I continually get infuriated when I hear commentators talking about the market returning to normal.. the markets will, of course, reach a relatively stable equilibrium at some point, but a sustainable recovery does not mean returning to previous market highs:
The financials should never have been worth 25% of the S&P, because 75% of their earnings were stolen from future quarters and based on totally false accounting assumptions. The land held by homebuilders was never worth 100% more than it is now – that was a bubble – and Exxon Mobil (XOM) never had $5Tn in reserves as that was another bubble, and the gold miners weren’t really going to get $2,000 an ounce for gold (without massive inflation) nor were the copper miners going to sustain $400 copper, simply because it’s not economical to use it at that price.
The Dow was NEVER worth 14,000 and the S&P was NEVER worth 1,500 and (yes, I’m going to say it) the Shanghai composite was NEVER worth 6,000. So please, pundits, stop targeting these numbers. Yahoo (YHOO) was once $300 a share and we’ve accepted that it’s not likely to get back there; what is this fixation with getting back to market highs that have proven to be based on a total falsehood, on earnings that were not only reversed but were clawed back to erase half of this decade’s earnings? It is a market that has cost the US government $11Tn to bail out so far. Do we even want S&P 1,500 if it costs the US government $1Tn per 100 point gain per year? That’s the question Warren and I are asking – at some point, you need to step back and figure out what it is we are trying to accomplish here. ‘The bubble popped, long live the new bubble’ may not be the right attitude for the second decade of the century.
Finally…somebody says it.