The Great Depression is not that great after all?

The economic sentiment and the job market is indeed picking up. For one of the very few times, bullish estimates by Wall Street analysts had failed to keep up with S&P 500 gains. The prevailing feeling though unstated but apparent is that "Prosperity is just around the corner". Though cautious, several company executives through their actions have demonstrated this belief implicitly.

I must say that because of this, I have been fortunate enough to be able to get a good job in such difficult times. I would recommend friends that are graduating soon to secure a job as soon as possible, if they had not already done so. Though the first job is very important, this is no time to get picky. Then work very hard to prove your worth to the company and maintain your job security.

However, allow me to reiterate my stance that I still remain bearish at a time even when several other pessismists are starting to get bullish. I feel sure that the bear market is a long way from over. That is why I chose the statement given by Herbert Hoover as the country sank into the Great Depression of the 1930s.

My point of view is that what had shifted was the emphasis, not the facts. The fact that earnings remain poor, prices of real estate outside of US remains high, financial institutions have not deleveraged, joblessness continuing to rise and problems arising from Option-ARMs, Alt-A loans.
The investment and political community seems behave as though they are oblivious to the problems that continue to persists.

I must say that my focus lies on the average American consumer who have been the key engine and driver of global growth over the past decade or so. The balance sheet of the average American consumer is now broken, rising debt levels, rising unemployment and declining salaries. These are not exactly conditions required for a vigorous recovery. Furthermore, I also believe that there is going to be a dramatic reversal in spending habits.

It is true that human behavior and cultures are extremely difficult to change in a short span of time. However, I believe that this time, the economic shock that was delivered is powerful enough to embed deeply in the psyche of several people. The pain experienced will serve as a strong somatic marker in the brain reigning in the once spendthrift ways of the average American.

There is also an increasingly popular viewpoint that Asian consumers will pick up the slack and become the future engine of global growth. I must say that though I agree that it this will be the case ten or twenty years from now, I totally disagree with that it will happen anytime soon in the near future. If one were to look at the Asian economies, from China, ASEAN and India. All of them have one thing in common, they are all structurally export driven economies. Domestic consumption is nowhere near the kind of levels that the west provides. Without strong demand coming from the US and Europe, to whom exactly is Asia going to export their goods?

Having just learnt from the "sub-prime" phase of the crisis, one might have thought that the investment community would have taken warning against similar adventures in Wall Street. But a prime characteristic of a speculative mania is its complete insulation from all the lessons of history, whether remote or at hand. Though admittedly, the europhia and delusion is currently in its mere infancy stage and is far from bubblelistic proportions.

If prices were to continue rising with such tremendous pace, then it will be a matter of time that we will have to re-learn the same old lessons again. Probably in less than 2 years time! For now, I am pretty sure that I must be one of the very few minority to hold such a view.