The economy is much worse today than mid 2002 yet s&p500 in mid 2002 was 887 now it is so much higher. at 1134. makes no sense any reason for this?
Noob, noob, noob. Balance sheets are much better this time around, and we don't have completely overvalued stocks. The market is more rational now than it was in 2002. To say the economy is worse is inaccurate. It was worse then, and with the dot com bubble, a much bigger problem than now. After 2003 we added several million jobs and only lost about a couple million in 2008-2011 coupling with the population growth the rate of job loss may be high in absolute terms but not in relative terms. I recall pointing out that overall compensation hasn't had a single losing 3 month period and I bet you'll still find that in the BLS. I'd be shocked if that changed.
Take a look at the consumer confidence index, and the velocity of money. Absolutely terrible compared to 2002.
in 2002 the markets were also lower because you demanded a higher risk premium for not really knowing if there was accounting fraud. There was a "ponzi scheme" premium to stocks.
GE was close to BK if it was not for TALF. it just seems the S&P is priced for much higher growth in the future than it was in 2002.
B/c... teh market is irrational. It never trades at the price it should trade at --- either too high or too low, never just right.
This is due to short-sightedness, high frequency trading, and transactionalism. The need to do a trade in order to produce revenue regardless of rationality is what makes the market move at all hours. Creating better mechanisms for generating pricing information is something I'm working on.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/spearn.htm S&P Earnings 2002 46.04 2010 83.66 ... Next question?