The unicorn economy

This time a year ago, I probably would have thought Tyler Durden was an internet crank par excellence, but with each passing day, his invective against Wall Street, the media, and the U.S. government becomes more and more believable. Even someone like myself with modest financial skills can easily see that corporate earnings – which should be the greatest measure of economic strength – are stuck in neutral. That should portend flat stock-market valuations, not the perky markets we have experienced of late. And it should serve as a muzzle for stock-pumping journos (but it hasn’t).

On a daily basis, I follow a basket of about 50 companies, and by a ratio of about 3:2, analysts have been revising 3Q earnings projections down, not up, with the oil and gas sector leading the way down. Some companies have beaten estimates of late, but those estimates were insanely low to begin with, and as more companies reported at the end of the month, it was clear that this was no earnings season to write home about. So, again, what gives with the stock market?

There is no way that current and projected earnings justify the valuations we are seeing, and yet here we are mid-day with another strong increase in the market, or as the Wall Street Journal’s MarketWatch site gushed:

“Investors were perhaps primed for some good news following a two-day decline in which the Dow shed 38 points. That soft patch was an exception to what has otherwise been a stellar month, with the blue-chip index up more than 7% amid investors’ rising appetite to take on risk.”

We’re truly a nation of idiots.