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davejh23 (< 20)

Maybe DOW 15,000 Isn't Ridiculous After All...

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July 23, 2009 – Comments (4) | RELATED TICKERS: STU , PID , GS

Some will argue that earnings have been fantastic with most companies beating estimates.  However, earnings have been terrible.  Beating weak estimates on cost cutting and asset sales doesn't show economic strength.  Based on earnings, it looks like financials are in for a dismal Q3 and Q4...GS may be able to manipulate their way to a profit, but most financials are still hurting, and too many companies are reporting massive revenue declines. 

So, some argue that the markets are forward looking...and I think everyone knows that.  However, is there anything in the news that's pointing to any kind of recovery 6 months out?  Unemployment is still looking terrible, with signs that layoffs could start to accelerate again heading into next year.  Housing is still weak, and including bank's "shadow inventory", inventory is actually increasing even as sales pick up.  There's no arguing that revenues for most companies have been terrible.  Many companies will not be profitable without revenue growth going forward, as they've already made huge cuts...some with layoff costs that will affect Q3 and Q4 earnings as well. 

So, I can only see two possible reasons for any strength in the market rally:

1. Market manipulation - If this is the case, how long can it be held up?  I wouldn't be suprised to see new lows if this is the case...how high we go in the near term is anyone's guess.

2. Hyper-Inflation Expectations - Maybe the market is looking forward to hyperinflation in the near term.  With still rising unemployment and weak demand, I don't expect inflation to be a huge issue in the near future, but I could be wrong. 

4 Comments – Post Your Own

#1) On July 23, 2009 at 7:40 PM, awallejr (81.52) wrote:

I can see many reasons for strength in the market rally.  I think the market is basically fairly valued now, maybe a little on the high side after today.  I would guess Friday would be a "profit taking" day.

I see companies by a wide margin posting PROFITS. That is always a good thing for the market.  It's further important because they are doing it as a result of cost cutting during one of the worse economic downturns in history. 

Now imagine if the economy moving forward appears to be not as bad, and then further down, ok, and then further down, upbeat.  Companies who "prepared" during these last months have now set themselves up for even stronger profit growth down the road.  The market being forward looking, can't ignore this.  And apparently it isn't.

We aren't seeing DOW 15,000 anytime soon, but you might start seeing the DOW continually trending upward, after each correction should things actually turn out the way some, like Bernanke, think possible.

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#2) On July 23, 2009 at 7:48 PM, rofgile (84.39) wrote:

I second awallejr.  I think CAPS folks are overly bearish compared to the outside world - and this is hurting them in the long run.  You should be studying what is the psychology of the investing world outside of CAPS right now if you want to invest wisely.

I believe manufacturing will be turning around in Q3.  This will be the foundation for the recovery. 

 -Rof 

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#3) On July 23, 2009 at 8:07 PM, zloj (98.51) wrote:

I have called for Dow 14000 by year-end. 15000 seems too high, at least for now, and I'm not ready to be that optimistic yet.

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#4) On July 23, 2009 at 8:09 PM, ozzfan1317 (< 20) wrote:

Dow 15,000 will happen but not for about 5 Years or so. We will hit 11,000 by years end then Gradually trend upward.

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