I read about several dozen fed official reports, along with daily econ. report from yahoo finance, cNN, marketwatch, CNBC, etc, etc. It's very clear as per what these fed official are saying that the economy is moderating, and that they are looking for a soft landing. Well then, why is the Dow (and the S&P, even the Nasdaq) keep going up after the Israel cease fire (in July - Aug 2006)? Not to mention Dow has record high almost every week. Some of these sectors, for e.g., look at retail sector, factor in the gain of those dept. store per year, then look at their 2006 gain, I mean, they are jumping like internet stock in the late 90s. Not only their P/E doesn't justify it, neither does their earning. Regardless, in the 2nd half of 2006, we have talks of recession, on top of that, currently we have a housing market that as per their NAHB economists said, has not bottomed, we have soft customer spending as per today's retail report. So, knowing these econ data are true, why is Dow keep going up? We just had an intraday high yesterday.
Smart money is already out of the markets. This upwards move is the crowd of retail investors late to the party and not wanting to miss the move.. too bad cause the move is already over - they've had since july! I'm expecting a soft landing as well. I believe 2007 as a whole will end up above break even, but a correction will happen first. best of luck.
Look at the long term retun of the dow, 6 + years. Not that exceptional considering economic and earings expansion. Just a return to moderate risk in the big cap. Put your thinking in context.
economy structures lag immediate trend prices.....same way, at a major trend low, the media will be screaming look at the (glass tit) numbers can't you see the economy is going to hell in a handbasket......but, the truth is, that the economy makes a low much later after the stock indexes have already turned.......watch the transports for a clue....also watch the ftse for a clue too.....the ftse likes to speed ahead of the euro action and lead the US too.... the yield curve is dodgy as but the ndx made a classic beta push up thursday.....the fundamental arguments don't match the technical arguments.....never do...... short squeazes are the launch pad not the total fuel...... ....once the mutual funders come off the sidelines and the hedgers decide its time to go long.....ping!
Look at every past decade that ends in 6, it's just a cycle. The market does the same thing every year, every decade.
as per Bernanke lastest speech (either Nov. or Dec.) as well as his testimony in July, in conjunction w/ the lastest econ. report on business profit/spending, he is saying that even though consumer spending is somewhat soft due to the housing sector drag down, but corp. pofit is at all time high. I forgot what that record is, (I have it in my journal) but his theory is because corp profit is at all time high, so will business spending, I forgot if it is at either 4 year high or was it 10 yr. high or a all time high. In short, he is saying business spending will keep the econ. going. Now, there is a way to prove this: If we look at the upcoming quarter earning on dept. stores, vs. staples, office depots, if Office Depot and staples are at new high, then the above theory is correct. i.e., if business is buying office desks, computers, chairs, etc. and dept. store profit is low, then Bernanke is right. ========== I disagree Smart money is out, there is no way that retail investor can push Dow from 10K to 12.5K in that 4 mth. w/o institutional money, you can forget it. ===== Greenspan and that ?? governor at FOMC already debuke the yield curve theory, because the original yield curve is developed in 1996, and Greenspan said today's economy is too complex to be confirmed as a recession solely based on the yield curve. Besides, there is talk out there, latest from bill gross today, that they are cutting rate.
Asian central banks are bidding for S&P futures all the time. The world is swimming in dollars and they need to do something with them. They cant sell them because then their currencies will appreciate and their export advantage will dry up. This world is flush with liquidity but at some point it will dry up. Central banks are historically late to the party.
Will recent drop in oil be a bonanza for consumer spending and corporate profits? When energy went up the media went crazy for the spending and profit squeeze, why not now the opposite that evergy is falling? How can walmart not project sss's #s growing faster than expectations with oil falling? They blamed the shortfall on higher energy?!!!! On the other end of the spectrum alot of liquidity driving lbo's and venture cap, and commodities chasing returns has come from mid east oil revenue. Will falling energy dry up this liquidity?