We are caught in a steady “spin cycle” of contradictory reports about our most fundamental concerns: the environment and the economy. Will China financially intervene to resolve the sovereign debt crisis in Europe and save us all from the economic consequences that loom ahead? Will the “China syndrome” finally become a reality at Fukushima? When confronted with a propaganda assault from the “rose-colored glasses” crowd, I become very skeptical.
Widespread concern that Greece would default on its debt inflamed lingering fear about debt contagion throughout the Eurozone. Economist John Hussman, one of the few pundits who has been keeping a sober eye on the situation, made this remark:
Simply put, the Greek debt market is screaming “Certain default. Amésos.”
Meanwhile, the Financial Times reported that China Investment Corporation has been involved in discussions with the government of Italy concerning Italian bond purchases as well as business investments. Bloomberg BusinessWeek quoted Zhang Xiaoqiang, vice chairman of China’s top economic planning agency, who affirmed that nation’s willingness to buy euro bonds from countries involved in the sovereign debt crisis “within its capacity”.
Stefan Schultz of Der Speigel explained that China expects something in return for its rescue efforts:
The supposed “yellow peril” has positioned itself as a “white knight” which promises not to leave its trading partners in Europe and America in the lurch.
In return, however, Beijing is demanding a high price — the Chinese government wants more political prestige and more political power . . .
Specifically, China wants: more access to American markets, abolition of restrictions on the export of high-technology products to China as well as world-wide recognition of China’s economy as a market economy.
Even if such a deal could be made with China, would that nation’s bailout efforts really save the world economy from another recession?
As usual, those notorious cheerleaders for stock market bullishness at CNBC are emphasizing that now is the time to buy. At MSN Money, Anthony Mirhaydari wrote a piece entitled, “The bulls are taking charge”.
Last week, Robert Powell of MarketWatch directed our attention to an analysis just published by Sam Stovall, the chief investment strategist of Standard & Poor’s Equity Research. Powell provided us with this summary:
Consider, at a place and time such as this, with the economy teetering on the verge of another recession, none of the 1,485 stocks that make up the S&P 1,500 has a consensus “Sell” rating. And just five, or 0.3%, are ranked as being a “Weak Hold.”
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From his vantage point, Stovall says it “appears as if most analysts are not expecting the U.S. to fall back into recession, and that now is the time to scoop up undervalued cyclical issues at bargain-basement prices.”
However, in S&P’s opinion, it might be high time to “buck the trend and embrace the traditionally defensive sectors (including utilities), as the risk of recession — and downward earnings per share revisions – appear to us to be on the rise.”
On September 14, investing guru Mark Hulbert picked up from where Robert Powell left off by reminding us that – ten years ago – stock analysts continued to rate Enron stock as a “hold” during the weeks leading up to its bankruptcy, despite the fact that the company was obviously in deep trouble. Hulbert’s theme was best summed-up with this statement:
If you want objectivity from an analyst, you might want to start by demanding that he issue as many “sell” recommendations as “buys.”
It sounds to me as though Wall Street is looking for suckers to be holding all of those high-beta, Russell 2000 stocks when the next crash comes along. I’m more inclined to follow Jeremy Grantham’s assessment that “fair value” for the S&P 500 is 950, rather than its current near-1,200 level.
While the “rose colored glasses” crowd is dreaming about China’s rescue of the world economy, the “China syndrome” is becoming a reality at Japan’s Fukushima nuclear power facility. Immediately after the tragic earthquake and tsunami, I expressed my suspicion that the true extent of the nuclear disaster was the subject of a massive cover-up. Since that time, Washington’s Blog has been providing regular updates on the status of the ongoing, uncontrolled nuclear disaster at Fukushima. The September 14 posting at Washington’s Blog included an interview with a candid scientist:
And nuclear expert Paul Gunter says that we face a “China Syndrome”, where the fuel from the reactor cores at Fukushima have melted through the container vessels, into the ground, and are hitting groundwater and creating highly-radioactive steam . . .
On the other hand, this article from New Scientist reeks of nuclear industry spin:
ALARMIST predictions that the long-term health effects of the Fukushima nuclear accident will be worse than those following Chernobyl in 1986 are likely to aggravate harmful psychological effects of the incident.
As long as experts such as Paul Gunter and Arnie Gundersen continue to provide reliable data contradicting the “move along – nothing to see here” meme being sold to us by the usual suspects, I will continue to follow the updates on Washington’s Blog.