Down goes the Dow

To those who say the US rally is entirely or maybe 90% Fed-driven - how does 5% GDP growth strike ya? Maybe there is some actual growth going on that investors are correct to tag along with? Maybe? A little?

WASHINGTON (AP) -- The U.S. economy grew at a sizzling 5 percent annual rate in the July-September period, the fastest in more than a decade, on the strength of consumer spending and business investment.

The resurgence in growth last quarter provided the latest evidence that the U.S. economy is steadily strengthening and outshining most others around the world.

The Commerce Department on Tuesday sharply revised up its estimate of third-quarter growth from a previous figure of 3.9 percent. Much of the increase came from consumer spending on health care and business spending on structures and computer software.

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all time high for the Sp 500

agip wrote:

To those who say the US rally is entirely or maybe 90% Fed-driven - how does 5% GDP growth strike ya? Maybe there is some actual growth going on that investors are correct to tag along with? Maybe? A little?

WASHINGTON (AP) -- The U.S. economy grew at a sizzling 5 percent annual rate in the July-September period, the fastest in more than a decade, on the strength of consumer spending and business investment.

The resurgence in growth last quarter provided the latest evidence that the U.S. economy is steadily strengthening and outshining most others around the world.

The Commerce Department on Tuesday sharply revised up its estimate of third-quarter growth from a previous figure of 3.9 percent. Much of the increase came from consumer spending on health care and business spending on structures and computer software.

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all time high for the Sp 500

The sizzling growth for me is when I start to see the red flag. This whole time from 2009 until now, has been great, and I knew it would continue to be great because people were still saying how bad the economy was (when it really wasn't). When everyone and their brother starts to believe that it IS good though, that's when it's time to wonder when the drop will come.

I hold firm to my prediction that the economy and markets will be good through the remainder of Obama's presidency...this will allow another Democrat to be elected President, but then during the first term of that President, the economy will slow...not sure to recession levels, but there will be some bad financial information. The result is a Republican President elected in 2020.

So, while Dow 18,000 is good...I never bemoan an up market...a hot fire will eventually cool down. Hopefully when it settles down it will just be stagnant for a year or so...just time to acquire shares.

Now at age 48 with perhaps 12 years left of working, I won't change my investing strategy. If I were retired though, I would be drawing only if the market continues to climb or holds steady. Once it begins to drop, I would live on Social Security and the 3 years of expenses I will have by then in liquid vehicles (cash or maybe CDs).

I hear you on being wary when things are good...but I don't see anything like euphoria about the economy - if you asked the average person in America, he'd probably say we've been in a recession for the last 3 years. not that the economy has grown for 24 straight quarters or whatever it has.

My worry is that all the money from all around the globe will come here too fast and drive prices up too far -- that would be great in the short term, but that's how bubble form, so it could end badly. But heck, it always ends badly - might as well get the big runup.

I wonder if we should be buying europe, brazil, australia, emerging markets - they are being ignored for the most part...

I agree that the euphoria hasn't started just yet. We get another quarter like this last one though, and that COULD happen. This is where I should actually thank Fox News for spewing doom and gloom (simply because of the person in the White House).

I also agree with you about all the foreign money coming here. US stocks are hot right now. I always keep about 25% in international stocks, and I'm not likely to change that for now.

Unfortunately the "average" American is clueless about the economy, and doubly unfortunate is that they often believe the economy is one way or the other based on their political beliefs (that are steeped mostly in ignorance too).

...you can almost hear people thinking...

5% GDP growth! $50 oil! buy stocks!

but

5% growth and cheap oil is probably inflationary and we could get a surprise interest rate hike which could hurt stocks! wait!

tough decisions out there, as always.

Unless you buy and hold - then no decisions.

agip wrote:

...you can almost hear people thinking...

5% GDP growth! $50 oil! buy stocks!

but

5% growth and cheap oil is probably inflationary and we could get a surprise interest rate hike which could hurt stocks! wait!

tough decisions out there, as always.

Unless you buy and hold - then no decisions.

My stance of course is that you shouldn't buy individual stocks unless you already are putting 15% into mutual funds and you have zero debt and own your home outright. Then, if that's the case, you should own no fewer than 5 individual stocks and they should all be in different sectors of the market with no more than about 20% in each one.

Big dog investments wrote:

What's the over/under for DOW 18K?

Looks like Dec 23.

another all time high for the US using VTI as a proxy

I'd bet a nickel on a big downdraft first two weeks of January

I mean really, a nickel. That's not code for anything but 5 cents.

Raise the rates!!! wooohooo

So, where is this 'growth'?

peter lemonjello wrote:

Raise the rates!!! wooohooo

So, where is this 'growth'?

where's the growth? Did you see the revised growth numbers yesterday? +5.0% - massive growth was here.

Maybe you are saying you, anecdotally, don't see the growth. Well, sure. it isn't exactly evenly distributed. Sorry if you are in Detroit or some such place.

But man - visit NYC some time. Buildings going up everywhere, new cars. city completely packed.

Boom times here, shure.

Fair enough.

So, how is this 'growth' sustainable with world markets tanking?

peter lemonjello wrote:

Fair enough.

So, how is this 'growth' sustainable with world markets tanking?

well that's the question - will the rest of the world move up with the US or will the US move down with the rest of the world?

I'm an optimist so I think the rest of the world will move up, but I don't pretend to have any predictive ability.

but the US is an amazing economy - it is rugged and tough and flexible - we aren't as dependent on other countries as most countries are dependent on other countries.

agip wrote:we aren't as dependent on other countries as most countries are dependent on other countries.

Are we not? I understand that a majority of our debt is domestically held, but do we not have quite the pickle in foreign held?

agip wrote:

but the US is an amazing economy - it is rugged and tough and flexible - we aren't as dependent on other countries as most countries are dependent on other countries.

Why do you say that? The health of US economy is dependent on cheap imports and foreign investment. Foreign investment in the US dwarfs US investment abroad.

peter lemonjello wrote:

agip wrote:we aren't as dependent on other countries as most countries are dependent on other countries.

Are we not? I understand that a majority of our debt is domestically held, but do we not have quite the pickle in foreign held?

well we're talking different levels - debt ownership vs. economic activity.

Sure a lot of our debt is foreign owned - around 50%. They are loving this - the rise in the dollar has goosed their returns. But who owns the debt only matters if they decide not to own it anymore - but the entire planet is lining up to buy US bonds right now - hardly a problem unless TOO MUCH money comes here.

on the economic activity side - we are more self contained than most developed nations - we don't depend on exports as much as most other industrialized countries, so we can be more of an island to ourselves. Not completely, but to a large degree.

The posters on this board are overwhelming narrow minded in their view of the U.S. economy, sure take into account how much foreign vs domestic debt that US holds, but the global economy is slowing substantially in a period where the US is accelerating growth. A lot of whom are concerned that this is primarily fed driven by QE effects, but if you take a look at the fed inflationary target for Q3, it is under by about 1.1%, which is indicative that the growth is NOT due to the fed simply printing money, real growth is occurring and that is supported by the increase in consumer spending that we are seeing. Further, another indication of inflation and negative effects of QE check out the WSJ for how the dollar stacks up against other currencies, it has been for the most part strengthening, granted you take into account the downturn in the eurozone, japan, and china. And just as an overall guideline for those retail investors who don't have any kind of formal training in economics or finance, take a look back at the historical levels of the dow or s&p, recessions are cyclical. Major ones occur every 15-20 years, we are about 5-7 years out from the bottom of 2nd largest one in US history, this intermittent time period is all about growth growth growth until people forget about the recession, look at another 7 years before you think about any major downturns, little minor ones here and there are not significant and all you have to do is ride them out. Sure take some unrealized losses for the short term, but unless you are about to retire it doesn't really make sense to get cold feet.

Randy Oldman wrote:

agip wrote:

but the US is an amazing economy - it is rugged and tough and flexible - we aren't as dependent on other countries as most countries are dependent on other countries.

Why do you say that? The health of US economy is dependent on cheap imports and foreign investment. Foreign investment in the US dwarfs US investment abroad.

see the post right above this one.

fact is, of the developed nations, the US is amazingly resilient and flexible. I'm not sure that is debatable really.

So, asking questions, is narrow-minded? Ok, tool.

Randy Oldman wrote:

Why do you say that? The health of US economy is dependent on cheap imports and foreign investment. Foreign investment in the US dwarfs US investment abroad.

You say that as if these are bad things.

Cheap imports? So, you are complaining about a strong dollar?

Large foreign investment? So, the rest of the world thinks that the US is a great place to invest?

These are negative?