brewer12345
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Mar 6, 2003
- Messages
- 18,085
What is troubling to me Brewer is that equity levels are within 15% of all time levels. Economic activity is certainly better than it was 2 years ago, but I dare say it looks much worse than it did back in 2007.
I also think that financial crisis caused structural damage to many institutions, mainly governments but also banks, and the housing industry that are decades away from being repaired. I think it is almost certain that austerity measures that are being enacted at all levels of government both here and in Europe, will cause a short term contraction in income. While I am very happy to see the measures cause I think they are the right thing to do, I am worried that in the short-term they will further depress demand and possibly employment.
So on an absolute basis I much happier purchasing SP @1500 back in 2007
because I think the outlook for 5 year corporate earning from 2007-2012 looks much better than 2011-2016. (Obviously with perfect hindsight, I'd understand that SP500 earning were really a house of cards back then.).
On the other hand on a relative basis with bonds/CD earning 2-3%, cash earning nothing, real estate on life support, stocks look cheap. But I wonder if it is not an illusion.
Well, will not belabor the point, but vs. 2007 a lot of the leverage has come out of the system and the economy seems to be doing a better job of allocating capital to the "real" economy. Total US GDP is (IIRC) at an all time high, and without many of the imbalances of a few years ago. Could we hit an air pocket? Sure. But I think the downside is lowe given the clearout we had.