Tuesday, August 9, 2011

It's The Economy Stupid!

Either company earnings estimates have to be revised downward pretty significantly or the market is over-sold.  And  I think the sell was overdone.  So we will probably get a good bounce.  The dividend to earnings ratio on the S&P 500 is the highest it’s been in about 20 years.  So it appears there is good value in equities. 

 

But clearly people are worried.  I can’t imagine this downturn in the market doing anything but hurting consumer confidence.  And the downgrade in Treasuries and agencies has led to a significant increase in the spread between Treasuries and mortgages.  If that wider spread remains part of the new normal, that ain’t positive for the housing market.  So I’d say that there is a good probability that we could get a double dip recession.  Goldman Sachs puts the probability of a double dip recession at 33%, and that sounds about right to me.

 

The economy desperately needs job creation and we just aren’t getting it in significant and meaningful numbers.

 

It ain’t looking good.

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721

Email:  jbroussard@treasusry.state.la.us

 

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