•We are 49 months into this bullSH!T market, which began in March of 2009. there, fixed it...
Posted on 04/08/2013 6:03:47 PM PDT by grumpa
The Dow Jones Industrial Average reached a high last week of 14,684. Let’s consider the reasons for optimism and for pessimism about the stock market from here.
REASONS THE MARKET MIGHT GO HIGHER:
•The Fed is keeping interest rates so low that it is forcing investors to buy stocks (and real estate) to try to get a return on their money. The Fed has said that this will continue until the unemployment rate gets to around 6.5%, which could be many months from now in the best scenario. This intervention into the markets could theoretically overwhelm the negatives and propel the market to higher and higher levels.
•Price earnings ratios are only slightly above normal: currently Dow 16, S&P 18. The historical average is in the neighborhood of 14. But they have been well into the 20′s on occasion.
•The economy is making progress, as evidenced by the unemployment rate inching lower, now 7.6%.
•There can be found healthy companies selling at large discounts to their all time highs, suggesting that we are not in a condition of over-enthusiasm or a “bubble.” Such stocks include Apache (APA, 74), Apple (AAPL, 424), Bank of America (BAC, 12), Caterpillar (CAT, 84), Cisco (CSCO, 20), Intel (INTC, 21), Microsoft (MSFT, 28), Newmont Mining (NEM, 39), Potash (POT, 39), Transocean (RIG, 51).
REASONS THE MARKET MIGHT DROP:
•We are 49 months into this bull market, which began in March of 2009. The average bull market since 1900 has been 31 months long. The Dow is up 128% (over this same 49 month period), compared to an average historical bull market gain of 90%. We are long in the tooth by historical averages. (See the chart at the site for details of market cycles.)
•We are in a “secular” (long term) bear market which began in January of 2000. There have been two other secular bear markets in the last one hundred years, one began in 1929, the other in 1968. Each of these contained three “cyclical” (shorter term) bear market periods. So far we have had two in this cycle (2000-2002 and 2007-2009), so a third would be normal before the final bottom of the secular down trend.
•It would be normal for p/e ratios to sink to under 10 at the end of a secular bear market.
•Based on various surveys, nearly two-thirds of investors are optimistic. This usually marks an impending temporary top if not a major top. When investors are this optimistic, any change in psychology has to be negative.
•Earnings progress for American companies may be waning. Earnings estimates are on balance beginning to slow or to disappoint. See http://seekingalpha.com/article/1294081-there-is-no-asset-bubble.
•The May to November period is seasonally weak for the stock market.
•While corporations are generally financially healthy, and household debt has improved in the last five years, both consumers and governments have more debt than they can reasonably afford. The debt contraction that is inevitable will be a drag on the economy. See the chart at this link and click to enlarge:
http://en.wikipedia.org/wiki/Debt-to-GDP_ratio. Also see:
http://www.financialsense.com/contributors/lance-roberts/consumer-debt-still-a-long-way-to-go.
•A “black swan” event. This is the term for an unforeseen shock from outside of the economy---such as war, death of an important politician, natural disaster, etc.
•The problems in Europe are not over. There will likely be defaults and runs on banks. Cypress is a warning shot across the bow. Governments across the globe are completely irresponsible, and we have passed the point that luck or normal economic growth will bail them out.
Conclusion: While nobody knows just when this party will end, it is likely to end badly. There simply is no growth driver in the economy that is strong enough to propel us through the worldwide debt problems. Just as in previous boom-bust cycles which were aggravated by federal government policy, innocent people are being forced into risky assets—and in time they will become victims. The government cannot create wealth out of thin air. The clash between liberal political policies and real world economics is likely to soon come to a head.
•We are 49 months into this bullSH!T market, which began in March of 2009. there, fixed it...
I stopped reading right there. No point in going further.
Agreed.
Dems and Republicans are together selling out America.
Get with it GOP.
American jobs! Now.
This should be good for 200+ points on the DOW tomorrow.
Yep. An “unemployment rate” which doesn’t count the people who have given up looking is just stupid.
This is not yelling fire in a crowded Theater, it is putting chains on the doors and pouring in gasoline.
If we wait till the employment pool shrinks enough for them to declare 6.5% employment, there will be NOTHING LEFT butt vaporware. Instead of looking at employment figures, we look at Unemployment claims! That is trick math, for as claims reach the end of the payment period the unemployed person magically disappears off the books just like his job did.
That is why we can show 88,00 jobs created, with an increase by 600,000 job loss claims and it results in the employment figures going DOWN!
The Job pool is shrinking so fast as the economy CRATERS that you cannot hide the lies in the statistics anymore. Time for new statistic methods, fresh smoke and mirrors and "figure adjustments".
The Fed is not trying to save the Economy, it is deliberately engineering its collapse. Everyone in investment knows to diversify your position, the Fed is consolidating America's only position into the Stock Market.
All the better to burn you all to the ground my dear...
“The Fed has said that this will continue until the unemployment rate gets to around 6.5%, which could be many months from now in the best scenario.”
If only enough people will give up looking for work and drop out of the labor pool...
arguably the most lied about statistic in Soetoro's usurpation..
The UE numbers are the biggest scam in Hussein’s hate America arsenal..
Oh, I don’t know....my husband came home tonight and told me we are in for a big bull market for the next 10 years....(I think he WANTS to believe it.) I laughed. Bought a new sofa today. Spending our money as fast as I can to make sure we have what we need...for the coming “tumble” when we will likely lose at least half of our savings. (And, we are just heading into retirement.)
Same here. It was like a train wreck in my brain. Sign up?!? LMAO!
Yes about May
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