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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

October 28, 2010 at 10:29 AM

The overvalued market jitters set in on Wall Street

I’ve been waiting for some Seattle-area stocks to head north this morning, and finally some motion into (very modest) positive territory: Alaska Air; Paccar; Microsoft. The major indices have recovered a bit but remain in the red. Now, say it all together, nobody knows why the market moves most of the time. Still, is this market getting overvalued?

The Business Insider blog argues, yes. The boost from the election (likely big GOP gains) and the Fed’s quantitative easing are cresting, among other reasons to be cautious.

I’ll throw out a few more: The stink-bomb tossed by the banks on foreclosure paperwork (and, hence, any hopes of a housing recovery); the currency tension between the U.S. and China, along with the too-obvious-powerlessness of the G-20 is not over, and continued high unemployment. Then there’s the possibility of a Chinese asset bubble…

It’s been a fun run: Wall Street confident it can buy an election and policy that tilts even more its way. That hasn’t been the only reason behind this rally, but it’s a big one. While some earnings have been at the unsustainably spectacular level The Street demands, the market remains largely disconnected from the real economy. Soon the smart money may be gone, leaving your 401(k) on yet another branch being sawed off. At the least, it’s vulnerable to any small (or big) shock.

Today’s Econ Haiku:

We clean up our act

On the corruption index

No bubbles to scrub

Comments | More in Stock market

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