Hey the US markets were booming in 2007 and it is booming again in 2013.
Is there a take away? Is the 2013 boom the same as 2007? is there a learning to be had from the previous time?
Well 2008 – the bad news about Europe was surely not in the price. The other economies in the world were doing well – and the US currency was perhaps stronger. The Chinese and other trade partners were more than willing to keep prices low to help the US consumer consume more. The US government has again kept the currency cheap – and thus goods are still available in plenty.
The interest rates were higher – almost 5% but this time around it is lesser, much lesser. However the REAL interest rates seem to be same in 2007 and 2013. So there is not much to choose from between the 2 years.
The Dow was at a p/e ratio of 15 in 2007 and is currently at 13.5 in 2013….that does not mean much. Actually the gap is high, but we have no clue about how these indices will behave when so much of note printing is happening.
The US economy is doing well, but in 2007 nobody was even asking about some of these numbers. After all when there is a boom who wants to find out the reasons for the boom? everybody thinks they are making money!
The economy of 2007 and 8 were showing signs of slowing down but 2013 is showing signs of recovery. However we do not have enough data to say whether 2007 is like 2013 or not. It is quite a good boom in the equity market – which might see interest rates go up. After all with US $ 124 billlion in its balance sheet Apple Inc. must be worried about bubbles in the market…but how much can you really leave in a Money Market Mutual Fund…and for how long?
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