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Today, the Dow rose by more than 200 points or 2%, and is now higher than it was a year ago. Ever since the stock market bottomed out in March, the Dow has risen nearly 59%, the Nasdaq has risen nearly 80%, S&P 500 Index has risen by over 60% since bottoming out.
Even while millions more people have lost their jobs, foreclosures are still rising at a rapid rate, home prices are dropping, consumer spending is continuing it's long term decline, the value of the dollar is STILL falling, and people's incomes are dropping still, the stock market has boomed.
And investors saying that there is a "recovery" occurring are completely ignorant. They're getting drunk on money from the way stocks have been increasing. I believe there is going to be another stock market crash sometimes in the future. Stocks are definitely extremely inflated, and a crash will only worsen the economy in the long term. In my opinion, stocks should really only be about 50% to 60% of where they are right now.
Today, the Dow rose by more than 200 points or 2%, and is now higher than it was a year ago. Ever since the stock market bottomed out in March, the Dow has risen nearly 59%, the Nasdaq has risen nearly 80%, S&P 500 Index has risen by over 60% since bottoming out.
Even while millions more people have lost their jobs, foreclosures are still rising at a rapid rate, home prices are dropping, consumer spending is continuing it's long term decline, the value of the dollar is STILL falling, and people's incomes are dropping still, the stock market has boomed.
And investors saying that there is a "recovery" occurring are completely ignorant. They're getting drunk on money from the way stocks have been increasing. I believe there is going to be another stock market crash sometimes in the future. Stocks are definitely extremely inflated, and a crash will only worsen the economy in the long term. In my opinion, stocks should really only be about 50% to 60% of where they are right now.
People like you have been saying that all along. When the DOW was in 6000 range they said it will hit 2000. All the areas you mention as negatives are actually showing signs of stabilization, and that's why people are investing.
- We are losing less and less to unemployment every month, so the trend suggestes we will soon be adding jobs, not losing,
- the housing market has bottomed out and is already picking up in some areas
as the US has become the new carry trade, all classes of assets (gold, stocks, treasury bonds) rise simultaneously. now the US funds the world with cheap money. of course, this proves that our leaders learned NOTHING from the near meltdown last year with the japan carry trade.
roubini has written an article on the mother of all carry trades and denninger has some interesting remarks also. here is some of denninger's today:
The underlying mathematical truth - that this was nothing more than "extend and pretend" writ large, and failed to result in actual asset quality improvement - has not been lost on the FX market, nor on commodities such as gold. The Dollar has tanked as currency traders have come to recognize that creating synthetic shorts on dollars through carry trades are essentially risk-free, since forcing The PDs to cover the reverse repos means either crashing the stock and commodity markets, the PDs themselves, or both.
This, by the way, is exactly what Japan had happen to them. The unwind of the Yen Carry featured prominently in the 2008 market collapse, especially in the credit markets where the loss of the "free money hose" caused risk premia to blow wide and created a feedback loop that was arguably one of the primary triggers for the global meltdown.
Notwithstanding The Japanese Government's desire to prevent it the unwind happened anyway and The Japanese Government found itself on the hook for the balance it had printed, which it has now tried to absorb. This made the damage from the carry permanent, just as it will in our case.
Those who refuse to learn from history are consigned to repeat it, and with our tax receipts crashing we will not be able to cover the damage when it becomes apparent, especially if we continue to allow that damage to accumulate.
People like you have been saying that all along. When the DOW was in 6000 range they said it will hit 2000. All the areas you mention as negatives are actually showing signs of stabilization, and that's why people are investing.
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We are losing less and less to unemployment every month, so the trend suggestes we will soon be adding jobs, not losing,
Unemployment just went UP to 10.2% from 9.8%.....Trend would NOT suggest anything of adding jobs SOON enough!
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- the housing market has bottomed out and is already picking up in some areas
The housing market isn't even close to bottoming out. Just wait until next year about this time....and for a few MORE after that!
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consumer spending is stabilizing,
Stable in the sense that NOBODY wants to if they have any money. Let's see how great retail sales are between now and 12/25.
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- the economy expanded by 3.5%,
A little bird tell you this?
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- worker productivity has skyrocketed
PROVE IT, please. (link?)
Keep on dreaming!
America "needs" dreamers more than ever now.
The stock market is WAY overinflated. It'll be interesting to see how long they can manage to keep it artificially pumped.
I imagine they aim to keep it "pumped" until bonus pool decisions are finalized. ;-)
I agree that the market is due for a 2nd fall and I also feel that housing will also fall. It is quite obvious that the injection of Gov't funds (created from vapor) are started to see their way into the economy. This is a TEMPORARY solution. When the money goes.... so goes the "value" in the stock market. There is no actual production behind the stock gains. Nothing being created.
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as the US has become the new carry trade
This is a scary thought. Hate watching the US Dollar fall, but like to think it will stimulate exports and revive the economy. Please? We'll see... I would like to see these FX speculators get smoked. A few upticks on the dollar might make them edgy and back off.
The DOW may rally a bit more but we've basically hit the 52 week high. Unemployment is 10.2%, ~17% if you consider part-timers who'd rather work full time. The economy is not expanding. I don't think holiday sales will be solid. And think we'll see a downward trend in coming months, especially 1Q 10.
I make a living trading stocks, and they are not over inflated, they are properly priced. What has changed though is the dollar is devalued so the "high" average actually is normal when adjusted.
What many dont realise is that the government went and bailed out these business and these companies are using this cheap money to make more in the market. GS who received a bailout just profited $3,000,000,000 in the last quarter and over 98% of their stock trades were profitable trades while the government continue to pump money into the market.
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