While Germany, France and Italy expect to grow at 2.5 percent to 3 percent rates this year and next, unemployment remains above 11 percent in all three countries, compared with 4.3 percent in the United States. Heavy regulations, taxes and labor rules thwart entrepreneurs and prevent skilled workers from moving to sectors where they're most needed. Meanwhile, France has elected a socialist government that has adopted some anti-business policies, and Germany may do the same this fall. Many European firms have figured out ways to circumvent this burdensome system, but, in general, the case for continental stocks requires a combination of optimism and economic determinism. Not everyone shares this optimism.
Stocks are at or above all-time record valuations while earnings outlooks are pedestrian. . . .
The market rise is unsustainable, with sharp corrections no doubt in store. If you're more sanguine about Europe, consider some of the stocks that Lerner has been buying. A good example of a company that has restructured and repositioned, it's up 70 percent since January, and Lerner remains enthusiastic. In other words, the euro is enforcing stability. Friedman has been making unusual investments.