Economic environment

There are some thoughts regarding the situation with inefficiency of drug development industry - the lack of investment (and, you know, I completely disagree with this statment). However if it so - there is very little hope that the situation will be changed to the better in the nearest future. According to David Rosenberg we are experiencing a modern-day depression:

Q: Isn't this still a "modern-day depression?"

Sure it is. And just as we saw in 1933, 1934 and 1935, the economy and the stock market can experience a brief cyclical recovery, especially given all the massive monetary intervention by the central banks, but the fragility and vulnerability never go away, and neither does the hardship for many. Yes, yes, the stock market has doubled off the March 2009 lows. Yet, since that time, more than 11 million Americans have joined the food stamp program, including 4.4 million in 2011 alone. That may not fit into your definition of depression, but it does for these folks, I am sure.

The labour force has contracted by over 800,000 since the recession ended — this too is unprecedented. Assuming that the 200,000 payroll gain in December was the real deal, it would take 30 more of these to get employment back to where it was when the recession began four years ago. Real per capita personal disposable income in the U.S. has not grown for six years — despite trillions of dollars of government stimulus. If that's not a 'depression' outcome, then please come forward with your definition.

If you exclude the mountain of government social benefits, real income on a per person basis has rolled all its way back to where it was in 2001! Interest rates have been 0% for over three years and governments around the world have blown their fiscal finances out of the water in order to save insolvent banks and save economic activity from implosion. In fact, as a result, there has been such a radical decline in creditworthiness coming out of the Great Recession, that the pool of sovereign bonds that have unblemished AAA ratings has plunged to $4.5 trillion from $16.9 trillion (see page C12 of last Thursday's WSJ). That is a 73% nosedive and a reminder for investors that in the name of owning "scarcity", high-quality paper is noteworthy for its dwindling supply.

Well... I do not have any arguments, it looks like crossing of "Valley of Death" will be even harder for coming years.