Friday, April 11, 2008

Uh, oh...

The last recession (in 2000) was caused by the bursting of a stock market bubble, where stock price valuations were bid up to levels not supported by fundamentals, particularly in the technology sector. In contrast, during the current slowdown, stock market valuations, as measured by P/E ratios do not look unreasonable. Unless earnings fall, the stock market should be OK, ...
General Electric reported a 5.8 percent decline in first-quarter profit on Friday, falling far short of expectations and stunning investors who consider the company one of the nation’s most reliable earners.

The unexpected decline, from a company known for rarely missing its estimates, will probably further erode confidence in the economy’s ability to rebound from the current financial crisis.

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