Market euphoria blowing Ivory Soap bubbles? N.Y. Times Paul Krugman thinks so. He chalks up such euphoria to investor greed, "investors buying stocks because they are rising."
He slams the brakes on such Alice-in-Wonderland thinking when he states that businesses are "still more interested in cutting costs and laying off workers than buying new capital goods."
He thinks the bad bear news is still out there with huff puff puffs for not just the three little piggies' houses but Joe and Jane Doakes' houses, refinanced to hilt-guilt, with their maxed-out bridge hands of credit cards. Yes sir lords and ladies, Greed is good in good old America.
Krugman on the job market: "Payrolls are stil contracting; since the U.S. econony has to create 80,000 a month just to keep up with the growing working-age population, the already miserable job market continues to get worse."
Krugman on tax cuts and low interest rates: "Don't tax cuts and low interest rates create the conditions for an economic rebound? Well, interest rates have been low for a while. And everything that's happened since 2001 suggest that Bush-style tax cuts--which, because they are targeted on the very affluent, basically give people with plenty of cash to spare with even more cash to spare--provide very little employment bang per deficit buck. Meanwhile, desparate state and local governments are continuing to slash services and in a growing number of cases, raising taxes, undoing much or all of the stimulis from the federal government."
Krugman pegs the average stock selling not just at 31 times earnings but how about 40? Is he blowing smoke? He answers: "If you take into account pension liabilities and the cost of stock options, that number goes above 40."
He might just rest his case on the old feeding frenzy binge when he says, "The new bull market isn't forecasting anything; it's just feeding on itself."
Gorging would be more apropos.
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