There was a time, not too long ago, when bull markets were driven by the headlined successes of great American companies. These days, however, such corporate icons as IBM, McDonald’s, Coca Cola, Target, Sears, Best Buy, GE, Caterpillar and Wal-Mart are struggling to grow revenues as the Great Recession drags on for a wide swath of businesses and America’s beleaguered middle class. The stock market surges relentlessly higher anyway, impelled not by commensurately good news from the corporate sector, but by announcements such as the one that came Friday from the Bank of Japan, that it plans to raise its target for monetary growth.
Money managers of course thrive on this kind of news, but we shouldn’t kid ourselves that it constitutes a sound basis for pouring trillions of dollars into stocks. Meanwhile, the hot-shot companies that are doing just great — Google and Facebook, to name two standouts — are just huge ad agencies, albeit with more clout than even the most visionary Madison Avenue denizen could have imagined just ten years ago. What kind of economy counts as its very biggest successes companies that exist merely to hawk the wares of others? We should rather it be their clients’ shares that are grossly overvalued.