Well, it got here a little earlier than I thought it would, but the Dow's back above 10K--about where it will be for the next three-five years whilst we work our way through excess housing inventory. Companies are valued more appropriately after the correction, and one market segment (financials) isn't either overvaluing or undervaluing the market all by itself anymore.
What does this mean for the US? It means a slow recovery going forward, but a recovery nonetheless. It means high unemployment, higher than we're used to. It means there will be continuing pressure from the Democratic Party for more stimulus, which would be folly as the stimulus already passed has had little impact on the recovery thus far (save for psychological).
It means that savvy investors are going to have to look at the international portions of their portfolios for real growth options--which will be there.
What could change this? On the positive side, an energy technology breakthrough or breakthroughs. Problem is, we've offshored most basic R and D, so something like this is just as likely to develop in India or China. On the downside, foolish attempts at stimulus could snuff out the emerging recovery (as happened early in the Depression), or I could just plain be dead wrong (like my buddy Bill says) and this is nothing but a huge "Sucker's Rally". I don't think that is the case at all. I can make a coherent case for why the market is up since March; I can't make a coherent case for any more upside.
Let me see, the dollar is being devalued more each day. Other countries going to the Yen and the Euro for reserves.
ReplyDeleteHigher unemployment leads to lower government revenues.
Governments increase taxes to make up for the lost revenues.
More companies flee America to countries with more business friendly tax policies leading to even higher unemployment.
Keep in mind that the stock market is a compilation of stocks in companies around the world, not just the USA and the Dow at 10,000 now will be worth less in a few years as the dollar becomes worthless.
America which was once the shining light on the hill is seeing that light grow dimmer with each passing day.
....can you hear the bears growling?
ReplyDelete"whilst"?? you been hanging out in the pubs, mate?
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteInteresting thought:
ReplyDelete"If there is anything that shows the divide between Wall Street and Main Street, it’s the contrast between a day when the stock market gleefully returns to five-digit territory, and the military beats its recruitment goals."
http://trueslant.com/level/2009/10/14/dow-10000-and-military-recruitment-goals-a-tale-of-two-numbers/
Should I sell my Beanie-Baby stock now?
ReplyDeleteShould our expectations for America be based upon what he did in organizing the community of Chicago?
ReplyDeletehttp://finance.yahoo.com/news/At-foreclosure-auctions-rb-853906128.html?x=0&.v=1
Matt Taibbi
ReplyDeletewatched carefully the reporting of the Dow breaking 10,000 the other day and not anywhere did I see a major news organization include a paragraph of the 'On the other hand, so fucking what?' sort, one that might point out that unemployment is still at a staggering high, foreclosures are racing along at a terrifying clip, and real people are struggling more than ever. In fact the dichotomy between the economic health of ordinary people and the traditional “market indicators” is not merely a non-story, it is a sort of taboo — unmentionable in major news coverage.