The following chart reveals the stunning increase in corporate profits margins despite very low industrial capacity utilization rates. Itís no wonder that job creation is very disappointing. Corporate managements, under intense pressure from anal cysts and shareholders to grow profits at double-digit rates, cannot afford to hire workers, period. In fact, poor employment data emanates from the crux of the bull case: still artificially low interest/inflation rates and very high corporate profitability.Ē
Monetary policy is marching investors off a plank. Faced with no income from bank deposits and money market funds, individual investors are throwing money into the stock market again. But the market is swallowing their money without going up much. This is probably another case of imminent capital destruction.
The seller/buyer ratio for the Financials was a robust 9.7 to 1 and for the Brokers was a huge 16.8 to 1. The shares sold/bought ratios were respectively 70.4-1 and 60.1-1. Despite booming business, insiders cannot get rid of their own shares quickly enough. But In Wonderland, nothing computes.Ē
The Investment Company Institute reported January fund flows in late February. Equity fund flows were a surprisingly large $43.8 billion. When we put this figure into our database and look at monthly flows, flows as a percentage of assets and flows compared to household savings, the comparisons are all reminiscent of early 2000. It is also worth noting that January equity fund flows coordinate with Januaryís extreme AAII bullish sentiment readings. (January 2004ís sentiment readings were the highest since January 2000.) In short, January 2004ís sentiment and flow figures are much like January 2000ís statistics. Need we say more?Ē