Given the problems in Europe

David Rosenberg offers his usual incisive comments on the economy and suggests a couple of reads:

Whether you are perma bull or perma bear or everyone in between, the  column by Paul Lim in the Sunday NYT business section (The Bounce Isn’t Enough to Recover From a Bubble on page 4) states that fully recovering from a bubble burst usually takes a long, long time, notwithstanding the flashy 100% rally from the March 2009 lows. The economic recovery is less than spectacular, and in fact, ranks as one of the poorest ever ― 3% growth so far whereas GDP usually expands at a 5.5% pace. And outside of exports, no real economic variable is close to coming in anywhere near the levels prevailing before the recession began in 2007 (and the revisions the Fed made to the industrial production statistics on Friday show that output is further away from the cycle highs than previously thought ― by an additional 2.6 percentage points (now IP is down 7.6% from the pre-recession peak). The data up until January were looking okay but since that time the vast majority of economic indicators have come in below expectations. Look for nonfarm payrolls to disappoint, yet again, this Friday (consensus around 200k).
Also have a look at page B9 of the weekend WSJ ― Stocks: Bracing for Falling Profits. And then go back and have a look at Bob Farrell’s Rule 1 ― the concept of mean reversion. Profits relative to GDP stand at a historical high of  12.7% compared with the long-run norm of 10.5%; while S&P 500 margins at 8.2% are also far above the historical average of 6.1%.

The one area that is performing — exports — is likely to disappoint in the near and longer term. Given the problems in Europe and Japan, their purchases from us are likely to drop.