John, God help us put holders.
Anyway, can we summarize where we are now? What we know? (I will insert MythMan's response to the last question in advance: "We don't know JS" -gg-)
I see two worlds - the real economy and the financial world.
The Financial World:
(1) If you can contain your disgust and revulsion for a moment, the levels that we have reached in the stock market truly are amazing, even more so given the economic backdrop. NDX PE of 100!?! Just how many stars and planets had to align perfectly in order to permit this insanity??
(2) The bias and touting I see in the media is breathtaking. My favorite example is when CNBC reports earnings. Typically, the graphic they put up on the screen shows the "estimate" to be, say, 49 cents per share and the actual to be 52 cents. So, they beat the estimate and everyone is happy. Then, in the smaller print on the graphic, we see that revenues have declined 18% while earnings have declined 48%. And there is no comment on that - just rejoicing about beating the estimates. You know, maybe there are subjects to which the media's typical "15 second sound-bite" approach should not be aplied? Do you think? "Superficial" does not begin to describe their behaviour. How about "dangerous", "dysfunctional", "criminal"?
(3) I feel the internet has played a large role in this madness. Trading volume has accelerated. The speed with which trends are played out has also. The internet is central to the "New Paradigm" religion. (False gods for the prior manias? electricity, railroads, radio, tulips)
(4) The financial community appears to me, in large part, to be either Stepford Wives, silent co-conspirators, or whores. Integrity and thoughtful analysis are AWOL. The "earnings management" game played by both management and the analysts is repugnant.
There are exceptions (Hays, Fleck, Biggs, Meehan, etc.) and there are probably alot more, but you will never see them on CNBC.
(5) There is a (somewhat natural) propensity to explain or justify the irrational as somehow normal or acceptable. Yeah, IPOs opening 500% higher makes sense to me. Market PEs off the f*ing richter scale are fully justified. I was heavily invested in oil service stocks, starting in 1993/1994. However, I was too inexperienced to realize my value stocks were being transformed into momentum stocks, and gave back alot (thankfully not all) of my gains. At every price level, there was someone to justify the price and say things would go higher. This leads many people to actually believe those prices are justifiable. Liquidity and momentum are somehow explained as manifestations of strong fundamentals. Highly Speculative behaviour is classified as investing. We have financial nitwits, suffering from attention deficit disorder, providing us ringside commentary.
Honest people, admitting their "befuddlement", are ridiculed as senile.
(6) Financial engineering.
The Real World
(1) The economy is zipping along, no doubt about it. Retail sales, housing, autos and trucks, - GDP looks great.
(2) Tax revenue, especially at the state level, looks great.
(3) The dollar is strong. Interest rates are low.
(4) We seemed to have achieved the impossible: red hot GDP growth and record low unemployment with no inflation - and we accept the impossible as sustainable.
(5) But, there are several dogs that are not barking: inflation, employment costs, pricing power and corporate earnings. And there are several dogs barking their heads off (debt levels, low savings) being ignored. Of course, to make sense of this would require more than the alloted 15 seconds for the sound bite.
* * * * * * * * * * * * * * *
The Bull Market is corrosive. Integrity and critical thinking are being co-opted and corrupted. There is an almost unbearable stench - everywhere.
I have no mouth and I must scream. |
