Mr. Abelson of Barron's has been around a long time. He gained fame during the 1960's by correctly seeing trends in equity markets showing a bubble and expressing these views in lively prose as part of weekly columns.
His column published this week in Barron's contains the following quote that should give pause for thought among investors:
"We've been saving the best for last: Equities extended their gaudy winning streak, blithely ignoring such trivia as disappointing retail sales and intimations that inflation's demise has been greatly exaggerated. This has been the most resilient market we've ever had the pleasure of witnessing. Enjoy it, by all means, as long as it lasts. You won't lack for company, as pros and the public are piling in, but keep in mind that an excess of bullishness, as manifestly exists today, has been know to lead to a fall." [bold added]
Abelson, Alan, 2011. Worse than you ever dreamed. Barron's, Feb. 19.
I think this is a very strong statement from a man who has observed some of the most dramatic changes in equity markets during the past 60 plus years.
My feeling is that Quantitative Easing II is somewhat responsible for the strength and resiliency of stock prices. I think QE2 was probably conceived to address two things, 1) the weakness of the US economy and the threat of deflation, and 2) the Chinese policy of pegging the Yuan. Folks who are interested should see my previous comments on global capital flow imbalances:
This is among the top issues that America and the global economy faces.
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