GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Economic Steroids Are Toxic, Too

January 11, 2010
AS THE NEW YEAR OPENS, THE stock market is behaving as if the past 20 years were about to repeat themselves: Another recession will turn into a robust expansion. Stock prices already are discounting an earnings recovery to something only slightly below the level before the financial crisis. Risk-taking is in vogue again.

The global economy, however, is like a marathon runner who ran too hard and hurt himself. This runner has been injected with some industrial-quality steroids, and away he goes. As the steroids kick in, his pace accelerates, as if the injury never happened. He's up and running, so he must be OK, judging from his speed and his progress.

We may think the runner has recovered from his injury, but steroids have their costs. They exaggerate true performance and mask pain, and the longer an athlete takes them, the less effective they are. Addiction is likely.

The world's economy suffered severe injuries last year, and to keep it going governments have injected massive doses of economic steroids called stimulus. It's everywhere, but the U.S. is one of the biggest users.

Complete reading the article at Barrons.com.

About the author:

VITALIY KATSENELSON
Vitaliy Katsenelson is Director of Research at Investment Management Associates and teaches at the University of Colorado. To read more of his articles visit www.ContrarianEdge.com . His book Active Value Investing was published by John Wiley & Sons in September 2007.

Visit VITALIY KATSENELSON's Website


Rating: 3.0/5 (2 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK
Email Hide