And Rising Risk
The WSJ’s “Heard on the Street” today notes again the skewing of the data on economic recovery. Opportunities for investment are rising, but many indicators suggest we are still sinking deeper into a recession. (See article)
A dramatic slump in rail traffic points to sluggish industrial activity. Many commodities, including electricity, are decreasing in output as well as profitability. And while analysts are predicting a rebound in earnings, that looks to be at the expense of capital investments, wages and benefits. The article concludes that “spending power is leaching out of the economy,” while investors eager not to miss out on the rebound “pump money into riskier asset class.”
As if to reinforce the point, the Journal’s front page headline proclaims: “From Stocks to Junk, It All Sells Well Now.”
In short the evidence is mounting for a psychological bubble of optimism, a bubble that will drive a wedge between the few who may be able to make some short term speculative gains and those still looking to survive the recession – and set the stage for another bust.
What we don’t know we know here is how much we are allowing ourselves to be manipulated into believing that the worst is over. It is all there in the difference between the front page and the back page.