And the stock market keeps rallying...

Discussion in 'Economics' started by logikos, Jul 20, 2009.

  1. logikos


    I understand the the stock market is forward looking and can precede the actual recovery by 6-9 months, but there are no economic policies being put in place today that can spur a recovery in the future that is justified by the current 4 month rally.

    On the contrary, we have record out of control deficits, job-killing bills being voted on or considered in Congress, and looming possible hyperinflation on the horizon, all very bad for the stock market.

    One answer is that this is strictly a technical rally and not based on economics at all. The sentiment will eventually turn positive and the public will get left holding the bag (as usual) when the next shoe drops.

    Any thoughts?
  2. i agree a recovery in the near term is very unlikely. it is likely that the stock market could fall again. i guess people are not sure where to put their money so even though the outlook isn't great shares might be a better option than banks because of the lack of interest. also if the share price is relatively low it could generate profits eventually.
  3. logikos


    Check out the daily chart for IBM. It has recovered almost 80% of its loss from the crash and is in a good position to challenge last year's high.

    I know this is just one stock, but it is a blue chip stock and can't be ignored. Either the suckers are those of us who are missing these big rallies because we are convinced that there is more downside to come, or the suckers are those currently bidding up the stock when the fundamentals don't support it.

    I guess this is why I am not working on Wall Street! :p
  4. I've learned to no longer rationalize why markets move as they do. Just hitch on for the ride.
  5. How about Cap & Trade, and National Health Care may go down in flames. Together, they would have cost the U.S economy millions of jobs, and massive tax increases. If they are gone, it is good for stocks.

    See the coal stocks lately? Shezamm. Remember, Obama swore to bankrupt them.
  6. Yes, one: Stock market bubble.
  7. logikos


    For those who have subscriptions, there is a very good Page One piece today that deals with this topic, using CAT as an example, and the reaction this morning to a better than expected earnings report.

    Here is an excerpt:

    Shares of CAT are indicated approximately 12.0% higher in pre-market action. If the pre-market bid holds for the opening bell, CAT will have jumped nearly 35% since its close on July 10 and it will be trading at roughly 34x estimated FY09 earnings.

    CAT's move has crossed the threshold of absurd given the still weak demand outlook and the realization that it is hoping to earn as much per share in 2009 as it did in... 2002!

    The frenzy of buying interest that seems to be surrounding CAT's report is disconcerting. It has the look of desperation to get in at any cost and that's typically not a good sign at this stage of a rally effort like the one we have seen over the last six sessions. It is moves like these that are often seen as a topping mark in retrospect.

    he market sees what it wants to see. Right now it sees a panoply of pleasing colors, with a focus on green shoots, silver linings, blue skies, and a pot of gold at the end of the recession.

    The Fed's view is incongruent with the economic outlook that is being priced into the stock market. A reality check somewhere over the rainbow is in order.

  8. Amen to that!! Go with the market until you can't go anymore. If you're skeptical of the rally (Which I am), you can stay out or keep your stops tighter than a python's grip.
  9. That's all I've been doing. Smaller than usual positions with REALLY tight stops.
  10. menelaus


    The dollar keeps weakening against most currencies (DXU9)

    All dollar domininated assets will keep rising as the dollar continues to tank...this is classic inflation, nothing to do with earnings or economic recoveries.
    #10     Jul 21, 2009