averages and all the other entrails he looks at but he does bat better than 50/50. On the other hand we can all be fooled by randomness.
Interesting spot here - I really thought we would get a pull back to 1020 or so - we got to 1050 but no further and now up to 1150.
The market is getting used to the idea that 2010 will see S&P earnings of about $80 and inflation wil stay tame - the market should trade around 15 times so 1200 is doable. After that we will need to think about 2011 and other things. The elections later on this year will come into play. I am clueless as to what that might mean.
After a long period of doing nothing, this quarter I have switched out of corporate bonds (although I kept the junk) and preferreds and lightened up on emergings and small caps and moved more heavily into large and megacaps and into Europe. I think the risk reward is better there but it is only because the others have moved so much.
I continue to hold financials which I bought way too early in Q4 2008 but which now are looking decent - still very beaten up but I think they have some more room to run. REITS have had a great run and I continue to like them - I like it that the Simons are looking to buy GGP - tells me that things are not as bad as people think - they are smart buyers. I want to bet with them.
I am wondering about MLP's. They look enticing and the gas glut here will mean that pipeline capacity will be at a premium - could be some good money to be made especially as the economy grows.
E
If the country finally goes to natural gas (I think it will) the MLP's will really appreciate and get great Div's til they do. The power plant pull alone will guarantee the Div's.
Just what I am doing as I am still adding in to this market, I do like to buy on the MA dips, after I do my due diligence.
Good luck
I think some posters do not really care about making money as much as political points
Like most folks, I got battered pretty badly on the downside, but, perhaps, less than some. What served me, maybe ironically, the best was that I depend entirely on investment income for my livelihood, so any temptation to bury remaining cash in the backyard was a fleeting thought. I had to generate income, and that meant being long, somewhere.
I decided early last year that the preferreds and debt of solid financial (banks, insurers, etc.) companies was selling at absurd discounts, and that either life as we know it was over or that it was a rare buying opportunity. Given, again, my need for income, I went in. Turned out easily as the best investment decision I ever made.
At this juncture, I see it a number of ways: 1) a lot of the recovered debt and many preferreds will resist further panic selloffs, as that phase is behind us; they will trade based on prevailing interest rates, more than market action. In that respect they are relatively safe bets; even if the market is volatile 2) if the economic recovery keeps advancing, then, the common stocks of still-beaten-down sectors will advance nicely: regional banks, commercial realty (REITs), business development companies (BDC's); 3) if inflation is a concern, then some allocations to following make sense: real estate, natural resources, energy, floating-rate bonds. I choose to participate in all these mostly through various ETF's, many of which offer outstanding yields, as well as inflation protection. Unlike many others, I eschew gold because it trades with its own peculiar mentality and offers no income.
Lastly, I never buy non-income issues, whether looking for appreciation, or not. I like to get "paid" to wait. It's served me very well over the years.
Good luck to all.