Posted on 01/06/2010 7:47:05 AM PST by blam
2009 Annus Horribilis
Stock-Markets / Financial Markets 2009
Jan 06, 2010 - 02:23 AM
By: John Browne
Now that 2009 has passed into history, analysts have flooded the public with their opinions on how the events of the past year will impact the coming years. While most are optimistic, I feel that last year's developments have greatly exaggerated the imbalances in the U.S. economy. Although we may see a temporary respite from the turbulence, these mistakes will hinder our long-term viability. I fear that we have gone down a road that will destroy the value of the dollar and may even threaten the political stability of the United States.
While celebrating nominal gains in GDP, consumer confidence, and home prices, most commentators conveniently ignore the deep freeze that persists in the private credit markets. The lack of risk capital continues to strangle small businesses - the main creators of new jobs.
The Administration has only worsened the situation by positioning itself as an enemy of business, creating great uncertainty among entrepreneurs. So moribund is the labor market that the economic boosters now cling to the oxymoronic hope of a "jobless recovery."
Rather than making any real changes that would portend recovery, Washington has entrenched failure. Two years after the recession began, consumption still accounts for about 70 percent of GDP. Even this economic activity has been made possible only by unprecedented "stimulus" spending. And even with the federal boost, retailers have been forced to protect market share with massive discounts, damaging future earnings. Therefore, the risk of a double-dip recession remains high.
Total unemployment, including those forced into part-time jobs, is approaching 20 percent. This suggests that employers are not seeing the profit opportunities that would justify new hires in the coming months or years.
Through it all, business on Wall Street remains largely unchanged. Washington has stepped in to provide cover for ongoing speculation by institutions that they have deemed to be "too big to fail." Furthermore, the feds have camouflaged the banks' de facto insolvency by permitting 'creative' accounting.
Investors retain some caution but have largely placed their faith in recovery. Forced by unrealistically low interest rates, investor funds are being thrust into bonds, real estate, and equities. Indeed, American stock markets have recovered some 60 percent of their 2008 nominal losses.
Standing at the level of 1126 level, the S&P Index represents a P/E ratio of some 22 times forecast earnings. This is quite a premium for an economy teetering on a double dip due to the aforementioned factors.
[snip]
2010 will be Annus Horribilis Magnus.
And it’s all because of the “anus” horribilus in office.
I chortled a bit of my coffee when I saw this title lol I am way behind the news cycle today if this is a start snicker it looks like things are colorful today.
I had that once. The doc gimme some salve and it got better.
He's an alien. He's from Uranus.
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