Free money from the Fed underpins this performance. Gone are the days when the broad indices truly reflect the performance of businesses.
The Market will correct IMO 15% or more when it becomes obvious that Obamacare is sucking disposable income out of the economy. I’d say come the 3rd quarter of 2014 the Corp. Financial reports will show the earnings decline well into effect. The Multinational Corps will be hard pressed to make up the losses in China, India .....
In the “legendary” Jim Cramer’s review of 2013 with Matt Lauer this morning on Today he did not mention the Fed’s input to this and said businesses were making tons and tons of money.
>>Free money from the Fed underpins this performance<<
Right? Wall Street reacted positively upon the announcement of Fed tapering...why?
Because the Feds are still planning to pump billions into the markets. The dollar dope for Wall Street continues.
Bears repeating.
I'm not so sure that this is true. Let's look at a broad index like the S%P 500. Do you really believe that the aggregate market value of these publicly traded companies does not accurately reflect their performance?
One of the mistakes that is commonly made when people look at these indices is that they look at profitability as the only measure of "performance" in determining the value of a broad range of companies. Profitability is one key measure, but growth prospects are also important in determining value. And yet neither of these account for what has probably been the single biggest driver of growth in the S&P 500 index: consolidation in industry.
Here's a perfect case in point ...
In 1999, two of the largest companies in the energy sector -- Exxon and Mobil -- merged into a single company. Before the merger, they were two separate companies that were included in the S&P 500 index. When they merged, the S&P 500 didn't suddenly become the S&P 499 ... The index was changed to reflect the addition of another company at #500.
In other words, there has been a lot of growth in the S&P 500 from one year to the next simply because the companies in the index aren't always the same companies from one year to the next.
Nowhere is this more evident than in a much smaller index like the Dow Jones Industrial Index. The Dow Jones Industrial Average (DJIA) tracks the value of 30 large companies that reflect industrial activity related to the U.S. economy. By my count, 14 of these 30 companies have changed just since 2000. And one of them -- AT&T -- had the unusual distinction of being dropped from the index in 2004 and then added back in 2005 after it was acquired by SBC Communications, which then changed its formal name to AT&T.