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Sunday, October 4, 2009

Economic optimism




Can we really have reached such a point so soon after the market hit rock bottom?

Yes, we can. The bear market of the 1990s in Japan was marked by many such moments. The crash of 1929 was followed by a 48% rally over six months - followed by another precipitous crash.


That bear market rally was fuelled by economic optimism at the very top. US Treasury Secretary Andrew Mellon said in December 1929: "I see nothing in the present situation that is either menacing or warrants pessimism."

Today's rally can hardly be based on ignorance of the economic facts. Scarcely a day goes by without an economist/politician/journalist explaining how weak the global economy is. And yet the rally continues.

Germany and France have been celebrating exiting recession

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