In January 2010 we all saw the stock market dip, rise and dive. At the end of the month there was no appreciable change from January 1. I offered the historic fact that January’s are a worthwhile bell weather forecaster of the entire year. I was wrong and the market grew dramatically month after month. I threw in the towel in December 2010 and joined the obvious surge in stock market values. The decision was reinforced this past January. However, I have continued to be sceptical because I see no reason for optimism in the United States. Brazil, China, and India are growing because the West has outsourced its manufacturing.
David Rosenberg of the Financial Times supports my view with some valuable observations.
There’s no denying we’re in the midst of an “incredible” stock-market rally, said David Rosenberg. But that doesn’t mean we’re in a bull market. Genuine bull markets are preceded by demographic shifts or technological advances that promote rapid, sustained growth in productivity and capital assets. The 1949-66 bull market was spurred by “a baby boom that would unleash years of tremendously strong demand growth.” The 1982-2000 bull run was powered by “a wave of innovation” that brought us the mainframe, the personal computer, the Internet, and the smartphone. By contrast, the “bear-market rally” of 2003-07 was fueled by “phony wealth generated by a nonproductive asset called housing,” with a dubious assist from “widespread financial engineering.” Likewise, the current rally doesn’t owe its existence to the iPad or Facebook. They’re “fun,” but they haven’t revolutionized productivity. What has fueled the rally is “unprecedented monetary and fiscal stimulus.” Granted, it’s tough to sit out a rally that has seen “the market surge more than 90 percent.” But “it is much, much tougher to actually experience a correction in the other direction.”
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