Market Overview

Trend-Topping Tuesday: Too Tough To Turn The Tide?


What a rally!

We're sort of betting against it now (through Friday) but – WOW! – what a rally!  We were super-impressed with yesterday's action as our indexes stayed aloft despite the Dollar poking over the 80.50 line and, this morning, the strong Dollar knocked the Yen down (up) to 90.40 and now the Nikkei jumped 2% to 11,440 and – WOW! – that is high – up 33% since mid-November.   


So, here's the question – are markets now grossly over-priced OR – WERE the markets grossly under-valued for most of the last 5 years.  That then begs the question of whether the markets were correctly valued in 2007 – as that's about what we're up to now – and I guess that makes us then ask the next question, which is:  Were the markets correctly priced in 2000?  

That's right, the S&P 500 was at 1,550 in 2000 and 1,550 in 2007 and now, in 2013, we're back around 1,550.  While values may have gotten ahead of themselves in 2000 and maybe we were too enthusiastic in 2007 – because we failed to take into account the dangers that faced the Global Economy – this time we're going back to the well for the third time with our eyes wide open – albeit hopped up on tremendous amounts of monetary stimulus.  

And there's the rub.  None of this is real, is it?  It's all one tremendous financial adrenaline shot that would make the proverbial dead parrot go VOOM, but that also makes it very difficult to judge the true value of our economy and, therefore, the companies that populate it.

Well, that's the short-term take, but the big picture is that the World Economy has indeed gotten bigger in the past 13 years – much bigger actually.  We do know China's GDP has more than doubled in the past decade but so had India while the economies of India, Russia, Brazil, Argentina, South Africa, South Korea and Turkey have all grown 50% with Mexico and Australia up 25% and the US, the EU and Japan have been bringing up the rear with average growth rates of "just" 1% a year.  

GRAPHICBUT – if none of us are going down and some of us are going up – isn't the Global Economy getting bigger?  Of course it is!  On the
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