A few humble thoughts about the stock market’s recent correction:
We all knew the market was too high. You would be hard pressed to find any observer who did not think that the market was poised for a fall. So, now we have our correction.
There is no sign at this point of a drastic fall in corporate profits, the main driver of stock prices. Except in the oil sector, profits are superb. This can and will change but it has not changed yet.
There is rarely a huge correction that lingers without either a liquidity crisis — i.e., a drastic fall in available credit or else a generalized depreciation of the dollar — i.e., inflation — or a generalized depreciation in asset values, i.e., deflation. Despite much talk to the contrary, there is at this point no sign at all of general deflation in any large industrial area, and very little inflation. There is no sign of a major bank failure or a shortage of capital. Indeed, capital is cheap and plentiful worldwide.