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.
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