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The Stock Market Soars - Why, and for How Long Can it Remain Buoyant Under Adverse Economic Conditions?

Indices Reach Five-Year Highs in a Nation Which is Dysfunctional and Near Budgetary Collapse - A Puzzle

I find it astounding that stock market indices have reached five-year highs, close to the level of value which existed before the economic collapse from which we are only now slowly emerging.

What can account for such positive investor sentiment in a nation which is an ungovernable mess? Democrats and Republicans cannot come together on any meaningful legislation. Any bill that is passed is a short-term, stopgap measure, the members consistently asking for more time to do their jobs. Comments are made by members of Congress and the president which display contempt for the opposing side. I would cite two prime examples, (1) a recent insult hurled by Republican Louisiana U. S. Senator David Vitter, the “family man” "moral values leader" whom we learned was frequenting prostitutes, yet he remained in office.  Vitter stated that Democratic Major Leader Harry Reid has shown once again that he is “an idiot.” (2)  Republican House Speaker John Boehner recently told Reid, “Go ---- yourself”:  what "dignified" comments coming from the mouths of the nation’s "luminaries".  How can anything of substance get done when members poison the well time and time again?

The president used his Inauguration Address to assert that he will pursue an expensive social spending agenda and indicated no flexibility which would enable the nation to get entitlement programs under control so that they will exist for future generations. He asserts that we do not have a spending problem, but a health care problem: good grief!

I fear that we may be in the midst of another roaring twenties, pre-Depression pattern which will soon come to a grinding halt.

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Roger January 26, 2013 at 05:38 PM
A good part of the answer is the profits coming from overseas operations. Yes, it is easy to see the dysfunctional government we now have. But, the smarter operations, at least the large-cap companies, have found good profits OUTSIDE the United States. This revelation is a good indicator of where the smart money understands financial growth. It is not in the US. Yes, profits are up. Yes, many companies have large cash reserves. But, these facts do not reflect the sound political environment of the United States. It is shuddering to think how well the national, as well as international, markets would be performing if the US had its house in order. The major issues for US businesses are: (1) Deficit reduction, and (2) Curtailment of spending, and (3) Taxes. All the other social issues, such as gun control, don't even make a blip on the radar screen. Yet, the political focus after Sandy Hook, until a week so so ago, was unrelated to the primary issues restraining the US economy. Nothing was solved with the November elections, at any level. It is just more of the same. And, nothing much is changing as 2013 starts to unfold, ... just more of "can kicking," with no substantive changes to give businesses optimism for US operations.

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