“Less bad” doesn’t equal good, but, contra Barry Ritholtz, it does equal better.
This is an important distinction given the current market is still well discounted from its highs.
At these levels, bulls only need to see a “better” situation ahead, they don’t need to see a “great” one.
The Big Picture: One of the arguments I keep making is that the folks pushing “Less Bad = Good” are ignoring the impact of Uncle Sam’s largesse.
Ritholtz goes on to warn us about The Federal Housing Administration’s (FHA) rapidly growing insurance of US mortgages, implying that this is why the “Less Bad” camp is wrong.
We don’t take issue with his concerns about the FHA, and we highly value his work in helping understand the problems of the US economy which continue to this today. Yet that doesn’t necessarily mean that the global economy, and that of the US, can’t grow regardless.
Despite the fact that the US still faces many problems, the global economy has already improved by many measures. Most economies around the world are set to grow. Manufacturing is rebounding globally, retail sales have rebounded globally, and inflation remains tame. While government largess may have helped things along, bears will be hard pressed to prove that the entire recovery is due to one-off stimulus effects.
Thus we feel some bears have become too focused on specific US problems, perhaps because they are too close to them. It might be causing them to forget, ahem, the big picture.