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by David Cay Johnston

Tech stocks have returned to bubble levels, thanks to PR, weak financial journalism and cheap credit

stock traders

Traders on the floor of the New York Stock Exchange in New York City. The Dow Jones Industrial Average reached record highs in 2013 and was up 23% for the year.John Moore/Getty Images

Irrational exuberance is back on Wall Street, encouraged by cheap credit lavished on heavily leveraged speculators, lax accounting rules and the unfortunate tendency to confuse the true value of stocks.

The Dow Jones Industrial Average, long a bellwether of the stock market, started the year at 13,416. Last week it hit 16,478, which is 2.5 times its low point during the Great Recession in 2009.

Given rather modest job growth, government spending cuts that have weakened the economy and other lukewarm measures of domestic and global economic growth, this rise in the Dow is difficult to explain based on rational expectations.

But the Dow’s striking 23 percent rise this year is nothing compared with the steep prices of many specific stocks, at least when traditional measures of valuation are applied.

http://america.aljazeera.com/opinions/2013/12/stock-market-techbubble.html

3 thoughts on “The coming stock market collapse

  1. Its unreal. Nobody even remebers history…just a few years ago!
    Before the FED was created the economy was a boom bust economy, the FED was supposed to smooth it out. Now we are in a boom bust economy because of the FED.
    Each boom bust gets worse. First the tech bubble, then the housing bubble and a worldwide meltdown that is still unfolding and now the next one….. the bigger the bubble the harder the fall.

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