With Stock Prices Soaring, Investors Fear Another Crash
By BRETT ARENDS
While the economy certainly seems to be recovering, much of this has already been reflected in higher stock prices. And while U.S. stocks may appear inexpensive compared with current earnings, that may be an illusion. Economists say earnings have been artificially inflated, both by the Federal Reserve’s actions to drive down interest rates and by the federal government’s enormous budget deficits. Deficits give the economy a short-term shot in the arm, boosting demand for companies’ products, while lower interest rates have allowed companies to borrow cheaply at what are, in effect, subsidized rates.
This video by Aaron Clarey got me thinking about this issue again more urgently, and I saw the above article only a few days later. I saw Clarey’s video after I read his quasi-manifesto Enjoy the Decline (my Amazon review of it is here).