Stocks Stumble As Yield Curve Inverts

Associated Press ^ | 27 December 2005 | Ellen Simon

[Protagoras]

The reason I was goofing off here was because I've been wrapping up a pretty good year and we've been feeling kind of giddy --but I need to keep in mind that maybe y'all havn't been so fortunate.

Son, I have paid more in taxes on my profits this year alone than you have earned. And good fortune has nothing whatsoever to do with it.

But I guess the kind of minute performance that makes you giddy is less exciting to many others.

:^}

[expat_panama]

"...the kind of minute performance that makes you giddy is less exciting to many others...."

Fine, anything you want. In fact, if it's really that important to you I can also go and take back what I said about you being right and me being wrong and I'll grant that I was right after all and that means that I was right when I said I was wrong and that--

Now I'm getting dizzy.

Hey, I liked it better when you were fussing with Tball.  How about you two having at it and giving me the rest of the day off.

[expat_panama]

My old-year's resolution to not fight with other freepers lasted all of 46 minutes.  On the other hand, it lasted clear into December, which is more than I can say about most new-year's resolutions I've made.

May our 2006 be at least as much fun as 2005 has been.   ;-)

[Protagoras]

I don't remember fussing with anyone. Actually, the only fuss I saw was you fussing with me for trying to help you out.

But please please please don't take back the part about me being right just 'cause I was teasin' ya.

Take the rest of the day off, you deserve it. :^}

[expat_panama]

"...I was teasin' ya.  Take the rest of the day off, you deserve it..

Thanks --I've got a bad habit of insulting people without trying and I'm working hard to quit-- so naturally I was glad to hear you were joking.   I was worried you were in a bad mood about having to pay more in taxes than I get in profits --I know for sure that if I had to pay more taxes than I made in profits that I'd be in a really foul mood.

cheers!

[Protagoras]

I am in a perpetually good mood despite the poor outlook for the world in general.

As my Grandfather always said, "better days are coming". He didn't say when so I was never disappointed. :^}

[remember]

I don't see a small cap indicator on that chart.

I've been using the Amex as a quick'n'dirty small cap index. If you have the energy or interest, you can show a difference if you want to plot the AMEX and some official small cap index but that sounds like a lot of work to me....

It's actually pretty easy to do that on Yahoo (with a few limitations). What's not so easy is finding the appropriate indices. For an official small cap index, I found the Dow Jones US Small Cap Index (^DJUSS). Of course, a U.S. small cap index should be compared against an international small cap index. The best representative that I could find for the latter was the Fidelity International Small Cap Fund (FISMX) and the iShares MSCI Emerging Markets Index Fund (EEM). I also included a broad U.S. stock index (the S&P 500 Index) and an ETF that tracks a broad international stock index (the MSCI Europe, Australasia, Far East index). The following graph shows the returns for those indices and funds over the past two years:

If you can find better indices or representative funds, you can make changes to the graph at the following Yahoo page:

http://finance.yahoo.com/q/bc?t=2y&s=FISMX&l=on&z=m&q=l&c=EEM%2C%5EDJUSS%2CEFA%2C%5EXAX&c=%5EGSPC

Following is a description of all of the ticker symbols in the above graph, in the order of their return over the past two years, starting from the highest:

EEM    - iShares MSCI Emerging Markets Index Fund 
^XAX   - AMEX Composite Index
FISMX  - Fidelity International Small Cap Fund
EFA    - iShares MSCI EAFE Index Fund
^DJUSS - Dow Jones US Small Cap Index
^GSPC  - S&P 500 Index

[Safetgiver]

Most all predictions are S&P up 11% minimum, DJ at 15000 before year end and overseas seeing records.....Looked WAY back for this. Dow at 12,500, S&P up 18.05%, and EAFE way up. Some predictions close, some spot on. Happy New Year.

[Safetgiver]

Most all predictions are S&P up 11% minimum, DJ at 15000 before year end and overseas seeing records.....Looked WAY back for this. Dow at 12,500, S&P up 18.05%, and EAFE way up. Some predictions close, some spot on. Happy New Year.

[WashingtonSource]

For a moment I thought this was reporting on today's stock market -- today being Monday, January 15, 2007. This was especially baffling since I assumed the markets are closed for the holiday. Then I saw the date: December 2005. Then I exhaled.

[Principled]

The Feds intention was to purposely cool the housing market by raising short-term rates.

Why does raising short-term rates cool the housing market?

[Safetgiver]

Last year I had heard some of the pundits prognosticating about '06. They missed the DJ by about 2500, underestimated the S&P, and were spot on about the European, Australian and Far East markets. Just thought it was interesting for everyone. Especially since the article was doom and gloom, mostly.

[groanup]

Why does raising short-term rates cool the housing market?

Because historically long term rates followed. Not this time. Therein lies the problem for the Fed. It really wanted this housing slowdown and it didn't really get it. The slowdown so far has only popped the spec bubble. Regular folks who don't need to sell (flip) remain very able to afford housing at these rates. We may see the housing market come roaring back in 07.