Signs of the Economy’s Recovery: Speculation
Abdulaziz AlMulla
What's the world coming to when you can't rely on speculation and rumor?
I don’t know what world The Wall Street Journal is living in (perhaps you can find a dimension or universe that I can’t) but the economy is well on it’s way to recovery. In a recent article, the WSJ laments the performance and over valuation of Bank of America Corp. Shouldn’t the fact that stocks are being inflated again be a sign of recovery?
The way I see it, if people are confident enough to jump onto Wall Street with no idea of what they’re really doing—as most do, kind of like the California Gold Rush—in search of high yield profits, then the economy is once again performing the way it should be. Stock speculation is a time-honored tradition. Yes, it comes with dangers. Hell, Mark Twain wrote, “October. This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February.”
The problem with this vice however, as with any vice, is that oftentimes, the gains outweigh the drawbacks, if only for a certain period of time. For once though, it is the other way around.
In a recent statement by Federal Reserve Vice Chairman Donald Kohn, we see “The crosscurrents in the recent data and a bit more favorable financial news of late stand in contrast to the uniformly bleak picture of a few months ago.” The developments “may be an early indication” that the economy’s contraction is slowing and it will stabilize later this year, he said. While it is true that “we are not out of the woods yet,” the economy is becoming less and less volatile.
While the economy has experienced constant small contractions, the overall trend is upwards. All of these contractions have been outweighed by greater expansions in a longer-term picture. Case in point: my favorite stock, Ford. Ford stock value has dropped from 4.01 to 3.69 in the one day since the weekend. A big contraction indeed. But when one looks at it in the light of the past month-to-date, it has more than doubled in value from a measly 1.58. No small gain.
Will this continue? Or will the rubber band snap back with a resounding clap? My opinion: short now, buy later.
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