Since January the Dow Jones Industrial Average has made new highs. Most every other stock index has confirmed a new high in one way or another. Our leaders in Washington have reassured the American public that the budget crisis is not solved but we are somehow made to feel better about the whole thing. The Federal Reserve has said they will continue their policy of monetary easing. Happy days are here again.
But why doesn't it feel that way?
There remains a lot of uncertainty in the financial markets and the global political picture. China is facing a real estate "bust" which will make our own real estate crisis in the US look minor. They will need to start liquidating assets in order to make good on their own debt obligations as they begin coming due. China is the single largest buyer of US Treasury assets. It stands to reason they will be forced to liquidate a portion of their holdings. How much liquidation has yet to be seen.
In addition S&P earnings are starting to slow down. This means that stock price-to-earnings ratios will continue to climb to historic proportions. Many countries around the world are still facing their own financial crises of different magnitudes.
The sabre-rattling around the world has become all too familiar. It almost lulls us into a sense of complacency. We are now closer to war in Korea than any time since the 1950s. Many countries are well along at building or obtaining nuclear weapons. The world is a much more complicated place than before.
But for now, the party on Wall Street is in full swing. Even the charts are confirming good times are here. I can't quite put my finger on it but something still does not feel "right" about all of this. It is certain that time will reveal all things. And all parties come to an end. This party might end when we least expect it.
