of the year cheer?
3 grueling months of panic selling is it over?
the 3 worst months of my career in the investment
business I wonder, could we actually see a positive
month to end the year? While the answer isn't
set in stone the tide does seem to be turning
a bit. There are many subtle signs that the market
is now giving to indicate that the intense selling
pressure is subsiding. Many of the most beat up
stocks held up during the November downdraft and
some sectors such as retail, banking and transports
are beginning to perk up. While it is still to
early to tell if this is the ultimate low, this
week may mark a change where investors begin to
fear losing out on bargain prices as opposed to
selling indiscriminately anything and everything.
am watching the 890 level on the S&P, if the
market can break above this level it has a fair
chance of a December rally of 15% or so. What
a welcome gift that would be as we enter the Holiday
important item to watch is what happens if we
do in fact rally into the New Year. Will the gains
hold or will we roll back over after a 4 to 6
Maynard Keynes was a prominent economist whose
theories are widely followed today. For macro
economics Keynes stated that the cause of an economic
slowdown was simply insufficient aggregate demand.
So what are the sources of demand and what could
actually pull us out of this recession?
We all hear that the consumer is the driver
of the economy. We also know that the consumer
is tapped out for awhile as credit has tightened
and folks are naturally gravitating toward saving.
Business investment / personal investment has
also been a driver in the past economic cycles.
If the consumer was not spending then we had
businesses investing in new plants or equipment
to help sustain demand. This recession has caused
businesses to tighten the purse strings just
like the consumer.
This would be the global economy buying our
products or services. With a global recession
and a stronger dollar recently this area isn't
spending: This was the last of Keynes 4 demand
drivers. If the other 3 weren't producing the
burden fell on the Government to fill in the
void and create aggregate demand with policy
and stimulus measures. This is where we are
selling quite a bit of debt to investors the Treasury
is now trying to make interest rates so low that
folks are forced back into the market for better
return on their money. Watch closely what they
do to try and make treasury yields so depressingly
low that consumers have no choice but to gravitate
back toward "riskier" investments for
a return on their money. If it works we will pull
out of this recession next year and the other
3 demand drivers will kick in.
Theft - Don' t let scrooge get you:
down economy doesn't deter ID theft and actually
may spur more clever thieves to steal your personal
information. Be on guard this holiday season:
all trash with personal or financial data on
ever ever respond to emails, letters or phone
calls requesting you to "verify" an
account number, social security number or credit
are very sophisticated and use company logos
and copycat websites to try and steal this data
from you. Always be suspicious. If in doubt
for a free report from the 3 bureaus.
for free information on protecting your Identity
and what to do if your personal data is stolen.
a safe and happy holiday. Let's look forward to
a better 2009!