Stock Market -- Does It Still Reflect the State of the U.S. Economy or Overseas Holdings?

[WhipperSnapper]

As I watch the Dow climb, I started wondering, does today's stock market or at least the Dow necessarily reflect upon the state of the U.S. economy or is it possible that to a certain extent, it reflects upon the health of business and industrial holdings in other countries?

If a company that is American in name only possessed most or almost all of its assets overseas and it began doing well, wouldn't that be a reflection on the economy in those other nations?

 

[Ausm]

You could ask the question to 10 economists and get 10 different answers I am afraid but I am sure there are some "Experts" in here that could you a more accurate answer

 

[dmcowen674]

Originally posted by: WhipperSnapper
Topic Title: Stock Market -- Does It Still Reflect the State of the U.S. Economy or Overseas Holdings?

Neither, it's just the rich playing a game of Monopoly.

 

[ElFenix]

the assets represented in the stock market don't necessarily devalue just because the dollar does. a lot of the stock market over the last few years has been inflation.


and to answer your question, yes, it reflects the value of those companies. if they have large overseas holdings they'd generally be more valuable than they would be otherwise, ceteris paribus (there's a whole discussion of conglomerate inefficiencies and a counter discussion of synergies).

 

[StageLeft]

The DOW invariably reflects perception of value (I think this stock is worth such and such); it is not an actual reflection of it. The companies in it are widely considered to be doing better now with a brighter future than they were six months ago, so the stocks to those companies have increased in value. The inherent value of course has not changed much in such a period of time, just as the value of these companies didn't drop by more than half from 14k down to 6666.

 

[WhipperSnapper]

Originally posted by: Skoorb
The DOW invariably reflects perception of value (I think this stock is worth such and such); it is not an actual reflection of it. The companies in it are widely considered to be doing better now with a brighter future than they were six months ago, so the stocks to those companies have increased in value. The inherent value of course has not changed much in such a period of time, just as the value of these companies didn't drop by more than half from 14k down to 6666.

That makes sense, but is the perception of their value based on better performance in the U.S. or could it be based on a better performance abroad with possibly weaker performance domestically?

 

[BigDH01]

Originally posted by: WhipperSnapper

As I watch the Dow climb, I started wondering, does today's stock market or at least the Dow necessarily reflect upon the state of the U.S. economy or is it possible that to a certain extent, it reflects upon the health of business and industrial holdings in other countries?

If a company that is American in name only possessed most or almost all of its assets overseas and it began doing well, wouldn't that be a reflection on the economy in those other nations?

I think one could have a discussion as to whether the stock market accurately reflects the state of the US economy even when primarily dominated by US investors.

 

[Pepsei]

i think this has something to do with the value of dollar dropping.

 

[WhipperSnapper]

Peter Schiff seems to think that it's also inflation and currency devaluation:

http://www.economyincrisis.org/articles/show/3536

 

[StageLeft]

Originally posted by: WhipperSnapper

Peter Schiff seems to think that it's also inflation and currency devaluation:

http://www.economyincrisis.org/articles/show/3536

I do believe that the stock market didn't go up much during the last bout of high inflation in the US, though. As always, take whatever schiff says with a bag of salt. He is a perma bear and a broken record, so he is always starting off with the idea that the dollar is dead and gold is king. Then he looks at the facts needed to support that. He already has his conclusions before seeing any of them.

 

[brencat]

The stock market is forward looking...that is stock prices typically reflect expectations for earnings, revenue growth, cash flow, etc. 6 months out.

I can tell you after speaking with many retail brokers regularly that ordinary retail investors are mostly sidelined and NOT participating in this rally. It is a momentum and leverage driven rally by institutional/professional traders and money managers armed with cheap money as a result of near 0 borrowing rates. And they are having a banner year -- especially in High Yield which is up 51% YTD.

In my view, this market is ridiculously ahead of itself. We have almost 10% unemployment, and there are millions just hanging on in quiet desperation. Foreclosures and late payments are soaring. Citigroup reported $8 billion in credit losses during their earnings report yesterday, and BofA's stellar trading/banking revenue from the Merrill acquistion was tarnished by similar credit card losses on the BofA side.

We are going to have a serious correction in the S&P500 and credit markets any week now. But not because Schiff says so...even a stopped clock is right twice per day.

 

[FerrelGeek]

Originally posted by: dmcowen674

Originally posted by: WhipperSnapper
Topic Title: Stock Market -- Does It Still Reflect the State of the U.S. Economy or Overseas Holdings?

Neither, it's just the rich playing a game of Monopoly.

Well, there's some deep-thinking and insightful analysis.

/sarcasm

 

[piasabird]

Both. There are companies/corporations that do trade on the stock market that are traded on the stock market (Several US Markets), that are mostly US Companies. However, many companies are very international. For instance Intel is one of the largest Tech Stocks traded on the Nasdaq. However, Intel sells products and manufactures products from Processors to chipsets all over the world. Many companies like Exxon Mobil and British Petroleum are also world wide companies.

Many companies like Ford are based in the USA but they have parts manufacturers in many locations including USA, Canada, Mexico, etc. They sell products worldwide as well as domestically. Almost all companies are like that. Some companies like Banks and power supply companies have a lot of business that is mostly in the USA.

Walmart is thought to be a US company but they are building stores all over the world and also buy goods all over the world.

You can not live in a USA only fishbowl. It is impossible.

I can think of some stocks that are mostly US like Lowes (LOW), Home Depot, Target, Boeing??, Sears Holding (Sears and K-Mart) SHLD, some of these are retailers and they are on the stock market. So dont believe in the mindless dribble on the news and from your friends. Go Open a stock trading account and trade some stocks and learn something. You can open a Scotrade account for $500.00.

Bank of America stock was as low as $2.00. If you had purchased it for $2.00 you could have made a lot of profit. This week I noticed it was selling for $18.00. It may be lower now. That would have been a substantial profit margin. I think Century Twentyone Holding Company stock has sold for as little as $1.00 to as high as $4.00, but it will pay out a dividend of $0.16 per shars. Most of this information you can find on the Internet.

If you can sit around in the USA and make money off of Europe and Asia and Malaysia, then you can let their good economy help to bring ours up. This is progressive thinking. Arent liberals suppose to be progressive. Watch the Kudlow report or Mad Money.