Could someone please explain..

[ObaMania]

.. how the economy can be so bad with the DOW soaring? What's the explanation for this? I thought that the DOW is a good indicator of how the economy is doing. Sure there are layoffs and all, but don't the Re 's counter this with jobs being replaced for those lost?

Also, could someone please explain what the Clinton recession is? Hard to counter any argument that * didn't inherit it and prevail with the DOW doing so well now.

[ET Awful]

1. The market was doing pretty good in 1928 too. n/t

[MercutioATC]

2. The Dow is based on investor expectations, which frequently contradict

reality.

[0007]

50. If that true, my minds eye just seen the shit hitting the fan

[Tsiyu]

3. Stockholders and execs can earn fortunes

If they aren't paying "the little people" it doesn't translate into goods being purchased, or income earned by the middle and lower class.

The DOW numbers means shares are being traded, how many and for how much. What percentage of Americans trade?

[Democracy Died 2004]

4. DOW is a piss poor indicator

of the economy.

[ObaMania]

5. Great answers but...

.. how 'bout the Clinton recession/* recovery and jobs lost/gained?

[Tsiyu]

8. Sorry, but a budget and trade deficit as we have today

are not Clinton's fault. Laughable concept, really.

Asia wasn't planning to dump US $$$$$ at the end of Clinton's term, were they? We weren't borrowing massive sums from China then, were we? We weren't spending $300 billion(?) for war, were we?

I could go on and on, but this boondoggle was created by the Chimp. He has no one else to blame for his irresponsibility and greed.

[Orangepeel]

31. IIRC, the economy (as measured by GDP growth)

had started to slow at the end of 2000. That is, although it was still growing (at around 3%), it was not growing as fast as it had been during the previous years. In part, this was due to the dot com bubble burst, Greenspan purposely trying to slow it down because he thought that it was growing to fast (see an old Reich commentary here: http://www.prospect.org/print/V12/2/reich-r.html ), and simple regression to the mean.

The next questions are: when and why did the economy move from a simple slowdown to a recession (two successive quarters of negative economic growth?). The best estimates in hindsight are that the recession began (that is, the negative growth began) in February of 2001. During the election, the bush administration invented the idea of a "Clinton Recession" by claiming that the negative growth actually began before Clinton left office, but this is untrue (see an MSNBC commentary here: http://msnbc.msn.com/id/4264572 / ). Now, if you google "Clinton recession" you'll get a bunch of RW commentary claiming that the left is trying to rewrite history! What hypocrites! They always project their own unethical/immoral behavior on others.

To be completely fair, the recession isn't all bush's fault. It did start very early in his administration. However, he certainly made a less than stellar economy worse. The market, for example, works on expectations, and he spent A LOT of time between November and January talking down the economy. Also, the programs he put and was determined to put in place did nothing to spur consumer confidence.

[ProfessorGAC]

17. It's Not An Indicator Of ANY Kind

Piss poor or otherwise. There is no reliable correlation between macroeconomic robustness and market performance. Only in extreme booms and busts of the overall economy does the market follow the way we should expect.

But, in normal times the fluctuations and overall growth curve of the equity markets cannot be predicted from or correlated to econometric data, other than profitability. But, of course, the latter is how the market is supposed to work. Successful companies, making loads of cash, see equity value increase as their success becomes something every investor wants to ride. That's not economics, though, that's finance.
The Professor

[Left in IL]

6. As MercutioATC said...

It is based on expecations. And don't forget, it's only made up of 30 stocks.


Also, some sectors of the ecomony are doing less worse (I don't want to say better). For example China is doing a lot of construction, and buying up all the steel they produce, so US manufactures now have to buy US made steel, so the steel companies, and all related industries that supply steel companies are doing "better", of course steel prices have tripled in the last 5 years.

[America is great]

7. Smart money knows

The smart money in America sees what some of us do not - a great investment opportunity.

Just as an example of what smart money people know: Gift cards. "Non-smart money people" believe that when Target sells you a gift card for $50, they book it as sales. This is NOT what happens. The gift card obligation they have to the customer is held in a deferred liability account ("unredeemed gift cards") until the receipeint of the card uses it. Then Target credits sales, debits the unredeemed gift card liability account, credits inventory stock, and debits cost of goods sold (put simply).

Pessimists wrongly say we are inflating sales with gift cards and sales are still down, optimists are saying (correctly) that as a result of all the gift cards, sales are staying pretty flat, but as the gift cards get used next quarter, sales will be strong.

That is a simple explanation of why smart money is investing now: they know accounting, they know what many people hear is wrong, and they see a good investment opportunity.

The above is only a single reason smart money is investing now. Whether its the weak dollar, which is good American manufacturers, or a world that readily will invest in our country and debt because they know this country will be a good investment.

[Tsiyu]

9. Well, just peachy if you can afford

Target gift cards and shares of stocks.

But guess what, MurikaTh'Great? The Nashville Second Harvest Food Bank says requests for emergency food boxes ( two to three day emergency non-perishables) are up 50% over actual donations.

In otherwords, more folks are asking for help than there is help to give. Not a good sign.

[America is great]

11. I don't want to appear to be cold, but

If you kept track of charities statements that "requests are up 50%" for each of the last 20 years, it would indicate that 100% of America must be on relief. It is a fund & food donation raising tool. Nothing more, nothing less.

[Name removed]

12. Deleted message

Message removed by moderator. Click here to review the message board rules.

[America is great]

16. It was just an opinion

So I guess I will shut up. I must not be entitled to it.

[jayfish]

14. Boy, You Almost Seemed Serious...

with that post about the gift-cards, but you really exposed yourself on this one. 100% of America on "relief"? Seeing as you don't know what the original number of people on "relief" was in year 1 of your 20 year cycle you have no idea what you are talking about and your post is hyperbole. That crap may work on other boards but you will be exposed if you try it here. If you actually believe what you posted ... .

Jay

[America is great]

15. I just did the math

If only 90,000 were on relief 20 years ago, with 50% increase for 20 years that would be 299,273,105 today. I think that is pretty close to the entire population of America today. So were 90,000 on relief 20 years ago? You tell me!

[Kingshakabobo]

19. You'll have to do a little better on this board than throwing

out bullshit numbers to make a point. You'll need links to back up your statements. This isn't The Rush "the pill popper" Limbaugh show.

Welcome to DU.

[America is great]

27. links?

I just used my Hewlett Packard financial calculator, typed in 90,000 as present value, 50% as interest rate, 20 years for period. Its called MATH !

[DireStrike]

29. Links to the source of your information.

You still haven't supported those numbers at all.

[Kingshakabobo]

32. Ha ha ha ha ha ha ha ha ha ha ha ha ha

I just used my Ouija board and it tells me you are full of shit.

Where did the 90k number come from? hahaha

The same people stayed in the system for twenty years? hahaha

No one died or left the system? hahaha

[miss_kitty]

42. Someone wants you to source your original statement

that every year "If you kept track of charities statements that "requests are up 50%" for each of the last 20 years..."Where are you sources for THAT statement?
Not the math done based on an unsupported statement. So put your HP away, pal. time to go to the library.

edit: punctuation

[antigone382]

23. With all due respect, the statement wasn't that "Requests are up 50%"

It was that requests are outpacing donations by 50%. That means that there are more people in need of charity than there are people able and willing to give it.

Besides, charities have to fill out 990 forms every year to prove their income and expense, which the public has access to. Lying would not be in their best interest.

But why worry? Everything's fine. The economy is booming, and there are all kinds of exciting career opportunities in compelling fields like...food service...and...stuff.

[lectrobyte]

38. Cold? My keyboard just froze.

[miss_kitty]

39. Your statement is inaccurate.

it's hyperbolic. Nothing more, nothing less.

Edit: typo

[DireStrike]

13. What makes you think more people are using gift cards than before?

Significantly more? Sounds like wishful thinking to me.

[oneighty]

43. Gift cards

Another rip off? CBS news did a segment re-gift cards, showed there are hidden fees, unexpected expiration dates. Retailers betting some of them will never be used. Give cash. Cash is best.

And now back to the topic.

180

[lectrobyte]

35. Stock prices are pretty worthless as an indicator of anything.

Got any Enron?

[arwalden]

36. But Cash In My Checking Account Earns Interest

The sale of a gift card generates CASH that "sits" in their accounts earning interest for THEY and their shareholders.

[lectrobyte]

37. Great investment opportunity = selling it off cheap

Let's see, didn't the Chinese just buy a big ol' piece of IBM? Oh yeah, their stock price went up after that, too. Great for some people, not so good for others. Manufacturing shrinking, energy costs rising and rising (look at oil prices in terms of Euros instead of dollars, for example), balance of trade in the toilet, middle class shrinking. Gift card boom next quarter? Uh, right.

[The White Tree]

10. I wouldn't exactly say the Dow is soaring

Sorry for the long post, this is on my mind quite a bit these days. If you don't want to read it all I understand.

Note that I'm no stock broker but someone who invests and watches the market.

From Yesterdays Yahoo Stock Page

Article link for this reference
<http://biz.yahoo.com/ap/041222/wall_street_2.html >

This is at the bottom.

The Dow Jones Industrial Average climbed 97.83, or 0.92 percent, to 10759.43, beating the previous high of 10737.70 from Feb. 11. The NASDAQ Composite Index was up 23.06, or 1.08, to 2150.91, and the Standard & Poor's 500 index advanced 10.78, or 0.9 percent, to 1205.43, just shy of its former year high of 1205.72.

So on December 21st of this year we eclipsed the previous high for the year which was on Feb 11th. The DOW has just "advanced" in a meaningful way for the first time this year since February. And the Standard and Poor which is a measure of the broader market still has not reached it's high for the year.

Now markets are subject to fluctuations - that is understandable. However I am basing my statement on the theory of why people are supposed to invest in the first place which is that the market historically,while it will fluctuate, will continue to rise. Based on the information I noted above the market has not "risen" in over 11 months.

What's more, if you look at the DOW over the last 5 years which you can do on Yahoo, I note that the DOW was just shy of 11,000 in Jan 2001. So after 4 years of Bush as president the DOW by the standard I am applying essentially did nothing, even though the market was actually very volatile during this time. To me that is troublesome. It means that if I had invested $10,000 in a DOW indexed mutual fund on Jan 2001 it would be worth the same or less today as it was back then.

Now 4 years may not be a long time from the perspective of the stock market but when you then stop and take a look at all the things that were done to try to spur growth from the administrations perspective (tax cuts and huge increases in government spending at the same time) and realize that from a stock market perspective we have seen almost no growth, to me that is cause for worry. We have huge deficits and trade imbalances and people have been borrowing more money then ever, many just to get by. We will have many people retiring soon who probably hoped they'd have this big nest egg to spend who will now have to scrimp and save and cut corners to just get by - that may be a drain on the economy. We've increased our outsourcing of jobs to other countries - that will be a drain on the economy. Jobs are not being created in this country at a phenomenal pace yet inflation is set to explode. Oil prices are very high. Investment in research is at an all time low. US investors are increasing their investments in foreign markets because as the value of the US dollar decreases it makes companies whose earnings are in other currencies much more valuable.

My fear is that a second Bush term will push us not only into recession but into depression. My Tin Foil theory is that this is what some of them may actually want. Call it, since it is Christmas, the Mr. Potter theory. Mr. Potter was the greedy rich villain in the movie, "It's a Wonderful Life". There is a scene in that movie where there is a run on the banks during the depression where all the citizens of Bedford Falls are worried they won't have money so they are all trying to cash out their investments in George Bailey's building and loan. George Bailey advises against that and in order to give people confidence uses his own personnel income to loan people money at to tide them over. Mr. Potter on the other hand offers to let people cash out by paying a penalty (i.e. they get 80 cents for every dollar). He can do this because he is rich and has no immediate concerns for his livelihood and uses the depression as an investment opportunity to increase his hold on the citizens of the town.

I think this is one of the reasons they are pushing social security reform so hard. It is a guaranteed way to lock up money in the stock market where the super-powerful can then manipulate it into their hands. That is why the Mr. Potter theory is so apt. Their goal is to try to set the corporate clocks back to the 1920's or 1890's, to a time when workers had no rights and were indebted to the owners. That is what is meant by the "ownership" society. Not that everyone will own something but that the "owners" will own everything.

Sorry for the doom and gloom but that's the way I see it and I agonize everyday trying to figure out the best way to protect my families finances from this occurring. One of the things I am seriously considering is pulling much of my money out of the market so that if there is another crash I'll be ahead of the wave and be able to invest it when the market if lower. I wonder if there are other people who might be considering doing the same.

[America is great]

18. You forgot to mention that the DOW stocks paid dividends for 4 years

Great information, but to repeat what I have been saying;

It is the smarter money in America that knows that despite the DOW essentially being at the same place it was about 4 years ago, each year the stocks in the DOW paid dividends which varied anywhere from 2% to 4% each year - a pretty good return considering how low interest rates are and were.

[BillZBubb]

20. Yeah, that's REAL FRIGGIN SMART!

The DOW dividends are wiped out by inflation while you are holding a portfolio that has market risk! Friggin brilliant.

Insiders are now selling at a historically high rate. Maybe they are smarter than the Freeptards.

[America is great]

25. correction

SOME insiders are selling at a high rate; and obviously for every one selling: there appears to be a willing BUYER.

If you depend on the media to tell you when to invest and when to sell, look out. There is a reason all those people writing for the business pages of the media ARE JOURNALISTS and not making a lot of money working for Wall Street.

[BillZBubb]

51. This is about as dumb a reply as I've ever gotten here.

Democrats are usually much smarter than this.

For every insider selling--there is an outsider buying. Get it? People on the inside are dumping at a very high rate. They know what's going. People on the outside are buying, they are the sheep going to the slaughter.

Is that too difficult to understand?

[Kingshakabobo]

21. 2 to 4 percent is NOT a good rate of return in the stock market

considering the RISK you took to get that return.

[America is great]

26. For the 30 DOW stocks, there is little risk

If you believe in the stock market, which you probably do not, 2 to 4% dividends when money markets were paying 1% or less is pretty good considering the 30 stocks are America's finest and most stable.

[Kingshakabobo]

33. Come on. Do you really believe your own crap?

Try telling that to someone who bought in @ 11,500 in the year 2000.

What was their rate of return Mr. HP calculator?

Don't bother answering. You have zero credibility and I'm done playing. You are not even challenging.

[Skittles]

44. it is tiresome, isn't it?

like a turkey shoot

[Beetwasher]

34. LOL! Indeed! 2-4%!!!!

LOL! Why the fuck would I risk my money for a measley 2-4%????? Shit, an orange savings account pays 2% and it's guaranteed! I'd do better at craps probably...*snicker*

[Kathy in Cambridge]

41. Exactly-he MUST think that DUers don't invest

and his syntax is eerily familiar, I might add.

[jayfish]

47. You Wouldn't Be Referring...

to a certain Tolkien character, would you?

Jay

[Kathy in Cambridge]

49. As a matter of fact, I am!

very astute observation!

[jayfish]

53. There Is A Certain Lead Singer About...

who sounds vaguely familiar as well.

Jay

[Kathy in Cambridge]

28. Less than 40% of the US has stock, and most hold indirectly

via 401Ks and pension plans. A select group of uber-wealthy have taken their tax cuts and made a fortune, meanwhile unemployment is up, layoffs are rampant, lines for the food pantries are triple what they were last year.

Go spew your RW talking points elsewhere. You have no grasp on reality.

[HamdenRice]

24. Thank you WhiteTree -- only one who knows what you are talking about

Sorry to be so critical of others, but frankly, White Tree your post is the only one that makes sense and is consistent with market and economic theory. A lot of material in this thread is pretty much nonsense.

First, does the market reflect the economy? Yes, the long term trends, not the day to day fluctuations, do reflect the economy, and not just "expectations." The Dow is an average of a basket of major stocks. The prices that people are willing to bid for stocks is based on the dividends that the stocks have paid, the discounted present value of expected future dividends and retained profits. So when corporations are very profitable, their stocks become more valuable and people are willing to pay more for them. High stock prices reflect profitability and expected profitability.

But if people believe that profits will not continue, then the future profit expectations are low and people will not pay high prices for stocks. So uncertainty caused by global and political events can cause the stock market to lag, even when profits are high.

White Tree made the most important point -- which contradicts an assumption of the original question -- namely that the stock market is not booming. It is doing worse than it has done in history, with the exception of the bear markets of the 1970s and the 1930s. The most important fact is that over 4 years the stock market has not gone higher than its 2001 high. Bush has presided over a bear market. The Dow is telling us that either the economy has not grown or if it has, people are afraid that the growth will not continue.

Several factors that have held the market back. First, investors have little confidence in bush's economic and international policies. The market had a prolonged crash in the lead up to the Iraq war, for example.

Secondly, to the extent that the market is recovering it losses for 2004, it is lagging behind profits. Many analysts have suggested that although corporate profits are up, they are up only because costs have been cut, rather than because revenues have grown. In other words, the only reason corporate profits are up is because corporations continue to lay off workers or outsource to other countries. America is great's comments are utterly ludicrous, because the market always pays some dividends; it is the rate of distributed corporate profits that determine whether the market will rise or fall.

The third factor is the declining dollar. These unsustainable federal and trade deficits mean that eventually China and Japan will stop buying our paper for their goods. At that point, interest rates will have to rise sharply and suddenly to attrace foreign lenders. High interest rates choke off investment, and consumer spending. They also make the discounted present value of future dividents lower. That's why interest rate increases instantaneously depress the stock market.

<edited for clarity>

[Phebe]

52. Wall Street and its Journal

The Wall Street Journal notes that we did get to the 2004 high again yesterday on the stock market. Holiday spirits is their cautious reading of it; they are not willing to say all will be well in 2005.

The stock market DOES like presidents to have second terms (any president, actually) because the market likes consistency, not change. So that is part of it.

Actually, they were so cautious this morning about the New Year I thought of selling a thing or two that has gone up.

There is inflation ---- very low, strangely low. The dollar, low maybe because of fundamentals rather than Snow talking it down. People who have money on it are predicting 1.40 to the Euro within 12 months; it was at 1.32 last week. (That wouldn't be awful, however: freefall would be awful. Forty percent loss is probably good for us, but it's what happens to the rest of the world's economy that is worrying, maybe.)

Our twin deficits, our low savings and high debt. I worry.

[SmokingJacket]

22. My guess: Investors counting on Social Security money to pump up

the stock market.

If * is successful in even partially privatizing SS, it'll be a humonguous boon for Wall Street. At least temporarily.

I think investors are gambling that it'll happen.

Disgusts me, personally. Basically taking a guaranteed income for old people and turning it over to corporations. Some old people will make more money, but others will lose out, big time. And that sucks.

[rman]

30. replacing US jobs... with Chineese and Indian jobs,

helps Chineese and Indian workers (a bit) and boosts the bottom line of the US/transnational corporations who do the outsourcing.
How would that help the US economy? Oh yes, it doesn't really reduce the total volume of economic traffic, but it does concentrate wealth at the top even more then it already was. The elites weren't doing to bad during the Great Depression either you know, in fact they made a lot of profit then. So you can very well have a strong economy while people are dying in the streets.

[Cocoa]

40. productivity

squeezing more profit out of less hours. They can lay people off, less payroll, more profits.

[Name removed]

45. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Sparkly]

46. Mark Warner has done a good job for Virginia

More evidence that things go better with a Democrat in charge.

[Name removed]

48. Deleted message

Message removed by moderator. Click here to review the message board rules.