On Bear Market Bottoms and Long-Term Values
Dateline USA....
Martin Hutchinson's "Armageddon" essay in Asia Times is sheer genius. Highlights:
*We've entered a prolonged bear market, though there will be ups and downs along the way.
*The Dow Jones Industrial Index will bottom out somehwere between 7,800 and 3,421.
*In the long run, the price of stocks should move approximately in line with the rise in nominal GDP; and the long-term value of real returns on holdings of US common stocks will reassert itself.
*For investors, dividends will be more important than ever.
*Equity costs worldwide will increase; projects will be more expensive to finance; the true costs of outsourcing will be clear; more jobs will remain in the United States, as lower US capital costs offset higher US wages.
*A wave of US corporate bankruptcies will lay pension funds off on the Pension Benefit Guaranty Corporation, and bankruptcy of the PBGC itself will require yet another bailout by the hard-pressed US taxpayer.
Click here to read the article.
POSTSCRIPT: China Confidential readers were warned nearly a year ago. On January 16 this reporter wrote:
Asian markets plunged Wednesday on growing fears that the US economy is sliding into a recession--or a full-fledged depression--which could lead to a global economic meltdown.
In Beijing, officials and analysts are already whispering the D word, speculating that the US could be on the brink of a depression with high inflation (in contrast with the US Great Depression of the 1930s, which was marked by deflation).
A severe case of stagflation in the US would spell trouble for China's export-driven economy--and for the ruling Communist Party, whose legitimacy basically depends on keeping the country's economic expansion going. (A recession or depression is also almost certain to assure a Democratic victory in this year's US Presidential contest.)
# posted by Confidential Reporter @ 2:04 PM 
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