[PAA-Discuss] Dow 8000: 5 Reasons Driving the Rally

[Ron and Kris Graham]

AND here are five reasons NOT to care about the DOW 8000!

 

1.	Unemployment is still increasing.
2.	Wages are stagnant.
3.	Worker benefits are disappearing.
4.	The cost of living index is increasing.
5.	Millions more will soon be added to the poverty rolls.

 

Now...are you still happy with the news about the DOW 8000?

 

Ron Graham

  _____  

From: Ron and Kris Graham [mailto:graham2639 at mindspring.com] 
Sent: Thursday, April 02, 2009 2:39 PM
To: 'discuss at paa-tx.org'
Subject: Dow 8000: 5 Reasons Driving the Rally

 

Bear in mind that ANY TIME the market is doing well and the Dow Jones is up
the regular people are getting fucked up the ass. Are we supposed to do the
big old naked happy dance down the street since the Dow is up 8000 points? I
would imagine that Status Quobama and his Criminal Cabal are creaming in
their designer undies with orgasmic glee right about now.

 

Kris

 

SmartMoney

Published April 2, 2009


On the Street by SmartMoney Staff 


Dow 8000: 5 Reasons Driving the Rally


Spring has sprung and so has the market. Like the first crocuses of the
season popping their pretty little heads out of the dirt, Dow 8000 is a
beautiful sight for winter-weary investors.

But why the optimism now? It's been a bleak two months since the Dow Jones
Industrial Average last saw this level and -- even worse -- that was on the
way down. This may be just another bear-market head-fake, but there's no
denying that the Dow and the broader S&P 500 are up more than 20% from their
March 9 closing lows. And, hey, that's certainly better than the alternative
of further declines.

Though there are plenty of challenges ahead -- including what promises to be
a dismal unemployment figure later this week -- but at least this rally
isn't built entirely on thin air. For the first time in a long time,
economic and corporate news is starting to come in better than expected.
Financial institutions caught a break in how they account for troubled
assets. And, most important, the new administration is -- for the time being
-- re-instilling confidence on Wall Street and Main Street.

Here, then, is a look at the five pillars of a most welcome rally.


G-20 Boosts Global Confidence


Meetings rarely fix problems but they're often freighted with big hopes, and
the market reaction to this week's gathering of the G-20 heads of state in
London is no exception. The most important leaders in the world have put
their heads together, and if they haven't come up with definitive answers to
the world's economic problems, at least they're giving the appearance of a
coordinated response. That goes a long way toward bolstering investor
confidence through the world.


Accounting Change Bolsters Balance Sheets


The group responsible for U.S. accounting standards gave the OK to a
long-sought change in accounting rules that will let banks use looser
criteria in determining the worth of their hardest-to-value assets --
sending shares of financial-services companies up sharply. The debate over
mark-to-market accounting has raged since well before the worst of the
financial crisis, but now the Financial Accounting Standards Board has
relaxed its terms. The bottom line: Banks' liabilities from so-called toxic
assets (which have hobbled many financial firms and exacerbated the credit
crisis) will now weigh less heavily on their balance sheets.


Team Obama Gets Its Act Together


There's no doubt that the Obama administration stumbled a bit after the
inauguration as it failed to fully explain the details of its plans to get
the economy back on track. But in recent weeks the president, Treasury
Secretary Tim Geithner and the rest of the team have hit their stride.
Whether it's TARP, TALF or any other plan with an acronym, investors now
have a clearer sense of how these things will work. The market has "cheered
the recent actions taken by the Federal Reserve and U.S. Treasury," says
Bill Stone, chief market strategist at PNC. That was certainly the case with
the Public-Private Investment Program, the $1 trillion plan that helped
stoke this rally two weeks ago with a 497-point pop.


Blue Chips Too Cheap to Resist


There was a blue-light special on blue-chip stocks, with prices far too low
for investors to ignore. When the market started to rise, investors and
money managers feared being left behind on giant moneymakers like DuPont
(DD1), up about 11% so far this week; Disney (DIS2), up 9%; and Microsoft
(MSFT3), up 7%. At the beginning of March, all three traded at
bargain-basement valuations of less than 10 times expected earnings.


The Early Bird Gets the Return


Take roughly $14 trillion in cash sitting on the sidelines. Add in the
reality that the market trades on perception as much as reality. And then
throw in a few critical historical market facts: Within six months of a new
bull market, more than a quarter of the gains have already been booked,
according to research from Fidelity Investments, while more than 40% of the
gains come within the first year. Meanwhile, Standard & Poor's has found
that investors on average recoup 80% of their bear-market losses within the
first year of the next bull. Maybe this isn't the beginning of the next bull
market, but given those stats, investors can't afford to miss out on the
stampede.

1http://www.smartmoney.com/quote/DD/
2http://www.smartmoney.com/quote/DIS/
3http://www.smartmoney.com/quote/MSFT/

URL for this article:
http://www.smartmoney.com/Investing/Economy/Dow-8000-5-Reasons-Driving-the-R
ally/  

 

 

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