Posted on 07/15/2002 10:55:40 AM PDT by SamBees
The DOW is in a nose dive, and for no reason. Economic indicators are up. The economy is improving, but faith in the future of business has been affected by the many "Enron's" in the news.
Fear is in full control of Wall Street, but what is it that investors fear? Since the economy is moving up, what are they worried about?
Is this drop in the DOW representative of their fear of possible terrorism? Or, could it be a fear of more giant corporations collapsing from the Enron Syndrome? (coined by SamBees)
OR, better yet, could it be that investors are watching each other, and are duplicating each other in a spiral into the trash can? That could create a situation like a feeding frenzy among sharks where there is not logic involved, just a fearful frenzy of selling that results in a vitural collapse of the DOW.
Some of us are waiting in the weeds for the bottom to be hit. There are many billions of dollars to be invested, and once confidence returns, the DOW will take off like a Saturn rocket to the moon!
Is it time for GW to step forward with a confidence building speech regarding the state of the nation, and the ecnomy?
WILL the Caped Crusader be able to put the kibosh on the Joker and his gang of asinine allies?
Tune in next week! Same bat time, same bat channel!
We, who are the owners of smaller business know something is very wrong since we talk among ourselves and receive "real world" information directly from the real world of business every day.
Right, but once they are sunk into bonds, it is not easy to get them back into stocks.
The government's "economic indicators" are worth about as much as an Enron annual report. They are massaged, prodded and poked to say whatever the government and the Federal Reserve want them to say. On a fundamental basis, the idea that masses of numbers can be tabulated and used to render meaningful predictions about the infinitely complex phenomena of the national economy is dubious at best.
Where's the bottom? When we find a confirmed bottom, BUY undervalued bluechips with good accounting histories. Before you ask, yes, I work for Salomon Barney Frank.
The economy? The rate of expansion started to slow in the early spring of 1999. Taxes are sufficiently high as to discourage investment and risk investment capital formation; after tax rates of return are to low to permit investors to make a reasonable return on investment.
The rate of economic expansion has continued to slow. We are now in an environment where government is doctoring the numbers instead of the economy--however the 2002Q1 growth numbers were somewhat inflated; the actual in fact GDP numbers are not as positive as the GDP growth would indicate because much production has been for inventory which customers are not buying--that borrows sales from future periods when customers might buy; and it results in capital being tied up in inventory not earning any return.
The government has bought expansion of the residential housing economy by artifically subsidizing house purchases with cheap interest, available on less than adequate security. Thus some of the better than justified economic numbers are the result of uneconomic expansion of residential housing.
Future bad news on the housing front is that homeowners are committed to house payments their income won't support--the lenders and investors who put up the capital won't get their money back; the homeowners will lose their homes.
Large public reporting companies are still reporting some profits (that are not artificial or inflated)? Sure. Because interest rates are also subsidized to artifically low levels--consequence of that is that the dollar is declining in value--so those who have dollars are losing values and the economics of making manufactured goods that rely on overseas supplied components or raw materials won't be able to compete any more.
The economy is not in good shape at all--it is in terrible condition and we have only seen the beginning of the contraction. The stock market is still overvalued after the current declines and we can expect it to fall much further.
From a technical analyst's point of view, we might get a rally here--maybe Greenspan will give us some excuse for a rally; but expect the market to really go down in the fall.
What do you attribute this rise in LUCENT to?
The market is going down because there are no earnings nor dividends to support it. News does not make the market go up and down, the market going up and down makes the news! If you pay attention, the news lead changes from "Enron took the market down" to " The market shrugged off the Enron news".
One thing people forget is that the market is not a pile of bricks, it is a bonfire. Like a bonfire, the bigger the fire the more money you have to keep throwing on it just to maintain the same level. When that supply dwindles because the last buyer contributed his last dime, the fire starts to die. When the fire dies, companies in debt start to implode. The bankruptcies destroy more capital which leads to less money available for the fire, until the fire runs its course. The market has a long ways to go down yet....and the next wave will start to take to take the consumer down with it. The Dow is headed under 5000, the SP to 600 and the NASDAQ to 800.
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