You make points, but ... Following your logic--that factors cited are all insurmountable and counter to growth, do you believe that we are headed to permanent depression? Assuming not, I assume you'd agree many/most of these factors are driven by or indirectly influenced by business, consumer and investor sentiment, all of which have taken a much publicized hammering. As the anxieties lessen or are eliminated, this will buoy an important economic engine--sentiment. Seems to be proven by recent market?
To your specifics, pension fund short fall a direct outgrowth of bear market--as the bear hibernates, those pressures ease. And many co's are making contributions and have this in hand. The relatively few, albeit large, that have the larger problem are also responding-not sure I'd own them specifically at this point, but don't believe we should let Ford's problem color all investments. Credit bubble is overstated, and easing, in part because of low rates. Same is true of housing, where analysis shows super-heated limited to relatively few markets (San Fran, etc.) that are already backing off valuations. Jobless rate high if you're layed off, but less than 6% is not high by historic norms, and the retiring babyboom is and will take huge numbers out of the workforce--look for worker shortages in coming years. Energy costs are going down--check the commodities page. Gov't cuts aren't easy, but ultimately, in my own opinion, less government is more. Weak dollar good for exports, balance of trade, etc.--and expect you'll see this turning soon enough. As to consumer spending, again sentiment will make a difference. And lets not forget all those reconstruction contracts for U.S. businesses in the aftermath of Iraq--not celebrating, but stating the obvious. So growth will be driven by fundamentals, but fear and uncertainty have had a huge impact on the economy--maybe even the oracle of Omaha? By the way, don't believe Warren said he was selling--just not making any big buys. 'Course we don't know what he's done in the last week, do we?
Point taken. I'm looking for a sub 15 (GAAP) P/E in the S&P. When we reach that point the market will be valued fairly. With mfg. capacity at 75% we have a long way to go. In addition to the terrorism, war fears and corporate scandal issues, we have some more fundamental overhang Among them are huge pension fund shortfalls, corporate and personal credit bubble, housing bubble, continued jobs weakness (record bankruptcies), energy costs (not cured by a swift victory), state budget woes (will result in layoffs), weakness in the dollar (foreign outflows), auto and home sales falling and trillions of dollars in goodwill and options expenses yet to be written off and an air transportation system on life support. Where is the catalyst for growth?
Don't think that the only stocks to blow up are in the much publicized sectors you mention. Wasn't EDS a shelter in the tech storm? Take a look at State St. this morning. How about the safety of utilities? How about banks and financials? Buffett doesn't see any of these "good companies" you mention. I'll go with him.
The # of short shares is high only compared to the daily volume; it's a low fraction of the float. Second, most heavily shorted stocks resolve to the downside in a major way, although the short positions lead to covering rallies now and then; these are opportunities to short again. The odds say it goes down and that you can short the bounces.