ALL BLOG POSTS AND COMMENTS COPYRIGHT (C) 2003-2018 VOX DAY. ALL RIGHTS RESERVED. REPRODUCTION WITHOUT WRITTEN PERMISSION IS EXPRESSLY PROHIBITED.

Sunday, April 04, 2004

The bull case

Here's a summary of why everything is peachy keen with the economy. My comments are interspersed below in blue.

The fundamental view is that we have come out of a short recessionary period; the excesses that built up in the late 1990's have gone through a much needed steep correction complete with corporate wrongdoings that are now under better control with stiffer governance and that now we should be able to move forward in a positive manner. Of course, we have no reason to believe that corporate behavior has changed in the least. I know of no CEO or serious corporate observer who believes they have. Interest rates are low; the Fed is providing sufficient monetary stimulus and they are prepared to maintain the low interest rate environment to ensure that the economy grows if maintaining low interest rates were all that was necessary to maintain growth, why hasn't it been done before? Answer = inflation and that we eventually move to the next stage of the recovery which will be a return of jobs as we did when we came out of the early 1990's recession. And how many of those jobs are/will be parasitic government jobs which add nothing to the economy but instead detract from productive capital? (Note: writing this as today's job numbers were higher than expected).

Further, the US Administration is, given the War on Terror and in Iraq, providing sufficient fiscal stimulus to the economy and that as the economy grows coupled with the tax cuts the current budget deficits will eventually disappear. That's an interesting premise given that the deficits are rapidly increasing. Furthermore, the tax cuts have been more than absorbed by concomitant state and local tax hikes. The debt is not a major problem as it has not reached the levels that were seen in the 1980's fighting the cold war and that the debt as overall percentage of the economy is also not a problem and remains below countries such as Japan and Europe. First, the official debt numbers are too low by 33 percent, second, the cumulative US debt may well be higher than in most countries in Europe, as with the exception of Switzerland, our sub-federal governments carry far more debt than do theirs. At our March 2004 rate of increase, Federal debt-to-GDP will surpass European pacesetter Italy's levels in 2011.

We are in a low inflationary period which is expected to continue as the cost of goods consumed by society keep coming down and should remain low going forward. The CPI is wholly mythical and commodity prices have been rising for three years. Stock valuations are down from the highs that were seen in the late 1990's and given the outlook for earnings, valuations in many cases are fair valuations are still absurdly high, in many cases higher than they were before the 1929 crash. and there is room for growth particularly as the high tech sector recovers and new technological innovations increase productivity which will allow stock prices to move higher over time. The productivity-growth calculations are little more than circular logic which mean nothing.


In summary, I'd say that the bull case is very convincing, as long as you take everything in it at face value and ignore the actual facts. Buy! Buy! Buy!

0 Comments:

Post a Comment

Rules of the blog
Please do not comment as "Anonymous". Comments by "Anonymous" will be spammed.

<< Home

Newer Posts Older Posts