The US market is "way ahead of itself", says David Rosenberg of Gluskin Sheff. The S&P 500 has now rallied by almost 50% in five months. There hasn't been such a rapid rise in such a short time and "without anything more than tentative signs of economic improve-ment" since the bear rally of 1930.
Since 1950, every time stocks reached the 50% mark, corporate profits had, on average, grown by 12% and GDP by 4.5%. Employment had revived strongly and bank lending was expanding at a 5% clip. But not in this rally; all these key economic numbers are still "trying to make a cycle low", says Rosenberg.
It also bodes ill that valuations both now and then never reached levels typical of long-term, bear-market bottoms, as the FT's John Authers wrote. Just as they did in 1930, stocks look pricey again after their latest run-up. But the most worrying sign is that this rally has tracked the 1930 rally very closely. The latter saw a 48% jump in five months almost exactly where we are now before sliding to new lows.
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The cost of the financial crisis could reach $11.9trn, says Edmund Conway in The SundayTelegraph around 20% of world GDP and equivalent to £1,779 per person. This is the total sum governments have made available; it includes direct capital injections as well as liquidity facilities offered by central banks and state guarantees of bank debt guarantees, not all of which will be called upon.
"Remittances provide a lifeline to many poor countries,"says the World Bank's Dilip Ratha. Money sent home by migrant workers adds up to 34% of Moldova's GDP, for example. Last year, global remittances grew by 15% to $328bn, but now they are following developed-world growth downwards.
Mexico's remittances, dominated by money earned in the construction sector, mirror the trend in US housing starts with a lag of four months, says The Economist. Immigration restrictions, triggered by rising jobless figures, are not helping. Overall, remittances could fall by up to 10% in 2009, says the World Bank.
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