Be Careful What You Wish For
Recession-Plagued Nation Demands New Bubble to Invest In
—headline, The Onion (7/14/2008)
Like many readers, I’m delighted that my decimated (and much too modest) stock portfolio is showing signs of recovery.
On the other hand, I’m leery that the gains are for real.
As I see it, first came the 90’s stock market bubble, fueled by Internet mania. Then came the housing bubble, engineered (or not) to counteract the effects of the punctured stock market bubble.
And now . . . exactly what?
The makings of another stock market bubble, to speed recovery from the housing bust?
I don’t make stock market calls — staying on top of the housing market is hard enough.
However, it’s hard to escape the fact that better-than-expected corporate earnings — supposedly the fuel behind the market’s 40% pop since March — are characterized by two things: 1) they’re good only in comparison to previously lowered estimates; and 2) most companies are making money — or losing less — thanks to cost-cutting rather than top-line (revenue) growth.
To me, neither of those make for the underpinnings of a sustained, new bull market.
Or, maybe I’m just a spoilsport.