If you asked somebody in 1990/1991 in the middle of Gulf War I, inflation headlines, a steep housing recession and hundreds of banks failing "Where will growth in the 90s come from", would you not have gotten the same answer? I am not saying 2008-2018 will mirror 1990-2000, but IMO the anecdotal evidence that there are "no currently evident drivers for growth hence the economy is doomed" doesn't stand the test of history.
What is dooming that wasn't there in the past is the levels of debt, both on a consumer level, and gov. level. That is a structurally different look than what we have faced in many decades.
I agree with you, but I also won't rule it out. (Pardon me if I prefer the broader S&P over the Dow): S&P August 28, 2000 Weekly high: 1530.01 S&P March 19, 2001 Weekly low: 1081.19 Change: -29.33% It rallied and then dropped like a rock like that two more times (although one of them was 9/11) before the bottom in March 2002... I also agree with the notion stated elsewhere that the debt situation is far more systemic than the Tech bubble ever was....but only because it supports my position.
Bingo and bingo! For some reason the perma bulls are completely blind to this. I don't think they have any idea how ridiculous debt levels are. Totally unprecedented on a consumer level, and damn high on a governmental one. Barring major technology breakthroughs, we need to work through a good hunk of that debt first. Can be done slowly with little growth, or quickly with a nasty recession (gobs of debt would be written off).
The Buffalo News: CONSUMERS PILE ON MORE DEBT- May 11, 1990 San Jose Mercury News : DEBT HITS $3 TRILLION - Apr 4, 1990 ECONOMIC NEWS IS MIRED IN STORY OF DEBT - Jan 2, 1990 Deseret News, The : IN THE DARK ABOUT US DEBT - Jul 4, 1990 Boston Globe: DEBT LEGACY OF '80S EXCESS SPURS FEAR OF LONG MALAISE - Dec 8, 1991 ... Yes, I know. This time is different. We're all doomed. Anybody that doesn't panic from Bloomberg headlines is a naive perma bull.
Compare it to percentage of income! Not even close. Here is an example, and it isn't even up to date. http://www.monthlyreview.org/docs/0506tbl1.pdf
Even if we have lots of debts, the Arabs, Singaporeans, and Chinese will still buy our companies even when they're on the verge of bankruptcy. So we can spend and they'll foot the bill! The homeowners are gonna be bailed out by the government to prevent further writedowns. Bush is giving stimulus package, good things are coming. So, essentially they're getting paper money and we get their oils, computers, clothes, and other products. We can always devalue the dollar. Look, US dollar is too big to fail, they don't have the courage to get out of the dollar. Not in the next 50 year, albeit. Even Japanese yen has decreased to 102 today. The world needs America no matter how bad they hate us. We're the #1 country in the world! What's there to worry about? That's why it's best now to buy financial stocks. Recession is over - or there isn't any. Just a tiny correction this year
You call that an analysis? We can't keep spending if we are broke. eventually the house of cards collapses, just as subprime did.
we're way beyond 1990 Mak. We had the dawn of the internet in the 90's as well to fuel a whole new technological growth boom. Also, people had savings and excess disposable income to buy all that new gadgetry. take an ongoing neg savings rate and add this picture to it and tell me where people will get spending money.
The charts are actually uglier than that if you take 2007 household debt to disposable income. It was at 139% and probably worse now. Never in the history of the US have we been anywhere close to this. Something has to pop. Its just inevitable. I was making the same argument about the housing market a few years ago by looking at mortgage to income ratios. It went parabolic. Most people just ignore this stuff until the "pop" actually happens. Its just amazing. At best we can expect years of really anemic growth. At worst, an implosion of the entire system, which may be better in the long run. Quick and ugly, then start over. That said, I am neither a bull or bear in the shorter term, for trading. I make a new decision with each day. The long only bias, and short only bias are both equally stupid in the near term.