Saturday, October 25, 2014

The Joy of Spanking?

My father used to joke with other parents that the reason I was such a good student was because he would spank me every week, whether I needed it or no.  His logic was that it was good for a kid to be humbled ever so often.  Of course, he was joking!

But, I still think about that with respect to both the economy and the stock market.  Both need to be humbled ever so often.  Over the long run, a recession is good for the economy, and a correction is good for the stock market.  We're overdue for both!

The Index of Leading Economic Indicators (LEI) was released this week, and it was surprisingly strong.  There is still no recession in sight.  There are ten components to the LEI, and nine were up, especially bank lending.  (Some think the huge reserves generated by Quantitative Easing has finally overloaded bank balance sheets so much they HAVE to make loans.)  The only component that was down slightly was consumer expectations, which is not surprising, given the steady force-feeding of PIE (Putin, ISIS, and Ebola).

The stock market enjoyed a scary, brief 6% correction (which is technically not a correction at all), but the bulls seem to be in-charge once again.  As a kid enjoys the reprieve between spankings, I guess we shouldn't complain.