Friday, May 19, 2006

Are we done yet?

Last week, the Dow was almost at an all-time high, briefly breaking 11,700.

Sine then? THe last 7 days of trading have dropped the major indices approximately 5% each.


Now, instead of talking about roaring economic numbers, we get to hear talk of a market crash, the return of skyrocketing inflation, billions of people out of work, and ManBearPig ruining the world, with women and minorities hardest hit.


Things are not as bad as it seems to be. Many stocks were due for corrections anyway, and while it's tough to see that at the time you watch your favorite stocks drop 10-15%, it's a fact that it happens, especially at this time of year. I don't like it or enjoy it much either but it happens.

Of course, to hear it being told, we're experiencing 1929 and 1987 all over again.

Which is not true at all.

The economy continues to run at full employment (i.e. an unemployment rate below 5%). Interest rates do not appear to be going much over 5%. Inflation indices read at fractions of a percentage point, not double-digit percentiles like the late 70's. And GDP still is running close to a 5% rate of annual increase.

Add the extension of tax cuts to the mix, and it's obvious we're not entering a stock crash anytime soon, or begin experiencing any other recessionary traits.

Which is bad news for candidates running against incumbents in November. Folks aren't too convinced to vote someone out without a big push from an empty pocketbook.

OK, end of the rant for now.

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