Yesterday, it occurred to me that with all the words bouncing off the walls concerning the Greek default, the US downgrade, the runaway debt in the country, and the out of control political system, it might be a good time to step back and look at today's story and see what makes sense. Is it bomb shelter time or is there an amazing opportunity staring us in the face?
To begin with, you simply can't think yourself out of this problem - regardless of the problem you are encountering. In the depths of the problem, it never looks as if there is a solution. But it is the hopelessness of the situation that forces a solution. Negotiating parameters change, the intensity changes, and the out of the box thinking suddenly becomes logical. The urgency to not go over the real or imagined cliff increases the effort to fight back.
That is supposedly where we are. We're not really, but we now have an intense "O.J. media" that follows every runaway villain from the great camera in the sky, and we all sit there glued to the impending disaster rocking and reeling around every curve in the road. So today, we are just one week to the end of the world - yeah right!!
Don't forget some of the improvements we've seen take place over the past few years:
- The action of the OEX Option Volatility Index, which very accurately measures the fear of investors, has consistently shown, since it's extreme peak in 2008, that internally, today's problems are receding, not getting worse.
- Since 2009, we've seen Initial Unemployment Claims consistently drop, and finally last year, this important gauge dropped under that "magic" 400,000 level. Yet, even though we saw an uptick in this indicator this year, it has returned to its positive down trend.
- ADP Nonfarm Private Payroll Employment continues to grow, while job cuts recover from their negative readings, according to the Challenger Report.
- S&P 500 forward earnings are up to a record high of $106.67, which is a 69.5% increase from May 2009. Analysts estimate that earnings will rise 15.6% this year and 15.2% in 2012.
- Consumers have borrowed less, saved more, and now the ratio of their debt payments to their income has reached the same level of 1994.
- The money on the sidelines remains around 100% of the market value of the S&P 500.
So with this story shaping up, along with the very positive story we're being told by our Monetary and Valuation Composites that we've referrenced before, we ask, is it bomb shelter time or is there an amazing opportunity staring us in the face?
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