Posts Tagged ‘Stock Market’
A few thoughts about the stock market
As the Dow Jones Industrial Average creeps ever so slowly toward 13,000, I’m reminded of the words of William Shakespeare, from the famed “Seven Ages of Man” soliloquy in the comedy, As You Like It:
…and then the whining school-boy, with his satchel and shining morning face, creeping like snail, unwillingly to school…
Now of course this blog is primarily focused on real estate and the various economic forces that affect it. However, since so much of real estate is securitized, particularly in the U.S., and so many of the players in the real estate market are publicly traded companies, an occasional glance at the ticker-tape is in order.
With that in mind, I have a small idea. It’s not a huge one, but just a little observation, if you will, about why the market is creeping so slowly, even though so many pundits claim that it’s underpriced right now. (I neither agree nor disagree with that sentiment — I’m in a wait and see mode.)
However….. I serve on the board of a small Trust which is VERY conservative. Our sole manager also manages a lot of high-tech money (remember — Microsoft is headquartered here… duh…). We have a lot of liquidity, and even our bond investments have a very short average duration.
As one money manager put it to me, “Our clients aren’t interested in MAKING money in the stock market. They just don’t want to LOSE any more money in the stock market.”
Thus, there MAY BE some upside potential to this market. However, it may take a long time to realize it, because so many money managers got singed in the flames of the market burn-out a few years ago.
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Conerly’s Businomics Newsletter
I’ve mentioned before that one of my favorite economic writers, particularly for the Pacific Northwest, is Dr. Bill Conerly out of Lake Oswego, Oregon. Even though Greenfield’s practice is national, we have to maintain a bit of a Northwest focus to our work. Dr. Conerly helps us with the underlying economics driving the economy of this salmon habitat in which I live.
Dr. Conerly’s “charts” are wonderfully informal and informative at the same time. In the ‘old days’ he would simply hand-write his thoughts on the charts then fax them to his subscribers (remember “faxing”?). Today, of course, it’s all digitized and stored on his web site, with an emailed link. Nonetheless, the succinct hand-written notes are still there, and the brevity is welcomed. (I could learn from that.)
Rather than reproduce the charts here, I’ll simply give you a link (here) and you can go view them yourself. If you’d like to contact Dr. Conerly — he’s a great speaker and consultant on economic issues — then the e-mail address is bill@conerlyconsulting.com. A quick synopsis may whet your appetite:
- Business equipment orders are still not back to the pre-2008 peak.
- Consumer sentiment is up, but not back to 2007 levels
- A January, 2012, Wall Street Journal survey pegged the risk of recession at 19%
- Private non-residential construction has “turned the corner”, but is still significantly lower than 2007-2009 levels.
- Unemployment: great headlines, but we’re a very long way from feeling good.
- Mortgage rates are at all-time lows, but only if you have great credit.
- Stock market: lots of up-side if Europe manages to muddle through
- Oregon and Washington bankruptcy filings on the way down, but still over double the 2007 rates
- Boeing orders may be tapering off, but still significantly exceed deliveries — no need to cut output
- Wheat prices (an important economic component in our area) are downturning, due to the global slowdown.
Well, folks, that’s about it — great reading from a great analyst.
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Yet another comment about today’s economic news
It’s hard NOT to be pleased at today’s economic news. The unemployment rate is down, total employment is up (the two numbers don’t ALWAYS move in sync, due to the growth in the potential workforce), the stock market is up, the dollar is up versus the Euro, Yen, and Pound (not always a good thing), and bond yields are up (reflecting a potential demand for borrowing — a very “old school” view of stocks versus bonds). Intriguingly, oil is up but only by $0.59 a barrel as of this writing (12:35am EST on Friday the 3rd) — one would normally expect that great economic news would spur a run on oil.
Which may, in fact, reflect the continued anxiety in the marketplace. Recessions rarely happen in a straight line (see my post a few weeks ago on the relationship between the yield curve and the onset of a recession — click here for a shortcut). Real estate continues to be in disarray, and the banking sector is still in rehab, with the continued concern of a relapse if the Euro crisis doesn’t solve itself.
Ben Bernake’s testimony before the House Budget Committee this week was painful to watch — members of Congress would prefer to listen to themselves rather than the Chair of the Fed, and it was clear that members of that august committee had only a cursory understanding of what the FED actually DOES. Nonetheless, a piece of Bernake’s testimony had the tone of Armageddon. He noted that we’re on our way to addressing the CURRENT problems — the huge deficit overhang, the Euro crisis, etc. Congress still has ample work to do in those areas, but we are at least confronting the issues. The larger problem, in his mind, is what start happening in about 10 years or so when the demographic overhang starts hitting. The rapid shrinkage in the number of people PAYING into social security and medicare versus the number of people COLLECTING these transfer payments will be substantial, and this doesn’t even begin to address the productivity problems associated with a society in which a substantial number of people are retired and not contributing to the nation’s output.
Sigh…. at least it looks great today, right?
From a small northwestern observatory... 