The Dow Jones Industrial Average (the Dow) finished above 11,000 today for the first time in 18 months. Loans issued to financially plagued Greece seemed to nudge the Dow upwards. Much has been made of the Dow reaching 11k. it stood for some sort of psychological ceiling that the Dow had to pass.
Many financial gurus are warning us that financial woes are far from over and to proceed with caution. Is this a good time to get back in the market or have you been here all along. Is this the time to hide your cash under the mattress or in the backyard in a jar? How about the freezer?
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Is this a good time to get back in the market – if you have not gotten back into the market, you have missed a good part of the recovery. For many of us (myself included) the best thing to do is to have ridden it out, unless of course, for some reason you got out before it really went down, but then when to get back in.
More evidence that the Presiden’ts economic policies are working very effectively.
DOW has really been pushed up by employers squeezing more productivity out of the employees to afraid to say no to employers. Which isn’t really a bad thing. But, you have to keep in mind that a lot of these numbers (going up) are because of employers making cuts (layoffs, benefit cuts, etc.). The recovery will occur when these companies start posting profits again and feel comfortable enough to expand.
Not saying it’s a bad time to invest (you should always have money in play) but trying to guage the ‘right time’ is a losing strategy. Just roll the dice and let it ride!! 🙂
Marin, the companies are posting profits. How does a company like Apple fit into your prognostication? Intuitive Surgical? Visa?
I think I will go with the Pat Herve investment method. I rode it out but I also finally gave up on laggards and sold and reinvested some. The loss helped also on taxes. I will also say that was one of the scariest rides I have ever been on.
No comment, other than to say I don’t hear a lot of meowing.
No disclaimer on this one, but if you don’t understand what I’m talking about, you probably shouldn’t be investing in the equity markets.
another cryptic message. Are we speaking of dead cat bounce? Bounces but goes lower than in the first place?
It was not a bad ride up….
Sorry, that’s all you are getting out of me.
You do know that the phrase “It was not a bad ride up…” is usually followed by the word ‘but’?
Formerly is playing hard to get. It does bear watching very closely. I agree. The but…is not so good.
This is proof that the President’s economic policies have been very effective. It’s good for the government to increase spending during recessions.
But where are the jobs? Neighborhood teenagers can’t even get those mall or restaurant jobs anymore like they used to. The unemployment numbers don’t even take those kids into account. So now they’re even more reliant on Mom and Dad, who will have to foot all the college bills as well as spending money. Look for the unemployment rate to go up once the million or so temporary Census jobs dry up and obliterate the recent false uptick.
The jobs problem seems to remain a problem. That sort of thing isn’t cleared up over night. Credit is also still a problem to individuals and to corporations. As long as credit is a problem, jobs will be a problem would be my guess.
On the other hand, I am not sure why people expect full recovery after a year and a half.
I am also not sure that the stock market really reflects anything other than the rich people in America are still dominating finances. 10-15 years ago, the mutual fund managers used to move the markets. Now the hedge fund managers are the movers and shakers. Hedge funds have very little oversight. Should we be afraid?
At least 30,000 jobs will be lost when President Obama cedes American dominance in space exploration to Russia and other countries by ending the space-shuttle program later this year.
The space shuttle program….not the entire space program will end. That was determined a few years ago actually. The very people bitching about money and spending now seem to be howling about the space shuttle program. Can’t have it both ways. NASA has always been subject to the whims of financing.
I hate to see the shuttle program scrapped. However in an environment where cuts have to be made, how do we justify it?
Emma, do you ever get tired of Obama bashing? Does congress have anything to do with this decision or is it all Obama? I would just be exhausted with so much bashing.
One single comment based on an item on the NBC Evening News that credited the President with this decision is “Obama bashing”?
I would have to ask if you ever get tired of constantly rushing to President Obama’s defense. Such unconditional positive regard is admirable.
And the U.S. will be losing its dominance in space. Ending the shuttle program means that we will have to rely on Russia to ferry our astronauts to the International Space Station. That is, as long as we can maintain a good working relationship with Russia. From a national security standpoint, it seems foolhardy to become that dependent.
I am not basing my statement on one single comment Emma, I am basing it on every single time you have something snarky to say about the president. It just seems energy draining to me. Maybe you aren’t aware you do it.
I don’t dislike the president. I don’t agree with everything he says or does but I don’t sit around waiting for him to slip up. And I didn’t do that to the last president either.
I believe the congress funds NASA. I know NASA has been plagued by continual tap dancing around funding since its inception. The space shuttle was programmed to stop…oh…a couple of years ago. I am sorry to see it end. Perhaps something else will replace it, but I hardly can put the total blame on Obama.
I don’t think I’ve done much commenting specifically on the President in the last week, so no, my energy is hardly drained by one comment today. Now, that Corey Stewart–you must be needing a caffeine jolt right about now…
“Snarky” is noting that 30,000 jobs will be lost with the demise of the shuttle program? I call that truth. “Snarky” that we will be dependent on Russia to access the ISS? Again, truth. The Dow doesn’t mean a whole lot to people who have no jobs and no money to invest. While I don’t think the economy can be fixed in a year, I’m also not ready to sing “Happy Days are Here Again” for a temporary uptick in the Dow. Cap and trade will threaten even more jobs and further depress a sluggish housing market.
If I wanted to be snarky, I would criticize the President’s obsequious bows to foreign leaders visiting in his own country. But I’ll refrain from mentioning that.
I’m not going to get drawn back into the political side of this blog but before anybody starts assigning credit or blame to political policy for the increase in the equity markets since their nadar last year, you should keep in mind two things:
1) Most international equity markets have outperformed the US market. The current uptick has been a global phenomenon, but the rising tide has lifted US markets less than other developed countries. Even with the short term stabilization of the dollar, thanks to the Grecian mess, US markets still underperform their peers.
2) It’s way, way too early to judge the impact of political policies that mostly haven’t even taken effect yet. People “in the know” are only starting to consider the effects of the S&L problems from 1987-1990 as being settled. Maybe in 10-15 years you can have an informed debate on the effectiveness of TARP, Obama’s economic policies, et al. but anyone who wants to debate it right now, pro or con, has a political agenda to push. (What did Chou En Lai say about the French Revolution?)
More cryptic. I just want to enjoy the ups and avoid the downs. Formerly, I would like to know more about the S&L problems and their impact on current issues.
I understand that TARP has made money for the US. Is that true?
I don’t want to debate TARP. I am just very glad it happened. Is it a political agenda to want to avoid a depression? Someone I trust told me it had to happen and why. I believed them and supported it.
And it was a good day in the stock market. Anyone with a 401k is in the stock market, even those who have lost their jobs unless they have liquidated their 401k.
Here is more evidence.
MONDAY, MARCH 1, 2010
GM Is Back!
By ANDREW BARY | MORE ARTICLES BY AUTHOR
After an impressive U-turn, the auto maker could become this year’s hottest IPO.
THE HOTTEST INITIAL PUBLIC OFFERING of 2010 could be General Motors. That’s right. GM.
The auto maker, long synonymous with bloat and mismanagement, has undergone an impressive turnaround since it emerged from a brief stay in bankruptcy last year. GM still is no Honda or BMW, but it’s probably in its best shape since its heyday in the 1960s. It operated at a narrow loss in the third quarter, and fourth-quarter results, due later this month, could show an operating profit.
Wall Street is excited because a competitive GM could be very profitable if the auto market turns up next year. Some of the good news: GM’s U.S. market share is up, its costs are down, its vehicle incentives and inventories have declined, while its resale values have risen.
http://online.barrons.com/article_email/SB126722854236252683-lMyQjAxMTIwNjA3MTIwMjE4Wj.html#articleTabs_panel_article%3D1
Turns out that the President’s decision to bail out GM was a very good thing for GM, its employees and our nation.
I really shouldn’t do this, but it’s April 15th and I’m feeling less charitable than usual, so I hope no one takes great offense at this.
Starryflights, you are citing a possible GM IPO as a success story? Ok, let’s do the math. I’ll only use numbers on GM from the from the article you linked to be fair. Your article says a GM IPO might see a valuation of $50 billion. Let’s say that number is correct. What you are forgetting is what it cost to “create” that $50 billion of value. Only quoting from your article:
” After its near-death experience, GM finally has an excellent balance sheet, with $42 billion in cash at the end of the third quarter, against $29 billion in debt and preferred stock. This admittedly reflects Uncle Sam’s largess in pumping $50 billion into GM in late 2008 and 2009, plus obligations the auto maker shed through its restructuring.”
“The federal government turned most of a $50 billion loan into a 60.8% stake. The Canadian government received an 11.7% stake for putting $9 billion into GM, which has several assembly plants north of the border. The United Auto Workers union got a 17.5% interest for forgoing a $20 billion health-care claim against GM. The holders of $27 billion of GM’s public debt, as well as other creditors, got a 10% equity stake, plus warrants for an additional 15% of the company.”
So in short, $59 billion in cash investments, $20 billion in future benefit reductions and $27 billion in debt erasure created an asset that might be worth $50 billion at a cost of $106 billion. (Even leaving out the $20 billion in UAW concessions, that’s still $86 billion to create a company that might be worth $50 billion.) I’ll ignore that secured bondholders were illegally trumped in the bankruptcy proceedings or that the ‘new’ GM is worth $50 billion because it holds $42 billion in cash, leaving the valuation for the actual operating assets of GM at only $8 billion. (compared to close to $100 billion for the operating assets of Toyota.)
If that’s counts as a win in your ledger, I’d hate to see a loss.
I wasn’t trying to be cryptic this time. The Chou En Lai quote is from the 1970’s when Henry Kissinger was visiting China. He asked Chou En Lai if he thought the French Revolution was a good thing or not. Chou En Lai’s response, stated nearly 200 years after the French Revolution was something to the effect of “It’s too soon to tell.”
That was my only point. You need some distance to be able to see long term trends. I used the S&L bailouts as an example only because a consensus has finally formed around them. They were very controversial at the time but much less so now. I suspect in 20 years or so there will be a consensus around TARP, but I’m not going to hazard a guess as to what it will be.
I’m certainly not going to start a debate on TARP, but to answer your question about if it will make money for the US, the answer is nobody knows. My biggest beef with TARP is that nobody can explain how much of the money has been spent and where it went. We know a few examples of TARP ‘investments’ that have turned a profit such as Citi. But it is very, very unlikely the total TARP pool will turn a profit on the whole. The $165 billion sunk into AIG isn’t coming back. Neither is most of the money that went into GM, C, GMAC, etc.
The other thing that makes answering your question tricky is it depends on what your definition of making money is. Congress has two different bills in the hopper that will reallocate TARP fund repayments to new expenditures. (TARP originally included a provision that repayments would be used to pay down debt.) So depending on how you look at it, even if all $700+ billion of TARP were to be repaid, the taxpayers would have still added the full amount onto the debt.
Again, I’m not saying if TARP was a good or bad, necessary or unnecessary. All I’m saying is we are far too close to the events to start assigning credit or blame.