Posted on 04/28/2007 2:32:45 PM PDT by Sleeping Beauty
It simply isn’t sluggish.
“What’s your theory?’
The DOW is -take your pick- a leading or a trailing indicator.
Low unemployment and low inflation are good. The economy is supposed to be slowing if we’re going to have a ‘soft landing.’ Looks to me like everything’s as expected.
Like a locomotive pulling a 150-car train, no matter how hard the brakes are applied, the rate of decrease in the economy will be practically imperceptible at first.
There will be jolts as the slack between the various connection points is taken up, but the sheer inertia of stopping some $13 trillion of national income takes a little while to show real effects.
But we hear the whistle blasting, and still there those who want to cut out around the crossing gates.
Well, not quite. This quarter's growth is not shown on the chart below, but if it were, it would be lower that the very first bar on the chart.
Overall, the chart is trending flat and slightly down. (I draw trend lines for a living, and that's what my eye tells me.)
yes....people were making quick profits for a while while speculating in the housing market, and yes, people got cheap, cheap loans that they probably didn't deserve, but the main housing market is very stable and that is just my opinion.....
Hi Sleeping Beauty,
“We know they didn’t put it in the bank, because there’s a negative savings rate in the US.”
The government uses faulty and incomplete information in computing the savings rate. Did you put money in your 401k? Not included. You paid less taxes, and saved money, but it’s not shown in the “savings rate.” Some googling will find articles on this. That’s just one example. Did you pay off some debt? Not shown as savings, even though it saves you money.
The stock market is going up because 2/3 of the companies reporting earnings are reporting higher earnings than were expected. Stocks are valued by estimating the future earnings of companies. Companies are making good profits, so their stocks are being valued higher. This also bodes well for the employment rate.
The Fed has slowed the economy (on purpose) by raising short term interest rates to slow inflation and let the air out of the real estate boom gently. They usually blow it in this situation by squeezing too hard, but so far, they have pulled it off this time (so far).
The economic cycle still exists, so a recession is coming, just a matter of when not if.
The largest driver of the economy is employment, and we have high employment. In fact, we have a labor shortage in many parts of the country.
Soft landings are hard to pull off, we did manage one in 1995, but there are too many variables to guarantee this landing will be soft.
Point being we have seen positive economic growth (above 0%) for each and every Qtr since the third Qtr of 01 (which is the same Qtr the GWB tax cuts were passed if I am remembering correctly).
I'll take that trend every year of my life.
Exactly right - The whole "we aren't saving as past generations did" is complete BS. Nor did past generations have as much FICA stolen from them....which directly helped to help their savings rates....
Low unemployment and low inflation are good. The economy is supposed to be slowing if we’re going to have a ‘soft landing.’ Looks to me like everything’s as expected.
Well, I like that idea.
As for inflation -- those numbers change because there are so many ways of looking at it. Food and fuel are going up at an alarming rate. Some inflation indices cut those out of the numbers. (For no good reason, as far as I can tell, except to make the numbers look good.)
The Americans have no savings, so they live on borrowing. Interest rates are very high on consumer credit, and growing higher each month.
Even the Federal Reserve can't calculate inflation very well.
The money that used to go into real estate speculation is going into the stock market — as the place where one can make money.
That scenario plays out fairly regularly. At the height of tangible asset price rises at the beginning of the ‘80s, money shifted from hard (tangible) assets to intangible assets (financial instruments) — which began the great bull market of the ‘80s. At that time, real estate prices peaked (along with commodities) — and pretty nearly continued to fall until the beginning of this century.
Rather than real estate (tangible assets) “going up all the time,” it tends to stay the same or decline most of the time but spurt up dramatically for a few years, but of course, cannot continue at those speculative rates for long. Then money starts shifting (rotating) into something else.
Initially, there is disbelief that this is happening because it isn’t heading straight up, and a “sure thing,” which is the phase it enters before it begins to “correct.” Because of these shifts, there are disruptions, dislocations and uncertainties until pretty nearly everybody realizes what is happening — and then the newspapers will write about it as though they created the idea, at which time, things are about to change again.
Simply look at the value of the dollar compared to commodities! It is called inflation (no, not the "Hedonically Adjusted" BLS version..., real life!
Even if you use "Official Consumer Price Index" adjusted data, DOW 13000 is not that spectacular! I will not even address the FACT that taxation of "Capital Gains" totally ignores the impact of inflation!
Don't get me wrong..., dip your toe in and GET OUT while you are ahead and, more importantly, diversify..., diversify..., diversify!
Don't get nailed with the "Dotcom Boom" mentality of the last punctured economic balloon!
I can assure you, your personal economic wellbeing should never be sacrificed due to your political allegiance!
Well, that is the trick question in this thread. The earnings of certain sector leaders are historically high -- outrageously high.
Everything the government has been doing should have resulted in more modest profits, if any. God knows, the consumer isn't fueling this growth.
So ..... ?
It is probably a good time to build the beach house.
Okay, I got you.
I wasn't even considering negative growth. When was the last time we saw that? (I won't pretend to be up on that data.)
If only stocks from American companies, not International ones, were sold on the Dow and buying was restricted American residents then the market would be a viable indicator of our economy.
As it is now, companies with their headquarters in the US who do more business overseas than they do here have their stock bought and sold on the Dow. Investors worldwide buy International stock on the Dow.
That’s my theory?
Well, yes, Mike -- you have a strong working knowledge of this. But let's not overlook the fact that since 2003, our economy has been completely fueled by consumers who took the equity out of their homes (homes they are still living in and now struggling to repay) -- and used that money to shop, shop, shop, shop.
They aren't real estate speculators. And they don't have any more equity to pull out and put into the stock market. You're talking about the big money players. But, still, this isn't the answer about why the Dow has been on a meteoric rise for the past quarter.
As it is now, companies with their headquarters in the US who do more business overseas than they do here have their stock bought and sold on the Dow. Investors worldwide buy International stock on the Dow.
That’s my theory?
You're hot hot hot! You're || <--- this close to being the grand prize winner.
As it is now, companies with their headquarters in the US who do more business overseas than they do here have their stock bought and sold on the Dow. Investors worldwide buy International stock on the Dow.
That’s my theory?
You're hot hot hot! You're || <--- this close to being the grand prize winner.
Here’s the grand prize winner:
Man Made Global Warming.......(/lib spin)
who the hell puts their money in a bank??? i put mine into the stock market!!! if you want to call that negative saving, so be it.
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