The DOW is down 222 points today

@JPB,

I'm hoping to see a new attitude re "the market", inthe past we americans have had essentially the same attitude towradsthe market we had about housing---just keep buying anything and everything because everything will valuate up---this time around (I hope) investors will THINK about what they are investing in and make much more intelligent decisions.
I also note that I am very much an optimist and see steady growth in good solid equities while junk will continue to be junk.

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@JPB,

That's a given; profit takers will make some movement downwards, but it's still a mystery what's making it go up to this level!

Retail sales are down, and thousands are still losing their jobs.

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@cicerone imposter,

I love these guys....

Quote:

“Most of the earnings news is garbage,” opines Dan Denning, “Earnings are whatever an accountant wants them to be. Compared to last year -- which was a shocker -- this year's earnings are bound to be better. And when analysts’ expectations are subjective, are you surprised to learn that the people who sell you stocks think that earnings are ‘surprisingly’ good?”

and

Quote:

U.S. foreclosures jumped to an all-time high of 937,840 in the third quarter. That’s a 23% rise from the same time last year, says a report from RealtyTrac today. One in every 136 households received a filing -- also a record. Once again, Nevada takes the cake… and incredible one in every 23 households was in some form of foreclosure last quarter.

And they tell us the economy is recovering?

But here’s the kicker -- a theme that should be no surprise to 5 Min. loyalists: This isn’t about subprime anymore. The most recent data from the Mortgage Bankers Association claims subprime mortgages currently account for hardly a third of foreclosure starts, down from 50% last year. Prime loans -- the gold standard of the mortgage biz -- now take up a 58% share.

About 35% of home foreclosures occur in the bottom third of the housing market, says zillow.com, down from 55% in 2006. In June, the most recent data available, 30% of foreclosures were in the top tier -- nearly double the rate the year before. (How could this happen? Heh, check out today’s reader mail.)

And the dirty icing on this rotten cake: Option ARMs. This pending rate reset crisis -- which just about everyone in “the know” saw coming in early 2008 -- looks like its really going to happen. 46% of option ARMs are currently 30 days past due, despite the fact that just 12% have reset to higher payments. Resets for the rest of those ARMs, as you know from this famous chart, are right around the corner.more

smoke and mirrors...

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@JPB,

That's true; earnings is what the accountant says it is!~ Numbers can be manipulated in so many different ways, it's a numbers game that some of us accountants used to call "scientific adjustment."

I haven't kept up with the news on the accounting rules of late, but it depends on when companies acknowledges "revenue" and "expense."

The government is the worst players of numbers when it comes to developing budgets and future costs on anything.

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@cicerone imposter,

The government's spending and increasing the deficit is going to be the biggest hurdle for our economy's recovery. Most economists have already stated that this recovery will be a jobless one, but as more thousands lose their jobs, consumer spending will contract. That in turn will require companies to lay off more workers, because demand will continue to constrict.

I see the stock market as over-priced at this point. Some companies continue to show profit, but it doesn't look promising for the long-term as more people lose their jobs and homes. The recent uptick in car sales was motivated by the government's clunker program that only pushed forward buying, and left the future of car sales in chaos. Same for home sales.

The government is doing most things wrong; they're not creating jobs as they increase the deficit. That will only create worse handicaps for the future economy of our country and the world's. The government is creating false demand that only exacerbates the deficit and ability for our economy to mend itself.

Our trading partners are worried about the decreasing value of the US dollar which will eventually fuel inflation. This at a time when most people's equity in their homes and savings have been depleted.

It's scary.

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@cicerone imposter,

yes, I too am optimistic.

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@cicerone imposter,

A while ago I think I predicted 8500 at years end.....I wonder if we'll get there.

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@maporsche,

A distinct possibility from where I sit.

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I'd like to add a few offhand comments at this juncture of our economy.
a) Most well managed companies have cut costs and are beginning to show some solid profits.
b) The GDP growth during the third quarter of this year is a blip created from the government's clunker and home buying programs, so don't expect the same in subsequent periods.
c) As more thousands lose their jobs, consumer spending that makes up 70% of our economy will impact GDP.
d) The value of the US dollar seems to be stabilizing, but as long as our government continues to increase our deficit, the US dollar will lose value.
e) More countries and consumers are buying US bonds over equities to protect their investments. Most see it as a fragile economic recovery.
f) I'm amazed at today's uptick in the stock market - now heading towards 200 points.

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@cicerone imposter,

cicerone imposter wrote:

f) I'm amazed at today's uptick in the stock market - now heading towards 200 points.

That sure didn't last long, did it?

DOW down -224 points so far today.

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@maporsche,

That's what I've been anticipating for over a week now. My gut feeling about the market has been pretty accurate.

I transferred over 60% of my YTD gains into intermediate bonds before this yo-yo in the market, and learned from several articles including the WSJ that many have been buying into bonds - after I took the action last week.

Feeling pretty smart at this point, but we never know how the market will proceed into the future.

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@cicerone imposter,

From Reuters:

Quote:

Consumer spending falls as sentiment sours
By Lucia Mutikani Lucia Mutikani Fri Oct 30, 11:24 am ET

WASHINGTON (Reuters) " U.S. consumers cut spending in September and turned gloomier this month, underscoring the fragile nature of the economy's recovery even as signs emerged that manufacturing activity may be picking up.

The Commerce Department said on Friday that consumer spending fell 0.5 percent last month, the largest drop since December, after a 1.4 percent increase in August. The decline, which was in line with market expectations, followed the end of a government program to boost auto sales.

A separate report showed factory activity in the nation's Midwest expanding for the first time in more than a year, but employment conditions deteriorated. A dismal job market appeared to weigh on consumers, with the Reuters/University of Michigan final index of sentiment for October slipping to 70.6, from 73.5 last month.

U.S. stock indexes briefly pared losses after the manufacturing data, but slipped back to session lows as investors worried about the health of the U.S. consumer.

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Here's the present challenge for those of us worried about future inflation; which is the better investment, gold or bonds?

I'd like to hear your opinion(s) about this issue from anybody that wishes to give their .02c worth of opinion/advise on this thread.

Gold hit $1,100/oz, and it still doesn't seem to have reached its top altitude.

Bonds are a bit riskier with price volatility that can wipe out any interest earnings, but more people are investing in bonds as never before.

When will the "real" inflation hit us? That's the 64-thousand dollar question for today.

Where do you stand?

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@cicerone imposter,

isn't nearly everyone in agreement that the dollar will continue to lose value for a long time to come? Unless your dollar denominated investment vehicle will factor in the decline of the dollar this does not seem to be a good place to park money. If your bonds are in a primarily international company that works in dollars then the risk would seem lower, as profits will account for the fall in the dollar.

Gold, like crude, automatically adjusts its dollar value to factor in the decline of the dollar. The decline in the dollar accounts for most of the recent price increases in crude.

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@cicerone imposter,

Quote:

Where do you stand?

At the end of the bar where I can keep my back to the wall.

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@hawkeye10,

Yes and no; oil prices are based on world supply and demand in addition to what the states or countries require in the refining of oil into fuel, and the taxes that they attach.

The US is one of the countries with the lowest taxes on gas, and it's been this way for many decades.

When price of oil goes too high, people cut back on its use, because they just can't afford it. A good economy will also develop alternative fuels, more fuel efficient vehicles, and create new industries.

The currency valuation of the dollar is based on speculation about our economy; the US is still the strongest economy in the world. China will eventually catch up for several reasons. 1) their natural growth in demand for goods and services, 2) their very competitive labor rates, and 3) their educational system that encourages math and science.

There are also external controls as to how low the dollar can go vs other currencies. Our trading partners can't afford to see the dollar lose too much value, because a) their products and services become less competitive in the world marketplace, b) their bond holdings become less valuable in the world, and c) what other currency is strong enough to replace the US dollar? Many countries that invest in currency are buying both US dollars and Euros. The old adage, don't put all your eggs in one basket is finally taking hold. Many countries use the US dollar as their primary currency. The biggest problem we now have is that China is unwilling to float their currency in the world marketplace, but keep it pegged to the US dollar. That makes China's products and services cheaper around the world.

I have never believed in the investment in gold; it's never outperformed the stock market in the long term.

If we don't have full faith in our economy, it means that the majority of Americans will end up struggling to make a living. Only the very wealthy will survive any dramatic downturn or in another depression. We need to keep our hope alive.

Most recent indications are that our economy is stabilizing, and the loss of jobs have been decreasing in numbers. That's a good sign, but it means that any recovery will be a jobless one. I anticipate that this jobless recovery will last a minimum of five years going onto ten years. Some financial pundits are saying that the job recovery will begin in the second half of next year. I don't believe that for one moment.

I find the investment in gold rather an irony; gold is used in some industrial and consumer products and jewelry. When the price of gold hits the level we now see, jewelry sales will drop, because more people are worried about spending money on luxury items.

I'm still not sure whether gold or bonds is best for the short-term, intermediate-term, and long-term.

I also own some international funds, and high yield corporate bonds.

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@cicerone imposter,

What you need to know ci. is that high yield means high risk and if you take that risk and it goes tits up don't come weeping around here.

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@spendius,

Not always true, spenceous! It depends on the inflation rate and where the economy is compared to the world.

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@genoves,

Well a year later and your were WAY TO WRONG to even warrant this response.
So much for your facist rantings.

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@jbeems69,

Quote:

Well a year later and your were WAY TO WRONG to even warrant this response.
So much for your facist rantings.

Genovas's major point was that this economic trouble is a big deal, and that Obama is not able to solve it. This was right on. Between declines in retirement accounts, pensions becoming far more shaky than they were seen to be at the time, job loses and erosion of worth of most families major investment (our homes) the American family has just absorbed a crushing blow. Obama has done nothing but to apply some very expensive bandaids in the hope that the illness heals on its own. It will not.

Genovas gets it, you don't.

1 Reply

The DOW is down 222 points today

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