Anyone here involved with the stock market ?

pmcollectour

I am not. Don't own any stocks.

Please explain something to me. When Obama took office the DJIA was 8,000
The economy has either stayed stable or even become worse. Most forecasters do not see any great recovery on the horizon.
Earnings are coming out below expectations with poor guidance for the near future.

Why is the DJIA now 13,000, up five thousand points, while the economy continues to show the complete opposite ?

Is the market saying that the future is bright ?

I don't understand why we're up 5,000 points on the DJIA in the past four years.

thanks

derryb

My opinion: The FED has juiced the market via FOMC activity and making more money available to the gamblers at the TBTF banks. The amount of investment money has actually increased. All that money very seldom sits on the sidelines, it gets invested somewhere. A healthy equities market is "supposed to" reflect a healthy economy. . . at least that's what the policy makers want us to believe. Adding to US equity desirability is a world economy in the tank. Most competing investments don't look as good, especially with the belief that the FED is going to soon pump MORE money into the system. Remember, most investments are made because of what is believed will be the future price of the investment. Investors believe the equities market will continue to be supported by economic policy and by more money.

Here's a good explanation of the affect monely supply inflation has had on the equity markets: According to this website and its charts "The Dow Jones has rallied 80% from its low in March of 2009. However, adjusted for real inflation, the Dow Jones is about equal to where it was in 1963. Stock market gains have been due to nothing but inflation."

Another factor is that the list of individual companies that make up the DJIA gets periodically changed making it hard to compare apples to oranges.

JCMhouston

It's pretty simple really, you've picked the lowest possible point to start. The market was heavily oversold with many people believing the world was ending. The world didn't end, so the market has recovered to about the same point it had reached prior to the crash. Companies cut their cost basis by huge amounts after the crash, and now any small uptick in demand allows profit margins to increase geometrically. Also the recovery in the stock market was aided by the Ben Bernanke giving away trillions of tax payer dollars to the bankers of the world so they could maintain the style they had grown accustomed to.

Just after the market crash in 2008 we started buying companies we felt were undervalued, GE under $8, Chevron at $60, Microsoft and Intel among others. Using a value approach to selecting stocks our current dividend yield on a cost basis is over 6%, and our main portfolio is up just over 250% since November 2008. And while some stocks now look overvalued there are still many that look just fine as long term holds. I don't expect to see the kind of gains since 2008 in the future but I feel a lot better with our dividend yields than I do with 0.5% interest on savings accounts.

cohodk

Corporate profits are up substantially since the 2008/09 lows and close to the 2007/08 peak so there really is no reason why the equity market shouldnt be nearer its highs than lows. Todays economy is vastly different from Jan 2009 when restraurants, car dealerships and theme parks were empty.

And ignore the "changing components" of the DOW arguements. The DOW is representative of the US economy and the economy is not the same as it was in 1980, or 1950 or 1920. So in order to accurately represent the economy, the components MUST change.

If you prefer, you could follow the Wilshire 5000 which in comprised of the 5000 largest companies in the USA, then the "components" agruement becomes moot.

jmski52

Stocks still represent real assets. The question is, "what's the relative value compared to something else?" That stock PEs are still historically high makes no difference when the Fed has injected $5 Trillion since 2009. That's about $1 Trillion per 1,000 pts on the Dow. It's like derryb said - that "money" has to go somewhere.

Where it goes is basically a matter of philosophy. If you trust the John Corzines, Bernie Madoffs, and Jeff Immelts of the world, buy into the stock market. If you don't, buy precious metals. If you believe in Geithner the tax cheat and The Bernanke, buy Treasuries.

Everything is manipulated. Lots of money was made in stocks during the Great Depression, and even more money was lost. Where the chips finally fall this time is anyone's guess, and nothing more than a guess. There will be a shakeout. Nobody knows whether or not the market, or the governments - will win the next round, or the round after that. We live in interesting times.

percyb

<< <i>Corporate profits are up substantially since the 2008/09 lows and close to the 2007/08 peak so there really is no reason why the equity market shouldnt be nearer its highs than lows. >>


And this is despite Obama's platform that inhibits growth and impedes business.

Baley

I invest in specific stocks, not "the stock market", just as I live in a town with specific weather, not "the climate of North America"
Both the stocks and the weather have been good to me

derryb

<< <i>

<< <i>Corporate profits are up substantially since the 2008/09 lows and close to the 2007/08 peak so there really is no reason why the equity market shouldnt be nearer its highs than lows. >>


And this is despite Obama's platform that inhibits growth and impedes business. >>


Small businesses are paying the price.

What the middle class and retirees can no longer afford to buy is being purchased by the recipients of the middle class's tax dollars.

cohodk

<< <i>

<< <i>Corporate profits are up substantially since the 2008/09 lows and close to the 2007/08 peak so there really is no reason why the equity market shouldnt be nearer its highs than lows. >>


And this is despite Obama's platform that inhibits growth and impedes business. >>



Not quite. Productivity is much better. Companies are producing just as much with less (employees). The total value of goods and services has not increased in 4 years. Corporate America is lean and mean.

BAJJERFAN

<< <i>

<< <i>

<< <i>Corporate profits are up substantially since the 2008/09 lows and close to the 2007/08 peak so there really is no reason why the equity market shouldnt be nearer its highs than lows. >>


And this is despite Obama's platform that inhibits growth and impedes business. >>



Not quite. Productivity is much better. Companies are producing just as much with less (employees). The total value of goods and services has not increased in 4 years. Corporate America is lean and mean. >>



And buying like crazy from the Chinese.

streeter

<< <i>It's pretty simple really, you've picked the lowest possible point to start. The market was heavily oversold with many people believing the world was ending. The world didn't end, so the market has recovered to about the same point it had reached prior to the crash.Companies cut their cost basis by huge amounts after the crash, and now any small uptick in demand allows profit margins to increase geometrically. Also the recovery in the stock market was aided by the Ben Bernanke giving away trillions of tax payer dollars to the bankers of the world so they could maintain the style they had grown accustomed to.

Just after the market crash in 2008 we started buying companies we felt were undervalued, GE under $8, Chevron at $60, Microsoft and Intel among others. Using a value approach to selecting stocks our current dividend yield on a cost basis is over 6%, and our main portfolio is up just over 250% since November 2008. And while some stocks now look overvalued there are still many that look just fine as long term holds. I don't expect to see the kind of gains since 2008 in the future but I feel a lot better with our dividend yields than I do with 0.5% interest on savings accounts. >>



If you ** zip about the markets, please pay attention to this explanation. my bold

edit: **know

Justacommeman

It's been good to me and my family. MJ

jmski52

From Bill Gross, today: Several generations were weaned and in fact grew wealthier believing that pieces of paper representing “shares” of future profits were something more than a conditional IOU that came with risk.

The Equity Cult may be dying.

(A word to the wise - he's right, you know.)

Baley

This is not the first time "the death of equities" has been predicted... these things run in cycles. When stocks were outperforming bonds in the 1990s, it was "the death of bonds", now it's the reverse. In 1931, it was "the death of stocks", and they died again in the 1960's, and then again in 2000, and then AGAIN in 2008.

Gold and silver outperformed in 1977-1980, and then took a nap for 25 years, and have now outperformed again the past decade. Who knows what next? Probably not another quintuple in our lifetimes.

"past performance is not a guarantee of future results" actually means "don't expect to extrapolate past trends indefinitely, and don't be surprised when things regress toward the mean"

Perhaps the smart long-term cyclical money is selling bonds and metals and buying beaten-down stocks and real estate (good ones, not junk. There's no saving a bad house in a bad area, and there's no saving a bad company in a bad market). It's the patient contrarians that make the money, long run, by buying undervalued assets and holding them until they go up.

Speculators either get rich quick or, more often, go broke. Some alternately do both Be careful out there

JCB1983

Hell no.

tneig

Mostly indirectly through Mutual funds. Less now, than 7 months ago.
But it doesn't feel like the dow is 13,000. If feels like its a very unstable 9,000.
My one main stock peaked at the last 13000 high and I took it and ran, so I feel good about that.

Its more than just the stock market thats of concern these days...
One thing I know about the stock market, bonds, or any investment, cash - including securities based, for the average saver/investor
in retirement concerns is:.. that all previous advice, safety, and rules are out the window and its brutal now.
Today, "Safe" means in accounts that loose to inflation.
You have no choice but to take alternate and multiple methodologies in higher risk levels than most folks are prepared for.

Used to be a person saved all their life to take care of the other end and if, if, they didn't do anything stupid they'd have something.
Now? where's a person to put their money to be safe?.... safe is stupid and stupid is safe...

Each coming decade will dump a load of folks on society that have no plan, no decent savings or retirement, and nooo retirement plans, and its going to get nasty.

fishcooker

Mother Government covered losses and handed out almost free money at the same time. Fixe income rates got killed. Who wouldn't toss the same money right back at the stock market, instead? That's my vote, anyway.

johnny9434

i got 3 maybe 4 stocks now. ive been on the side lines for a while now. im not making anything but im not losing either

Wingsrule

Does updating the PM forum contest count?

derryb

<< <i>Does updating the PM forum contest count? >>


yep, you're a hedge fund