Quote:
Originally Posted by Slava
I know what you are saying here Claeren, but you also have to be careful in that type of analysis. If you look at the underlying areas that make up the GDP in the United States things are not as bleak as you might think. In fact if you removd just two of these the growth this year would be %3.5! Housing is one of the underlyers that matters and it is down by 0.5% this year for example...but with the market being decimated as far as it has been there is not much more than it can go.
Another factor to consider is that the recovery will begin in the markets sooner than it will appear in the marketplace. In other words you will see some share price recovery in the nearer future. My suggestion to you is to expect that the bottom of the market will be somewhere between now and December, and the top of the market sometime in the next millenium all things considered!
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Unless 'real industries' in the 'real economy' have been reliant on all of that easy capital in order to grow. In which case they would lag the financial equities market first, and then drive the equities market even lower later.
And that is before factoring in the fact that a 50% depreciation in the USD has made the American economy seem a lot healthier than it was for the past 3 years.
If the USD drops another 50% (which IS a very possible policy option especially in light of the billions in currency the US-gov is printing right now) it won't matter how individual companies look on paper when you have lost 50% off the top on the exchange.
Tied up in all of that is inflation. "Core inflation" is a joke of a measurement, REAL inflation has been higher than GDP growth in the States for a couple years now and it is not going to ease. In fact hyper-inflation could well be next on the agenda.
I guess I just start sounding like a perma-bear versus all of these perma-bulls but I have been very close to dead-on in my rantings (more real estate but economics in general) for the past 18-24 months or so.... although much of what I am saying is just mean revision -- which is scary in that we are that far from the mean!
Claeren.