Transcripts

"Two Ways to Play"-Kevin Depew of Minyanville

SUZANNE PRATT: While signs of economic recovery have been few and far between, stocks have been surging. Tonight's "Two Ways to Play" looks at the disconnect between the markets and the economy. Here's Kevin Depew of minyanville and Minyanville's Kevin Depew.

KEVIN DEPEW, EXECUTIVE EDITOR, MINYANVILLE.COM: Despite the news this week that inventories of new homes plunged to a three-year low and evidence of price stabilization from the Case-Shiller home price index, the level of negativity about the economy is as great as it's ever been. These days, no good data point goes unpunished by the mainstream media. Stocks, however, are telling a different story. The market is up 8 percent this year. Are we still in a bear market? Look at it this way. Since 1997 stocks, excluding dividends, have shown no net gain. How much more of a bear market do you want? The point is well taken. Twelve years of virtually no capital appreciation in stocks is a pretty good bear market, almost as good as the 15-year period between 1965 and 1980 when stocks were largely flat. It's true, home prices aren't going to go to zero. But here's the elephant in the room: debt, the accumulation of it and then the repayment of it, drive every economic cycle. And while the past 12 years were about debt accumulation, this cycle is about repayment. How much more of a bear market are we going to get? Well, with respect to mortgaging our future earnings, we've pushed the envelope beyond any recognizable bounds.