This
slip of the tongue ran in today's LA Times:
Why Dow May Be Off the Money
The index's weak year raises concern, but some question its value as an economic crystal ball.
By Tom Petruno and Josh Friedman, Times Staff Writers
The stock market closed out 2005 on a down note Friday, leaving the Dow Jones industrial average with its first annual loss since 2002.
Once again the defenders of our lousy economy inadvertently reveal the truth. The Dow's performance or Wall Street's for that matter, is not an accurate measure of the health of the US economy.
In what may be the mother of all bad analogies, you could look at the market as a scoreboard of the Christians vs. the lions with the investor class playing the role of the lions.
We all know the Christians are being eaten, the scoreboard merely shows how fat the lions are getting...do the tanking numbers indicate we're running low on Christians?
On Wall Street, the year-end slump triggered fresh debate: Is the Dow's red ink sending a warning about the U.S. economy in the new year, or is it obscuring an upbeat outlook?
The Dow's 67.32-point drop Friday, to 10,717.50, left the market's best-known index with a decline of 0.6% for 2005.
Because the trend in the market often foretells turning points in the economy, the Dow's troubles raise concerns that investors are reluctant to buy stocks because they fear the U.S. is headed for a sharp slowdown or an outright recession.
Another significant market shift in recent weeks also has boosted recession fears: Long-term interest rates on Treasury bonds have fallen below shorter-term rates. That has been a relatively rare occurrence historically, and when it has happened it often has signaled a weaker economy ahead.
For those of you who read Darksyde's grim front page diary yesterday (Mid-winter Nightmare) it's time to be afraid. Seems like that (optimistic) five-year window may be as short as five months.
The cycle of the wealthy chimps `cashing in' at the expense of the rest of us (along with their cavalier disregard for the law) is an apt description of the economic climate over the past few years...which means we are already near the end rather than waiting for it to begin.
But many investment professionals remain bullish about 2006. They expect that the Federal Reserve soon will stop tightening credit and that energy prices won't rise much more, giving the economy room to run.
"We think the catalyst for further stock market gains will be what it has been: global and U.S. economic growth chronically stronger and more durable than most anticipated," said James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis.[snip]
Logically, what would you expect someone that makes their living off of investors to say?
A majority of workers are tapped out, they have already borrowed as much as their stagnant income will feasibly allow them to. Even if home equity continues to rise, stagnant wages makes it impossible for the average worker to `cash in'.
Tomorrow is New Year's Day and what does every new year bring? The next round of price increases! Everything but your paycheck will go up.
Compound this with the recent slash in federal funding for welfare programs. The fed doesn't pay these directly, what this slashing does is reduce how much the fed pays the states to administer these programs. This in turn reduces what the state pays out to cities and towns...which turns into local slash and burn as well as property tax increases to fund `vital services' that show up...in your mortgage payment!
Many will be sunk even if they still have plenty of equity in their homes thanks to stagnant wages!
Grrrr!
The Dow also was the weakest of major stock indexes in 2004, when it added just 3.2%. Despite that poor performance, the economy expanded at a brisk pace in 2005, and corporate earnings grew at a double-digit rate, on average.
The Dow has struggled as 16 of its 30 stocks fell this year.
General Motors Corp.'s shares, for example, plummeted 51%, to their lowest level since 1982, as high gasoline prices hammered GM's sales of highly profitable sport utility vehicles.
Pfizer Inc. slumped 13% for the year as it faced rising competition for some of its key drugs.
Wal-Mart Stores Inc.'s shares declined for a second straight year, losing 11%, as investors worried about its long-term growth potential.[snip]
The nation's largest employer is `worried' about it's long term prospects? Take this one at face value good citizen. If the nation's cheapest retailer is worried about a drop in business what does this say about the majority of the nation's income potential?
It says we won't even be able to afford cheap imported bullshit anymore, how sad is that?
U.S. investors also have been turning more to foreign stocks. Stellar gains in many non-U.S. markets in 2005 belie the idea that a global economic slowdown might loom, experts say.
Japan's main stock market index rocketed 40% this year, its biggest advance since 1986, as the Japanese economy showed more signs of a sustained rebound in growth after struggling for much of the last decade.
Most European stock markets rose more than 20% this year. In Asia, most markets outperformed U.S. stocks, as China's economic boom stoked growth across the region.
US investors are turning to foreign stocks, in effect taking the gains made here and placing them elsewhere...does this say anything to you? (Like take the money and run.)
Michael Metz, investment strategist at money manager Oppenheimer Holdings in New York, said the powerful rallies in foreign stock markets suggested that investors were expecting stronger consumer and business spending abroad than in the United States in 2006.
He doesn't fault their logic, saying that U.S. consumers may be overstretched financially, and that many have become too reliant on tapping their home equity to maintain their spending. If the housing market weakens in 2006, it could drag down the broader economy, especially if energy costs stay high, Metz said.
"I'm worried about the consumer," he said. "Is this going to be a hard landing or a soft landing for them?"
The recent trend in U.S. interest rates also has pointed to investors' concern about the economy's outlook.
The interest rate, or yield, on the 10-year Treasury note -- a benchmark for other long-term rates, such as for mortgages -- ended the year at 4.39%.
By contrast, the yield on the two-year Treasury note ended at 4.4%.
Normally, longer-term bonds pay more in interest than shorter-term issues to compensate investors for the risk of tying up their money for an extended period.
When long- and short-term interest rates "invert," it often is a sign that bond investors believe the economy will slow -- so they're locking in long-term yields in anticipation that rates overall soon will level off or even head lower.
The last time short-term rates were above long-term rates was in the second half of 2000. By the spring of 2001 the U.S. economy had fallen into recession.
Don't let them candy coat it, `recession' is a polite term for `depression' and the conditions are ripe for a depression that will make 1929 look like a bump in the road!
Keep reading, it gets scarier!
This time, however, many analysts believe that long-term bond yields are being pulled down by special factors unrelated to the economy's fundamentals. One such factor may be the ravenous appetite of foreign investors for U.S. bonds, which pay more in interest than similar securities in Europe and Asia.
Fed Chairman Alan Greenspan has said that the central bank won't necessarily assume that an interest rate inversion is sending the same economic warning that it has in the past.
Some Wall Street veterans say they're trusting other market indicators that suggest that the U.S. economic outlook remains positive.
The Dow transportation stock index, which tracks shares of 20 major railroads, airlines and trucking firms, jumped 10.5% in 2005 and hit an all-time high Dec. 23. [Thanks to more imported cheap shit being transported across the nation!]
Historically, strength in that index has signaled optimism about business activity because the fortunes of transportation companies are directly tied to the economy's overall health.
With the transport index near a record, asked Sam Stovall, investment strategist at Standard & Poor's in New York, "how can we be worried about the economy?"
Who does this guy think he is, Alfred E. Newman (of MAD magazine fame)?
Foreign investment driven by higher US interest rates only mean that when they pull the plug the economy of the entire world will go down the drain as one, just like 1929.
This is the `ownership society' at work. Not to get all sentimental on you but this reminds me of the lyrics of an old song, "Love is a rose but you better not pick it, only grows when it's on the vine, lose your love when you say the word mine."
And so it is good citizen that we will lose everything we value about our great society because someone decided it was theirs.
Labor driven, secular, non-profit society is the only path of salvation for our species good citizen, we all lose when we allow anyone to claim what we all need for themselves.
Thanks for letting me inside you head...somehow wishing you a `happy' new year seems inappropriate in light of how things are, so I'll wish you a courageous one instead, have faith!
Gegner