Friday, January 08, 2010

Economic tipping point in 2010

How can sensible investors be buying so much stock that prices continue to rise steadily at a time when real unemployment likely is above 20 percent and the prospects for earnings growth by US companies is as bad as it has been in the last 80 years?

The answer, of course is that they probably can't, and this is why suspicions about just what is going on are starting to be raised.

SHOOT: I'm also of the opinion that 2010 will be the year when the penny drops. Why? Because 2009 was all about denial and absorbing what slack remained, what credit and delusions remained. In 2010 room to breathe will run out and cuts will be to the bone.
clipped from

Just as climate scientists debate the existence of a "tipping point", beyond which rising global temperatures are uncontrollable, there may exist an economic tipping point beyond which control of the US and global economies is beyond the powers of government.

Although another economy-crushing oil price spike in the next 12 months is a possibility, it is the sovereign debt crisis and all that it entails that seems to be a more imminent threat as we enter 2010. Oil prices, however, are back over $80 a barrel, and although few are predicting a price surge in the near future, China, India and several other Asian economies are growing rapidly. There is a good market for the oil that is being produced somewhere and OPEC production has been climbing of late, eating into the cartel's spare capacity to produce more oil.

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