How much is priced in?
November 13, 2008
– Comments (7)
I'll save the perma-bears the trouble and post the following headline for them:
U.S. Jobless Claims Reach Seven-Year High of 516,000
Yep, the weekly jobless claim number that the government reported this morning was atrocious. We past the psychologically important 500,000 marker and are sitting at the highest level since September 11th. The more important continuing claims number soared to 3.897 million, its highest level since January 1983.
These numbers really didn't surprise me at all, though it is always disturbing to see confirmation of the bad news that you expected in writing. What did surprise me however, is the fact that the futures market took the numbers in stride and barely flinched. Sure we were due for a bounce, or at least a breather after yesterday's 5% shellacking, but the fact that we could get such terrible news and not have a major sell off got me thinking about how much bad news is already priced into the market.
I suspect that quite a bit is, but probably not enough. I would be very surprised if the S&P 500 didn't re-test the lows that it set earlier this year. In fact, I would not be surprised at all if we even fell through them. Why am I such an optimist then? Because recessions, even ones as bad as this one don't last forever. Even the Great Depression ended and people who purchased stocks at or near the lows always have done better than those who ran away and hid.
What do you think is more likely, that this is the end of society as we all know it and we will enter an era where guns and canned food rule or that this recession will eventually end? I'm betting on the former because if the latter happens I'm screwed anyhow so I might as well go down fighting. Besides the odds are heavily in my favor. Keep gradually purchasing stock in non-consumer discretionary companies that have attractive valuations, solid balance sheets, and pay solid dividends and more likely than not several years from now you will be glad that you did.
If you aren't taking advantage of the recent weakness in the market to at least dip your toe into the water, then chances are you are more interested in this:
Deej
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