For example, during the summer, when housing starts slowed, sawmills did not, so lumber prices fell. Scarce engineers were lured with stock options. That encouraged management to inflate share prices to retain talent. Investor giddiness caused anomalies. Cisco stock is down 55 percent from its high, Intel 58 percent, Lucent Technologies 80 percent.
Bearish analysts say aspects of today's prosperity are illusory, and unsustainable.
This is, they say, because, as in America in the 1920s and in Japan more recently, the prosperity has been paid for by improvident borrowing. There certainly has been a surge of borrowing by corporations and consumers, and now asset values are declining and the debt remains. Profits have been an unsustainably high portion of GDP and wages an unsustainably low portion. Corrections are underway. In the automobile sector, the inventory of vehicles is alarmingly high.