Why Does The Stockmarket Keep Going Up ?
- 07-13-2007, 07:04 AM
Why Does The Stockmarket Keep Going Up ?
Dow climbs over 280 points to end at record high in N.Y.+
Does it bother anyone else that the stockmarket keeps going up without any economic factor that might justify trader confidence???
The only factor i see is that the US national debit was cut in half
since 2004 but...
- 07-13-2007, 08:03 AM
Retail figures were up.
NEW YORK — Wall Street soared Thursday, propelling the Standard & Poor's 500 index and Dow Jones industrials to record highs as bright spots among generally sluggish retail sales allowed investors to toss aside concerns about the health of the economy.
The rally, which included the Dow's biggest one-day gain since March 2003, was perhaps surprising given the fact that there was no extraordinary announcent or other catalyst usually seen with such a huge gain, and that it came before most companies have announced their second-quarter earnings. The rise also marked a sharp contrast to the start of the week, when stocks fell sharply amid concerns that some hedge funds could buckle under ill-placed bets on the housing sector.
But investors, heartened by signs of a happy and spending consumer, clearly decided to put some bets on the table. Though retail sales generally appeared to be crimped last month by higher gasoline prices and a tepid housing market, and the outlook for the coming months was difficult to ascertain, the overall reading wasn't as dour as some investors expected.
Several reports beat Street expectations -- notably that of Wal-Mart Stores Inc. (WMT), the world's largest retailer, which posted a better-than-expected 2.4 percent jump in sales at stores open at least a year.
"It's relief that things weren't as bad as people expected," said Bill Schultz, chief investment officer at McQueen, Ball & Associates, referring to the retailers' reports and the economy at large. "We're maybe getting slower growth but not the fall-of-the-cliff economic scenarios," he said of investors' reading of the economy.
But, Schultz said, "I think it is, over the near-term, a little bit over done, certainly on a two-day basis," he added, referring to the rally.
According to preliminary calculations, the S&P 500 rose 28.94, or 1.91 percent, to 1,547.70, above its record close of 1,539.18, set June 4.
The Dow shot up 283.86, or 2.09 percent, to 13,861.73; its previous record close is 13,676.32, also set June 4.
The Nasdaq composite index rose 49.94, or 1.88 percent, to 2,701.73. The index, bloated by the late 1990s tech boom, is nowhere near its closing record of 5,048.62, set in March 2000.For answers to board issues, read the Suggestion and News forum at the bottom of the main page.
- 07-13-2007, 09:05 AM
07-13-2007, 09:42 AM
Ain't quite that simple. Prices go up in inflation, that includes stock prices. We might have record home ownership but last I saw despite that record and despite the fact that the housing market is still doing okay average equity is low because people keep refinancing and spending. Monetizing a notional asset gain by increasing your leverage against it and disapating the proceeds on instant gratification isn't a good idea. It will keep consumer spending going for a while which is necessary to support inflationary policy.
In short the stock market is nothing special, and as Henry Hazzlett was fond of doing you can break out the traditional stats the government likes to air and show how they can support quite different conclusions than most are lead to believe.
07-13-2007, 10:18 AM
07-13-2007, 10:32 AM
Foreclosures are at there highest levels in years, consumer debt continues to get deeper, and the cost of college continues to go through the roof. This economy is not as good as the Bush administration says it is, and its not as bad as the Democrats think it is either.
07-13-2007, 10:56 AM
07-13-2007, 11:15 AM
Another factor as to why the stock market is doing well is due to the fact companies are doing everything they can to show a "profit" so their stocks hold value. The companies that I'm directly involved with are simply laying people off to make the bottom line. Their revenues haven't gone up, their spending has been cut, and they save money by letting go of good workers, leaving more work for those left to do.
Another thing these companies are doing is outsourcing work. My group is lucky that we're not losing our jobs and just new work will be hired from abroad (Brazil in this case). The bad thing about that is now I cant get a promotion cause it will be going to some Brazilian. Raise increases have been flat for a long time too. And 90% of the manufacturing jobs that were around in the mid-90's are now gone.
I talk to a lot of people working at other companies around the country and they tell me similar things.
07-13-2007, 11:42 AM
07-13-2007, 12:36 PM
also the stock price is determined by alot of other arbitrary factors as well. for instance a company could take on debt to buy back stock and thus increase the stock price and they could also issue more stock to pay back debt and thus lowering the stock price.
07-13-2007, 01:40 PM
Last I saw capital goods spending, especially ex military spending, is flat. When you couple that with increased obselescence of a lot of new capital that's a bad thing.
07-13-2007, 01:48 PM
i also think it has something to do with me and my moods. When i am in a really good mood, the market breaks into new highs and the sun comes out! I have noticed this, i wonder if I some how was emotinally involved with the murder of JFK back in my past life
07-13-2007, 02:17 PM
07-13-2007, 02:18 PM
07-13-2007, 03:11 PM
07-13-2007, 03:19 PM
The CEOs took the fall but the speculative accounting process rolls on creatively showing profits wherever possible !
07-13-2007, 03:24 PM
American companies generally outsource work that requires little skill or training. The high-end work and wages stay here; but in fact, they might not be retained if the stateside work were not augmented by outsourced functions in lower-cost countries. Furthermore, workers freed up from routine tasks that have been outsourced are often redeployed within the company to higher paying jobs, or on projects that generate greater value-added services or products.
"There is no denying that the number of manufacturing jobs has fallen dramatically in recent years, but this has very little do with outsourcing and almost everything to do with technological innovation. As with agriculture a century ago, productivity gains have outstripped demand, so fewer and fewer workers are needed for manufacturing. If outsourcing were in fact the chief cause of manufacturing losses, one would expect corresponding increases in manufacturing employment in developing countries. An Alliance Capital Management study of global manufacturing trends from 1995 to 2002, however, shows that this was not the case: the United States saw an 11 percent decrease in manufacturing employment over the course of those seven years; meanwhile, China saw a 15 percent decrease and Brazil a 20 percent decrease. Globally, the figure for manufacturing jobs lost was identical to the U.S. figure -- 11 percent. The fact that global manufacturing output increased by 30 percent in that same period confirms that technology, not trade, is the primary cause for the decrease in factory jobs. A recent analysis of employment data from U.S. multinational corporations by the U.S. Department of Commerce reached the same conclusion."
07-13-2007, 03:27 PM
Also keep in mind again that consumer spending or exhausted spending, while overemphasized in GDP and other such aggregates, often accounts for a minority of the bills and invoices raised and settled in the market in any given time period. The majority of the flow of money through the market is from business to business. Mutual nonautomatic entrepreneurial productive spending basically. Even during the great depression retail sales generall only took a 10-20% hit, while capital goods took an 80-90% hit, sometimes more, and well before the fall in retail. So concentrating on retail sales as a market indicator is like only looking at the foothills of a mountain range to get an idea of what a hike will be like.
The reason exhausted spending is so emphasized is because it is exhausted spending that is needed to keep an inflationary boom going. As long as you can keep people spending out the ass and stop a drain/devaluation of reserves through various means you can expand the money supply massively and generally without direct consequence for some time. This means more government spending and wealth transfers are possible without direct taxation, which is why politicians like the idea so much.
07-13-2007, 03:45 PM
07-13-2007, 04:32 PM
The upturn is about becuase the sales and earnings numbers that are coming in are better than what were expected. I dont think inflation is much of a concern because most of these compaines are MNC's. Like I beleive Exxon had high earnings but 70% of their revenue comes from outside the us, coke, ibm, intel, hp all get 60% etc etc
07-13-2007, 04:38 PM
Then one would need to know where the increases were happening. Either way increased spending and better consumer numbers really mean nothing until they're cast in a much larger context.I dont think inflation is much of a concern because most of these compaines are MNC's. Like I beleive Exxon had high earnings but 70% of their revenue comes from outside the us, coke, ibm, intel, hp all get 60% etc etc
07-13-2007, 04:43 PM
its not my theory. its just what i learned in international finance.Also, your theory on Americans moving up in the ranks and the outsources getting the lower end jobs is untrue. You just have to look at the IT sector. IT companies that use to outsource service desks are now outsourcing Engineering jobs as well.
Outsourcing creates jobs in U.S., industry study finds - Mar. 30, 2004
07-13-2007, 05:04 PM
[QUOTE=CDB;905191]true, and inflation is slightly up compared to the last month or two. I think that people were expecting lower revenues and sales due to rising fuel costs and the poor housing market. but i guess people kept on spending regardless.Which is exactly what happens during an inflationary boom.
true. but in reality stock prices are only loosley tied to a companies profits/earnings/revenues. Some are perceived to be under/over valued. but the price is only set by what someone is willing to sell and buy it for (supply and demand). i think right now people are really over-reacting untill all the information comes in over the next few weeks.Then one would need to know where the increases were happening. Either way increased spending and better consumer numbers really mean nothing until they're cast in a much larger context.
07-13-2007, 05:12 PM
Yes, stock prices are like all prices. People evaluate and buy or don't. But when you see things like hikes in the price when yields are **** and what not, then you have to wonder what's driving the price hike. And it just could be a nice infusion of credit.true. but in reality stock prices are only loosley tied to a companies profits/earnings/revenues. Some are perceived to be under/over valued. but the price is only set by what someone is willing to sell and buy it for (supply and demand). i think right now people are really over-reacting untill all the information comes in over the next few weeks.
Edit: Check this article by Sean Corrigan, basically a transcript of one of his speeches. It's a nice eviceration of common macro economic indicators even though it's based on year 2001 figures.
07-13-2007, 05:30 PM
[QUOTE=CDB;905256]yeah i guess i dont really know how they come up with the number.The standard measures of inflation aren't really reliable. For increases in credit and money stock I think in the last eight years more was issued into existence than in the entire history of the US up until Bush's term. No matter what the subjective price indexes may be doing, that's an increment to say the least.
what yield are you talking about? stock, bond, mutual fund?Yes, stock prices are like all prices. People evaluate and buy or don't. But when you see things like hikes in the price when yields are **** and what not, then you have to wonder what's driving the price hike. And it just could be a nice infusion of credit.
07-13-2007, 08:57 PM
History of Global Insight: 2001 to January 2005
2001—Global Insight, Inc. is formed. Global Insight, the privately held company formed by Dr. Joseph E. Kasputys, Michael R. Kargula, and Vicki Van Mater in March of 2001, brought together the world's premier economic and financial information firms: DRI and WEFA. WEFA (formerly Wharton Econometric Forecasting Associates) was founded in 1963, and Data Resources, Inc. (DRI) was founded in 1968. The formation of Global Insight also included the acquisition of DAFSA, a European market-research company; and GlobalInTech (formerly Primark Poland), a software company specializing in time-series data management, as well as an interest in Decision Economics, Inc.
Dude, these are more than theories they are agendas!
CNN? Time/Warner/AOL are "Good Shepherds" that help formulate
the execution of outsourcing labor.
That "theory" is disinformation cranked out by Global Insight. Yes its true because they make it true!
Bad news is more good news
07-14-2007, 02:55 AM
huh? its just common sence. basic economics
i could go on and on with articles.
07-14-2007, 03:22 AM
I see GE sold off its unprofitable sub-prime morgage business, which would increase revenues. and it terminated a merger with Abbott Laboratories, which freed up 12billion dollars in which its going to buy back outstanding equity which will raise share price.
I see that Alcan wanted too high of a price for Alcoa to purchase it. And investors believed that there are better options for delivering additional value to shareholders. Alcoa is a more attractive takeover target.
I see energized is buying playtex.
I see markets all over the world are also up. while the key economic indicators of the us economy are certainly important to look at dont over look the fact that all of the 30stocks in the djia receive over at least half of their revenues out side of the united states. pfizer earns close to/ over 100% of their profits from overseas. certainly the stock exchange does not just stop at the boundries of the united states.
07-14-2007, 04:27 AM
07-14-2007, 06:48 AM
This is more of a 5 steps forward, 1 step back scenario.
For answers to board issues, read the Suggestion and News forum at the bottom of the main page.
07-14-2007, 07:43 AM
The correction and subsequent elimination of the "sub primes" is a great thing for the market and the stability of the economy as well. It is similar to the elimination of the 80's "junk bond" market. There will always be speculative investments, but when deep speculation becomes an acceptable market strategy there will always be a correction.
The reality is that the people who were hurt the most by this shift were the mortgage brokers and specialized market traders who pushed the "sub primes" through the banks.
While some people lost their dreams of home ownership, most did not put down any real money, and at least they got to feel the American Dream was real for a few months !
07-14-2007, 07:52 AM
that same factor.
While this current trend is good for corporations and the Market in general, it could lead to American having to go abroad to find work!
Lets face it Walmart is "the business model case study" in how to exploit this economic factor. Walmart is basically the distribution network for China!
China will become the most dominant economic force in the world because of the exploitation of the labor factor. 1.3 billion people with no laws to prevent their exploitation. This will eventually be the factor that leads to some Americans not finding jobs in America.
You are quite correct, Its basic economics !
07-14-2007, 10:57 AM
If we got rid of state sponsored health care then it would go away, good luck with that. Once the government starts handing money out to people it is hard to take it back. It is ironic that Walmart abuses a socialist program in the name of capitalism which is now leading people to cry for more socialist policies and state regulation.
IMO the factor that leads to Americans not finding jobs is likely going to be run away government spending. I think you mentioned that as a concern already.
If you are confident the market is going to tank soon then invest in it. You can make just as much money when the markets are heading down if you invest correctly.
07-14-2007, 11:18 AM
the evidence does not support your claim, free trade benefits both parties involved. the unemployment rate is currently 4.5% which is the lowest that it has been since sept 2001. Average weekly earnings rose by 4.1 percent, seasonally adjusted, from May 2006 to May 2007. After deflation by the CPI-W, average weekly earnings increased by 1.4 percent. where are these "lost jobs" where is the "lost income".
07-14-2007, 02:31 PM
Your confusing causes here though. Those companies that outsourced do not have the power to suck up and destroy other opportunities for those they fired. No company does. The key question is where is the opportunity? The answer is the government has flushed it down the drain.Both companies had very good unions and these people were making very good money with great benefits and as a result, the middle class here was very strong. Now the jobs are gone; replaced with retail, fast food, or non-union manu jobs that pay crap. The population is shrinking every year. College grads are going elsewhere for employment and these two companies where were doing great when the union jobs were here are now struggling.
07-14-2007, 02:38 PM
07-14-2007, 03:37 PM
Walmart is always hiring
but it will become more difficult to find jobs outside the retail distribution networks, which Walmart dominates.
...the income is there but what about actual buying power.
The average worker could afford to own more things 30 years ago than todays worker.
There are more workers and more jobs and more money in the economy, but inflation and interest have devalued lifestyles.
The ability to outsource labor increases production, profits and
directly leads to inflated prices for devalued goods.
So again the outsouring of labor is great for ownership but not so much for Americas working class.
Which brings us complete to a complete circle and once again proves that it is better to own than to be owned!
07-14-2007, 05:41 PM
Imagine yourself an entrepreneur planning a new business. After extensive market research, you decide to manufacture some sort of bodybuilding suppliement in pill form. You begin selling them for five cents each. Your accountants have determined that it costs you two cents to cap each pilló40 percent of your selling price. Another firm can cap each pill for you for only one cent each (a 50 percent savings on caping). Do you continue to cap them yourself or do you farm out this operation?
now imagine that you sell 500 pills per bottle and cap them inhouse for a selling price of $25 per bottle and your competitor outsoruces the caping process and and with the savings can sell the suppliments for $20 bottle while making the same profit as you can off 1 bottle. you would go out of business. Outsourcing makes good sense. By outsourcing, companies can achieve improved levels of efficiency. More efficent companies have lower production costs. Lower production costs lead to a decreased price for the consumer in a competitive market. That frees up more of the consumerís income to purchase other goods and services. its win-win.
07-14-2007, 05:54 PM
07-14-2007, 06:04 PM
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