“George Soros is in heaven. He has created the perception of unquantifiable risk. By using Greece as his starting point, he has captivated the imagination of global investors to believe that European debt contagion is a real threat that could lead us into a double dip. Contagion can’t be calculated. Confidence in contagion produces unbridled fear,” Jason Schwarz writes for Seeking Alpha. “Few understand how sovereign debt actually manifests itself in real economic terms and Soros becomes the one who creates the threatening perception. Yes, Grandpa George is in heaven, or to put it more accurately, hell.”
“The man is out preaching his gospel of destruction to the media, declaring that Europe faces almost inevitable recession next year as eurozone countries pass austerity measures aimed at balancing budgets. He mentions that this is ‘eerily reminiscent’ of the 1930’s situation when governments were pressured to narrow their budget deficits when economies were still weak. As if comparisons with the Great Depression aren’t enough, Soros goes on to forecast that the current climate in Europe is ‘liable to give rise to social unrest,'” Schwarz writes.
“Don’t let the irrational pessimism of Grandpa George and his hedge fund gang cause you to miss the the biggest investable cycle in the history of mankind. As we hover at Dow 10,000 and Nasdaq 2,300 after climbing a little ways from the depth of March 2009, the mobile tech revolution is beginning to show signs that it will far surpass even the wildest predictions of the dot-com bubble,” Schwarz writes. “Grown men are taking off work to stand in line just to pre order the iPhone 4 (AAPL). We have never seen anything like this. Morgan Stanley analyst Katy Huberty is forecasting that up to 50% of current iPhone users will upgrade to this new phone which will lead to 48 million units sold in 2010 and the installed base will rise to 100 million by the end of 2011. The acceleration of tech evolution predicts that 10 billion mobile Internet devices will be sold in this cycle that is just beginning with Apple.”
Schwarz writes, “Apple has $50 billion in cash on its balance sheet. Corporate profits in general are surging with an average of 11% cash compared to assets on US corporate balance sheets. This is a 60 year high. Corporate profits are on pace to reach an all time high in Q3 2010. It’s only been one year since the depth of the recession and Real GDP is close to reaching its all time high. Manufacturing levels are showing the equivalent of 6% GDP growth. If you get caught up in Grandpa George’s heaven of pessimism you’ll miss the elephant in the room. Concrete data is proving abstract fear to be completely irrational.”
Full article here.
Part one, “Irrational Market Pessimism,” from June 8, 2010, is here.
[Thanks to MacDailyNews Readers too numerous to mention individually for the heads up.]