Sometimes as I listen to analysts on TV I forget that they are trying do something to get the audience to react as opposed to really being objective. Now they do try to keep some facts in view but it is clearly better to be perceived as controversial, rather than dull.
By the same token, the audience they cater to is a very very small subset of people in this country and they strive to add some excitement and controversy to admittedly a boring subject.
So we hear about the horrors of September and October (and yes they have had some of the worst corrections in history but if you consider their performance over the last 100 years it is just marginally worse than some of our best months) and the correction that is coming (maybe it is but then again, maybe it isn't).
One of the fallacies I think they propagate is that the Stock Market reflects a recovery. They mostly ignore, or at best give very minor acknowledgement, that the increase in stock prices since March still leaves us well below the prices from one year ago and far below historical highs. Now as they do sometimes point out, when they discuss earnings, we are starting to enter a period when year ago comparisons will get easier, since the economic disruption started to kick in. We have not had a recovery yet, we are coming to the end of the decline and will start to see growth in the next year. The fact that stock prices recovered from lows that anticipated economic Armageddon and are now at levels that actually reflect the downturn in economic activity is not signs of a recovery or signs that the market is too high. The Market went down much further than the economics indicated due to panic and if the March bottoms didn't exist, I think a lot of people would see how low it still is from where it was.
Those who believe that the March lows were accurate reflections of Market value are entitled to that opinion, but I think the rebound from that correction tends to prove them wrong.
The economy has fallen about as much as it is going to and as we are starting to see in retail and manufacturing, there is increasing demand. We are not going to bounce up to the bubble levels and if we did, it wouldn't bode well. However, much like economic downturns feed on themselves, economic upturns become self sustaining. Each job we create helps to create other jobs to provide goods and services. One issue we face now is that some of our jobs are gone forever and need to be replaced with new ones. However, I believe the next growth industry has already started and as it grows it will absorb those who have lost jobs to technology.
A sustainable recovery's data looks just like the data I am seeing, a slowdown in the rate of decline in area after area that will change to a rate of increase. If the increase gets too fast we risk inflation and relapse, so slow and steady is the best course of action. Tax bases will start to expand, property values will start to increase and economic activity will grow.
It is just starting.
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