July 15, 2008
The JK Bottom
DISCLAIMER: Past, crappy, predictions are quite likely an indicator of future performance.
All the same, I am calling this a market bottom. Three stories:
The DJIA closed under 11,000 today.
The Dow Jones Industrial Average fell 92.65 points, or 0.8%, at 10962.54, its first close below the psychologically important 11000 level since July of 2006. It was held back by a sharp decline in American International Group, which fell 8.5%, and Bank of America, which declined by 8.1%. Citigroup dropped 4.3%. Exxon Mobil and Chevron each fell nearly 4%, victimized by the drop in crude.
Intel sees strong demand; profits jump 25%
Intel Corp. reported a 25% jump in second-quarter profit, as strong world-wide demand for portable computers that use its chips outweighed a slowing U.S. economy.
Trade Data Boost Q2GDP Projections
Today’s data on May international trade prompted several economists to boost their tracking estimates of second quarter GDP growth. Macroeconomic Advisers boosted its estimate to 3.3% (annual rate) from 3% as did HSBC. Morgan Stanley raised its estimate to 3.9% from 3.8%. GDP grew just 0.7% in the first quarter.
Official, 20%+ bear correction, check. Negative sentiment, check, Under support, check. I think this market has priced in a recession that ain't happening. Posted by jk at July 15, 2008 6:52 PM
Yup. My securities investments are managed by my employer, but I've wanted to give myself broader exposure by buying some index funds that track the DJIA, NASDAQ and S&P500. I've been waiting for them dip lower, but it might be time before they bounce back.
One thing that makes me wonder, though, is that I seem to recall Krugman writing a while back thgat we might be bottoming. And you know how his predictions always come true in the reverse.
I think it was Intrade (not my work for them, I've been too busy to write for them since early 2007) that recently charted a strong correlation between the stock market dipping and increasing odds of Obama being elected. R-squared at .91!
Posted by: Perry Eidelbus at July 16, 2008 9:54 AMYeah, right after I wrote this bravado-filled post I watched Kudlow & Company and thought "I should do a little Obama-Orwell-Airbrushing and delete that bottom post."
Krugman aside, we do have some stuff headwinds coming from government. My post claims that the real private economy is in recovery and I will stand by that. But doubt is sown as I watch Bernanke and Paulson take on more authority at the same time they are abject failures in their current responsibilities. After that, we get President Obama with 60 votes in the Senate -- we may see new lows after all.
Posted by: jk at July 16, 2008 11:32 AMI think Don Luskin was absolute right a few weeks ago. An Obama election will result in a very short-lived stock surge, followed by the biggest sell-off since the Depression -- or did he say "ever"? -- once people realize what he'll do to the economy.
His plan for a cap gains tax hike is all that's needed to kill people's returns from mutual funds (because you pay cap gains on every profitable trade your mutual fund makes, not the overall return). So with Obama in the White House, say goodbye kisses to your 401K! It could even be worse: Obama could pull a Mike Bloomberg when cap gains revenue falls. When people started leaving NYC after 9/11, property tax revenue fell. So Bloomberg raised property taxes to close the gap, which prompted more people to leave. Imagine if Obama did this with cap gains, which would spell the death of mutual funds, if not much of the securities industry. And why shouldn't he love this? It will bring savers to their knees, forcing them to become dependent on government for their retirement.
Posted by: Perry Eidelbus at July 17, 2008 11:35 AM | What do you think? [3]