Jeremy Siegel, finance professor at Wharton, says the United States has entered a “self-sustaining” recovery that isn’t dependent on the federal stimulus. He’s also confident about the direction of the stock market, where the Dow recently topped 11,000.
The Dow number “doesn’t matter in a real economic sense, but more in a psychological sense,” he said on the Knowledge@Wharton Web site. “Obviously, these are just arbitrary points. But this is the highest position since September 2008, when the crisis really broke out. More illuminating than just looking at the number 11,000 is that the market is only about 22 percent or 23 percent off from its all-time high, which was reached in October 2007 when the Dow was over 13,000. We went down 58 percent and now we are back within a little more of 20 percent of the high. That shows you that there has been a very significant recovery.”
Any downsides? “Housing is going to be weak for a long time and prices, even if they stabilize, are not really going to go up.”
He may be too optimistic. I continue to worry about all the hot money in the market, an artifice of zero interest rates and an abundance of dollars. It’s inherently unstable. All those toxic “assets” are still out there, many on the books of the Fed. Massive and continuing unemployment is a tinder box. But here’s Professor Siegel. So you can’t say there’s no optimism on Sound Economy. (So far, nearly 400 have voted on yesterday’s poll, and the majority say we’re still in recession or bumping along the bottom).
The Back Story: Nerd alert! The federal Bureau of Labor Statistics has released its annual Charting International Labor Comparisons report. Americans’ GDP per capita continues to far outpace our competitors, for example. And the United States has the most output of nations as a percent of the world total, at 18 percent, with China second at 12 percent. China leads in employment as a percentage of the working-age population. You can download the entire report or skim sections here.
Today’s Econ Haiku:
Despite the shouting
Most tax bills are lower now
Still, some are tea’d off