Stock Market at it's highest level in over 6 years

[dullard]

Originally posted by: BaliBabyDoc
it is quite likely there will be a long-term impact from the Bush Years.

There will be a long-term impact on many things. Long term debt, etc are all major hurdles. But, the president has very little impact long-term on the stock market. People either invest money or they don't. How much people invest is almost completely independent from the federal deficit.

The best way a president can have a long-term impact is to drastically change retirement plan laws. But even then, a president cannot force you to invest more/less. He just doesn't have that level of control (yet).

I don't predict this pattern will last forever. I don't guarantee any pattern. But until there is strong reason to expect a pattern to change, you are best of to expect it to continue.

 

[Engineer]

Originally posted by: ntdz
http://money.cnn.com/2006/04/20/markets/markets_newyork/index.htm

More bad news about the economy.

Hey ntdz, what happened?

 

[WhipperSnapper]

Originally posted by: conjur

Think about it, ntdz, for once. PLEASE do some critical thinking for once.

Yields keep rising, precious metals keep rising, oil rising, inflation rising and yet the stock market is going up, too? Doesn't make sense.

Not to mention that global labor wage arbitrage is still in its early stages. It's also possible that stocks have increased as a result of capital becoming more profitable as businesses are able to pay out less in wages and take a larger share of employees' contributions to the act of production for themselves. It could just be an indication that the rich are getting richer while the lower classes are slowly becoming enslaved.

 

[Engineer]

DOW down another 71 today to close below 11,000.

Nasdaq down 11.

Markets are scared sh!tless of Bernanke. Inflation fighter even if it destroys the US economy. The market is now looking for a recession instead of just stagflation (stagnant economy with inflationary pressures).

 

[WHAMPOM]

It is nice to hear how great the exchange is doing. :roll:But if had followed even a pessimistic growth curve, it should be in the 16,000 range. Ask why it is so static, but with inflation factored in, isn't it actually losing ground?

 

[Slew Foot]

Originally posted by: Engineer
DOW down another 71 today to close below 11,000.

Nasdaq down 11.

Markets are scared sh!tless of Bernanke. Inflation fighter even if it destroys the US economy. The market is now looking for a recession instead of just stagflation (stagnant economy with inflationary pressures).

It was bound to happen. "Economic growth" the last 5 years has been based on the government spending money it doesnt have, and consumers maxxing out their credit cards and HELOCs.

When the credit lines dry out, you have massive economic collapse. Ive been predicting this for the last couple of years, of course, no one listens to me.

 

[Engineer]

DOW down 1.3% to 10,786.

Nasdaq down below 2,100 with over a 2.25% midday loss.

Very sad!

 

[dullard]

Originally posted by: Engineer
DOW down another 71 today to close below 11,000.

Nasdaq down 11.

Markets are scared sh!tless of Bernanke. Inflation fighter even if it destroys the US economy. The market is now looking for a recession instead of just stagflation (stagnant economy with inflationary pressures).

I think it is time to change the thread title:

Stock Market at it's lowest level in over 6 months.

Down well over 1% again, Nasdaq down 2.2% at the moment. The Nasdaq is approaching 52-week lows.

 

[dmcowen674]

Originally posted by: dullard

Originally posted by: Engineer
DOW down another 71 today to close below 11,000.

Nasdaq down 11.

Markets are scared sh!tless of Bernanke. Inflation fighter even if it destroys the US economy. The market is now looking for a recession instead of just stagflation (stagnant economy with inflationary pressures).

I think it is time to change the thread title:

Stock Market at it's lowest level in over 6 months.

Down well over 1% again, Nasdaq down 2.2% at the moment. The Nasdaq is approaching 52-week lows.

The OP has clearly shown he can't handle the truth and will not change the Title.

 

[Engineer]

Market off "again" today. Wholesale inflation came in low but core inflation came in at up .3% (3.6% anualized) keeping pressure on the FED to raise rates. Just how much influence does a small rate hike have on the damn market anyway? *sigh*

Japan fell 4% in overnight trading! :shocked:

 

[Nyati13]

Originally posted by: WHAMPOM
It is nice to hear how great the exchange is doing. :roll:But if had followed even a pessimistic growth curve, it should be in the 16,000 range. Ask why it is so static, but with inflation factored in, isn't it actually losing ground?

Yes, the dollar has devalued about 30% in the last 6 years, so to have actually remained stagnant the market would have to be around 15,000 or so. Adjusted for the devalued dollar the market today is about 7,500 when compared to the market 6 years ago.

 

[Engineer]

DOW and NASDAQ 2006 gains completely gone now. Not sure about S&P500!

I wish I had a few dollars to invest right now as I think the market is terribly oversold (unless a REAL recession is looming).

 

[sandmanwake]

Well I just lost all my profit from last year and then some.

 

[Engineer]

Originally posted by: sandmanwake
Well I just lost all my profit from last year and then some.

Tell me about it....<insert throwing up emoticon here>

By the way, the profits in the US are the highest % of GDP in it's history, but you sure wouldn't think it now looking at the market, would you?

(souce: Kudlow and Company, CNBC)

 

[glenn1]

Market off "again" today. Wholesale inflation came in low but core inflation came in at up .3% (3.6% anualized) keeping pressure on the FED to raise rates. Just how much influence does a small rate hike have on the damn market anyway? *sigh*

It's influence is due to how it affects the risk-reward ratio for equities. Potential equity investors compare the riskless rate of return available from Treasuries and demand a risk premium above that to take on the higher risks of owning equities rather than debt. The hurdle rate investors set for what risk premium they're willing to accept will vary according to their mood but when the discount rate goes up it leaves less wiggle room.

An example with some made up #s just to illustrate the point. Let's say that as an investor you require a minimum risk premium of 3% to invest in stocks rather than a T-bond. Presuming stocks have a 8% average rate of return, that means that the T-bond has to be yielding 5% or less for you to consider stocks as an alternative. If the Fed raises the discount rate from 5% even to 5.25% (a 25 basis point hike, what the last 15 or so have been) then you're under your hurdle rate for risk premium. You might not sell your equities, but you're probably not going to add to your holdings.


BTW, the conventional wisdom for what's tanking the market right now is that the Bank of Japan is both unwinding their zero-interest rate policy and removing lots of liquidity at the same time. Traders were making tons in the carry trade, borrowing from BoJ at ridiculously low rates, and using it to invest in very low quality assets - everything from commodities to emerging market equities. That's why some of the asset classes that had the biggest price run-ups (precious metals, Indian stocks, etc) are the ones crashing down hardest now. Without the easy Japanese money fix, the money to fuel those speculative bubbles is drying up and the traders are having to unwind those positions. That's causing a rush for the exits and tanking out U.S. equities as well. Not to say that those U.S. equities aren't ripe for a correction in their own right, but they're more collateral damage than prime target.

 

[Engineer]

If the Nasdaq loses again today, it would be the first 9 day straight losing session since 1984. One the verge of the "longest" losing streak in 22 years.

 

[LegendKiller]

Originally posted by: glenn1

Market off "again" today. Wholesale inflation came in low but core inflation came in at up .3% (3.6% anualized) keeping pressure on the FED to raise rates. Just how much influence does a small rate hike have on the damn market anyway? *sigh*

It's influence is due to how it affects the risk-reward ratio for equities. Potential equity investors compare the riskless rate of return available from Treasuries and demand a risk premium above that to take on the higher risks of owning equities rather than debt. The hurdle rate investors set for what risk premium they're willing to accept will vary according to their mood but when the discount rate goes up it leaves less wiggle room.

An example with some made up #s just to illustrate the point. Let's say that as an investor you require a minimum risk premium of 3% to invest in stocks rather than a T-bond. Presuming stocks have a 8% average rate of return, that means that the T-bond has to be yielding 5% or less for you to consider stocks as an alternative. If the Fed raises the discount rate from 5% even to 5.25% (a 25 basis point hike, what the last 15 or so have been) then you're under your hurdle rate for risk premium. You might not sell your equities, but you're probably not going to add to your holdings.


BTW, the conventional wisdom for what's tanking the market right now is that the Bank of Japan is both unwinding their zero-interest rate policy and removing lots of liquidity at the same time. Traders were making tons in the carry trade, borrowing from BoJ at ridiculously low rates, and using it to invest in very low quality assets - everything from commodities to emerging market equities. That's why some of the asset classes that had the biggest price run-ups (precious metals, Indian stocks, etc) are the ones crashing down hardest now. Without the easy Japanese money fix, the money to fuel those speculative bubbles is drying up and the traders are having to unwind those positions. That's causing a rush for the exits and tanking out U.S. equities as well. Not to say that those U.S. equities aren't ripe for a correction in their own right, but they're more collateral damage than prime target.

I would also add in the slowing of the housing market and the eventual decline in consumer debt spending into that mix. When that declines, it hits a lot of ancillary sectors.

Your equity risk premium argument is a bit shaky, you are working backwards from a return target, subtracting the risk premium, and then looking at relative value to a risk-free asset. This would be true if the risk-premium were stable, but it is not completely stable and it is affected by a lot of things.

But I do agree that many models are being adjusted for the increase in rates, larger discount factors, and overall slower economy due to lower availibility and cost of capital. All of these have huge affects on equity (and debt) valuations.

Very interesting perspective on the carry trade for the Jap debt...I hadn't thought of that one before, nor read it in mainstream. Thanks.

 

[alien42]

Originally posted by: Engineer
If the Nasdaq loses again today, it would be the first 9 day straight losing session since 1984. One the verge of the "longest" losing streak in 22 years.

thankfully pre-market trading is looking good so far but that of course can change quickly. i will go ahead and predict that today will be in the green (crossing fingers) unless we get a surprise from the feds.

 

[conjur]

Ain't looking good anymore.

Real wages down 0.7%
Rents up 0.6%
Core CPI up 0.3%

http://www.marketwatch.com/News/Story/S...07%2DDF205AFC7C29%7D&siteid=mktw&dist=

 

[Engineer]

Major bounce the last two days. Dow up nearly 2% right now with the NASDAQ up nearly 3%. Dow over 11k again. 401k contribution went in yesterday so it feels a little better!

 

[blackllotus]

Dows up ~200 points according to CNN right now

 

[dullard]

Originally posted by: dullard
My next prediction: the next local minimum for the DJIA is 10,700 (give or take 100). Buy anytime it is below 10,900.

Hmm, what was that local minimum?

Let me think over the weekend what the next peak/valley will be. Can I miraculously predict 3 in a row? Or am I just full of myself?

 

[raildogg]

Stock market? Up what? Tell that to my portfolio. Or tell that to people during the past week. It doesn't really matter at level it is on. It depends on people. What I find really distressing is that people view the economy on a partisan basis. So if their man is in office, the economy is always up. On the other side, if their man is not in office, the economy is always down. Shens. It doesn't take much for the markets to lose what they have gained. Many people have lost lots over the recent months and years. That is the risk. I wouldn't be surprised if the market fell by a lot in the upcoming weeks and months. Noone knows.

 

[dmcowen674]

Originally posted by: conjur
Ain't looking good anymore.

Real wages down 0.7%Rents up 0.6%
Core CPI up 0.3%

http://www.marketwatch.com/News/Story/S...07%2DDF205AFC7C29%7D&siteid=mktw&dist=

I haven't seen the Repubs swearing wages are up lately.

I'm sure they will say wages are up before the Elections again though.

 

[dullard]

Originally posted by: dmcowen674
I haven't seen the Repubs swearing wages are up lately.

I'm sure they will say wages are up before the Elections again though.

But remember, if stats fall now, then return to normal before elections, that is a huge gain in all the stats right before election time. Thus, look at how great for the economy!