Jack Welch (former chairman of General Electric) last September:
"
one great statistic is most of these businesses are operating at about 70% or 80% of the 2007 peak in revenue. their profitability is back to 2007/2008 levels. because they cut the heck out of jobs. yes. 30% fewer people working in these jobs. and automation has taken out tons of jobs). the old belly to belly salesman is replaced with an ipad and other information. we don't have to have all these people chasing inventories. the stories of productivity are incredible in these plants. you're not going to get some of those old jobs back. unless you get big demand. because you've got to put more people in the street for that. but in general, the stories are the same. oh, we're recovering. yeah, we're back to 75% of where we were in '07. but our profits are back to where they were. but we're 30% down in people. it's a common theme. business after business after business."
http://video.cnbc.com/gallery/?video=3000117011&play=1 (specific comments are around 2:40 mark, but I recommend starting at 1:40 point for greater context)
http://video.cnbc.com/gallery/?video=3000114304&play=1 (start at 2:45 mark, where Brandeis economics professor says we have lost as many jobs to robotics as have been outsourced to China)
I remember reading an article on Zerohedge last year where a Goldman paper had listed fair value for market around 1600 and Fed's model putting it at 1700 (S & P 500, not Dow).
A lot of macro tail risks have been removed or at least contained and economy does appear to be growing (albeit sluggishly right now).
Morningstar recently had market at about fair value / slightly below it:
http://www.morningstar.com/cover/market-fair-value-graph.aspx
And just yesterday
Warren Buffett said that stocks are still cheap, at least
relative to all other assets, and
especially given how low interest rates are:
"Anything I bought at $80 I don't like as well at $100. But if you're asking me if stocks are cheaper than other forms of investment, in my view the answer is yes. We're buying stocks now. But not because we expect them to go up. We're buying them because we think we're getting good value for them."
He said stocks are not "as cheap as they were four years ago" but "you get more for your money" compared to other investments. He added, "The dumbest investment, in my view, is a long-term government bond."
http://www.cnbc.com/id/100515743
He was asked about his acquisition of Heinz, and he said it was a great business, but the price he paid was just on the edge of what he considered acceptable.
Wonder if the great rotation out of bonds into stocks, which I think had a false start last spring, might be starting now, though as a glacially slow process, rather than discrete event completed in a blink of the eye.
Technical analyst Louise Yamada had previously talked about central bankers trying to walk the
tight rope between inflation and deflation last fall (whole video clip is good, but inflation deflation tightrope implications start around 4:15 mark:
http://finance.yahoo.com/blogs/brea...mada-120820358.html?desktop_view_default=true) and she is on CNBC's Fast Money this evening, so interesting to see if she updates those previous comments. Yamada commented that the bull market was long in the tooth then, but that uptrend had not yet been broken.
Permabull Thomas Lee of JP Morgan (
http://video.cnbc.com/gallery/?play=1&video=3000144148) said the bull market he says started in 2009 was only about mid-cycle and would ultimately top out 4 years later at Dow 18000 - 20000 (S & P 500 peak earnings of $150 with 17 multiple). More recently, he has been calling for a tactical pull back, though.
(If we are really at the incipient stages of a new multi-year bull market, then I would look beyond what politicians say, but details of policies they put in place, and how market reacts to supposed bad news (politicians just kicking the can down the road), and see if elements of
stealth Grand Bargain (
http://www.economonitor.com/dolanec...ns-underline-need-for-goldilocks-budget-deal/) stabilize debt over 10 years are being put in place in bits and pieces, just not as a single piece of sweeping legislation that politically can be viewed as great victory of Obama over wing nut Republicans in House of Represenatives, and then if things such as corporate tax reform / repatration of foreign profits, and once debt is stabilized, whether Republicans will allow Obama to proceed with large infra-structure stimulus program to get the economy growing at faster rate)
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