Current stock market (Nov. 2010) not reflecting reality

Here you go.

http://www.federalreserve.gov/releases/h6/current/

agip, you seem like a smart and reasonable fellow. I could give you any number of pieces of info. But go back and read the Hoisington piece, as well as their 2Q outlook. Even as it's dated, it does as good a job as I've ever seen explaining the obstacles to the monetary transmission mechanism and why the velocity assumptions by the Fed are erroneous.

Umm...1) Stocks have been favored all the way back to 1933 brother...even in a flat market, with dividends being a much higher part of the return, investors earned just under 6% annually between 1933 and 1955.2) "People" or experts give up on stocks all the time brother...for short periods. Equities were DEAD in 1978...yeah, how did that work out? 1987 we were being punished for the ME decade. Stocks bounced back. 1992, 1996, 2002, 2008...all bad, and people were saying to stay out of stocks that a new dawn had arrived. Ha! I made 43% in 2003, 34.7% in 2009, and so far 15.1% in 2010 as of this morning, not counting the upward move so far today.3) Regarding housing prices, I've said for years that I don't care one way or the other about them...it's a place to live, and if your house drops in price then so do all the others. BUT, economists use housing prices as an indicator of the health of the economy, so that is why I mentioned it. For some reason homeowners (not me though) feel better when their home increases in value even though all the others do too...makes them spend money...some take loans out against the value (stupid). Stupidity doesn't change the fact that economists view rising prices as a good thing.4) I said watching short-term moves in the market was fun, and it is.5) My statements are 'dangerous'? Are you serious? My statements are ALWAYS a) have an emergency fund of 3-6 months of exenses; b) have no debt except for a mortgage that is no more than 25% of your take home pay; c) invest 15% of your salary into growth stock mutual funds split this way evenly...Growth, Growth and income, Aggressive Growth, and International; add more bonds to your portfolio as you get closer to retirement, and don't retire until you are completely debt free, house and everything. Ha! And THAT'S what you call "dangerous" advice? BS brother.

Does the stock market ever reflect reality?

Flagpole wrote:

Why own US stocks? Because they are a part of a diversified portfolio that should include those and international stocks and bonds if you're closer to retirement. As Buffet said, no one ever got rich betting against the United States.

Buffett's right. However, what people don't undertand about Buffett is that he made a lot of his money on "special situations," the likes of which you and 99% of investors are not privy to. His returns look far less stellar when you back these out. Moreover, he made most of his money in financial-related assets, as the financial sector climbed from some 10% of the S&P 500 to 40%. Not so sure Buffett is as good as he seems, but he won't be around to prove himself over the next 30 years will he?

Sagarin wrote:

Here you go.

http://www.federalreserve.gov/releases/h6/current/

Look at the quarterly change. I don't think the Fed publishes M3 anymore and I believe their assumptions for doing so are questionable.

agip wrote:

You are probably right on m2 - one reason it is not higher is that the money is just sitting in banks, not being lent out. If the banks did start a lending binge, m2 might soar unless the gov't shuts down the press.

Last post on this. This should serve as a reasonable proxy:

Is Flagpole a democrat propaganda machine, or is he a stock broker?

Sagarin wrote:

agip wrote:

You are probably right on m2 - one reason it is not higher is that the money is just sitting in banks, not being lent out. If the banks did start a lending binge, m2 might soar unless the gov't shuts down the press.

Last post on this. This should serve as a reasonable proxy:

http://research.stlouisfed.org/fred2/series/AMBNS

nice site -

But if you click on any of the "% change" links, you see that there was a huge spike in the financial crisis, but now year over year growth in money is normal.

So seems to show that the gov't turned on the fire hose during the crisis, but has shut it down since. Which is what they are supposed to do, and seems like wise policy to me.

the problem is all that money created during the crisis still sloshing around - not sure how it will be sopped up.

I hope you're right. I work for a company that contracts with a great many of the largest companies in the US, and I know for a fact that in the last year things have picked up considerably -- after a dismal 2009. The sales guys tell me things are really hopping, and mangagement has implied that our profit sharing bonus will be pretty big this year.

agip, look at the summary at the bottom of the H6 release. July-Oct: M1 14.7, M2 7.6. And climbing.

... and M3 is nonpublished.

The US is a country and culture on the decline. For the past 30 years the baby boomers have sucked us dry with consuming beyond their means and refusing to either have the government cut or to actually tax themselves to pay for what they expect the government to deliver. At some point we--collectively as a nation and individually as consumers--will have to pay for what has been provided, used, and consumed. Since we have over consumed and owe this will require a period of paying back, living within our means and providing some of our disposable resources to pay for the 30 year binge. Americans are not willing to do that because we are an inherently selfish group of people and equate consumer products with success and happiness. At some point the people that own our debt will demand it. Moreover, the changing demographics of the baby boomer generation will require substantial increases in resources devoted to health care and social security as they will live a long time and expect excellent medical attention, because they feel they deserve it. Yet, they will continue to refuse to tax themselves to pay for it. The baby boomer generation will ultimately be renamed the selfish generation by historians because that is what they have proven to be. They had access to public colleges and universities with astonishing low tuition rates because of high tax support for public schools, yet they now insist that those after them must pay a far greater share of college costs because their tax burden is too high, even though the current tax rates are historically exceptionally low within this country and absurdly low when compared to other modern industrial (or post-industrial) countries.

We are the new Britain. The only question is how slow or fast will our economic decline be? Fluctuations in the market are based on short term speculation and not based on any reality or recovery.

The Baby Boomers killed America. My children thank you as they will be forced to suffer and pay for your excessive lives. (That is sarcasm.)

dr rat

rekrunner wrote:

Does the stock market ever reflect reality?

Only in very brief moments in time and then only by accident.

honest question wrote:

Is Flagpole a democrat propaganda machine, or is he a stock broker?

Neither. I just said in this thread that Obama extending BUSH'S tax cuts was going to help the market. Obama had been against that and is feeling the pressure from the Republicans...how is that Democrat propaganda?

At the same time though, the White House needs to step up and while perhaps not take credit for, at least mention the GREAT things that have happened since Obama entered office (hard to get worse than it was)...1) Recession is over; 2) Manufacturing has seen growth for 16 months now; 3) Consumer confidence is up; 4) Stock market is up; 5) Banks won't be nationalized; 6) Combat operations in Iraq are over; 6) unemployment rate is SLOWLY falling; 7) Obama has frozen government pay increases for 2 years; 8) Spending and saving and income are all up; 9) Obama said NO to an increase in SS payments; 10) Corporate earnings are up across the board; 11) in 2011 the White House can point to an even better job market. Bad stuff still too of course, but they need to harp on the good as is evidenced here that too many of you don't believe the good is out there, because you don't do the research I do (because I have personal interest in the economy and it goes directly to the work I do).

No way brother (unless the WHOLE thing was sarcasm). The Baby Boomers are the GREATEST GENERATION. It isn't the Baby Boomers that have over spent...most of them are conservative with their money. It's those AFTER the Baby Boomers who have spent too much. BUT, as Buffett (was just a typo before Sagarin) says, America's greatest days are still ahead of her. Believe that brother.

Haha you just contradicted yourself by saying the Dow went up 200 points on manufacturing and jobs data. Go back to page 2 and see what you wrote about trying to identify why the market went up on a particular day....oh wait, you don't have to....I pasted it below. You are a fool. Go back to school.

Flagpole wrote:

I disagree that it's already baked. The Dow went up 200 points this morning on manufacturing and jobs data.

If the Dow doesn't make it to 12,000 by end of year, you won't hear all the reasons why not from me, because no one can ever really know the reasons. One day you hear the moves are because of X and then the next day it's Y, and it's usually just a bunch of crap...news reporters trying to find something to write about.

Dr. Rat... Read "Colossus, The Rise and Fall of the American Empire," by Harvard-trained historian Niall Ferguson. He is an unorthodox thinker.

We're going to need a paradigm shift or another killer app, which could happen yet.

I said "usually a bunch of crap". Doesn't mean I think it's ALWAYS a bunch of crap, and since I'm the one typing the info, I get to decide what to use and what not to use.

Fair Value wrote:

Haha you just contradicted yourself by saying the Dow went up 200 points on manufacturing and jobs data. Go back to page 2 and see what you wrote about trying to identify why the market went up on a particular day....oh wait, you don't have to....I pasted it below. You are a fool. Go back to school.

Flagpole wrote:

I disagree that it's already baked. The Dow went up 200 points this morning on manufacturing and jobs data.

If the Dow doesn't make it to 12,000 by end of year, you won't hear all the reasons why not from me, because no one can ever really know the reasons. One day you hear the moves are because of X and then the next day it's Y, and it's usually just a bunch of crap...news reporters trying to find something to write about.

Right....because you know more than news reports. With each succeeding statement you write you damage your credibility more and more. Seeing you and Sangarin debate is like watching a CEO (Sangarin) debate a High School kid (you).