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Stocks: crash ahead
Flags fly high on stock markets across the world. Leading indices are revisiting the peak levels. On the trading floors (sorry, computer cubicles) all are cool to the adage that the things going up will drop. Set backs expected only in the form of soft-landing. Markets bet on the efficacy of monetary and fiscal policies in fine turning the unruly economy forces.
But things are not going that way. See Wall Street. Everyone is going gaga. The popular industrial average rests in the shadow of its all time high. Trade imbalances apart, companies are doing well, inflation under control and tax revenues are rising. There is a feeling of well being despite the mess in Iraq.
Under the scanner, however, things are not so fine. Deducted for inflation DJI must climb 15% more to prove growth. Corporate profits as a share of GDP is of course increasing but profitability is stuck at its 1997 peak. A classic case of falling rate of profit heralding an economic crisis. The three percent growth rate needed to keep unemployment at bay will not be there.
The US (and the world) business cycles follow a pattern spread over a span of 8-10 years. That means a slump is in sight by the end of the decade. Not a mild one because of RDX is getting stacked up in the system. |
