Worth bearing with this lone voice on stocks

The tragic decline we see play out daily in the fiscal state of the US doesn't necessarily mean we have to give up hope for that country's listed companies.

Indeed, their rude health appears to give the lie to the belief that the US economy is going down the Swanee.

The known-known is that the large US corporations that make up the S&P500 index do not depend entirely on US consumers for their earnings. They are all multinational entities that derive vast profits from their overseas operations.

It is also a matter of record that no US conglomerate pays the amount of taxes it "should". Given various federal incentives to globalise their activities, US companies (and their executives) enjoy outrageous levels of tax relief simply because they do not burden domestic resources and maintain their profitability through exploiting cheap labour and materials elsewhere.

In the process of this lark, which dates back through various regimes both Republican and Democratic to at least Ronald Reagan's era, millions of US jobs have been lost, unlikely to be regained.

It does not apparently matter to even the most superficially enlightened president: Obama, for instance, has done nothing to reverse the disintegration of US industry and Friday's dismal employment numbers confirm his toothlessness.

With regard to the US stock market, of course, the big unknown factor is investor sentiment. Unprecedented 4% zigzags in index levels, sometimes intraday, often on consecutive days, show that nobody is too sure which way things will swing.

It seems that fundamental analysis, not to mention good sense, has gone out the window.

Few of the organisations making up the S&P500 have, intrinsically, become bad companies in the course of the past four years. Say what you like about US bosses, the best of them know what to do to turn a profit and they all, without exception, have long seen the potential in emerging countries.

But regardless of any measures of reassurance trotted out by CEOs, lots of investors have lost their faith. Which way they'll eventually push the world's biggest stock market is anyone's guess - but more and more learned fellows are guessing: down.

Apart from the usual Chicken Little bears (Roubini, Faber), another person you'd do well to cock an ear to is John Hussman, feted as much for the performance of the funds he manages as for his prescient weekly market commentary. Hussman suggests we're not being bearish enough.

This week he rubbished the view of many Wall Street analysts that US stocks are "cheap" with regard to forward operating earnings. Their mistake is to assume that profit margins "will achieve and sustain the highest levels seen in US history".

Not in this climate of fear, reckons Hussman. According to his historical research, the S&P500 index, based on profit margins of just 10% for the next 10 years, should be trading at around 800. If we enter a secular bear market, the level is likely to be 400. On Friday the S&P500 index was at 1200. So yes, some panic may well be in order.