The State of Our Economy

[Ferd]

Originally Posted by ILG

Do you have more to base your thoughts on than what you said? I suppose people might be heavily investing, trying to get back what they lost....but I wonder what people are investing with? Ben Bernanke said he didn't even know where all the money from the bailouts went. Maybe the government put some of it into the stock market.

ILG, it is very typical of the Stock Market to rebound within a year of a major fall off. it really is not a reflection of the real economy. In fact typically within 10 months you see as much as an 80% rebound

http://stockcharts.com/charts/historical/djia2000.html

Stocks are valuations of businesses as a snap shot in time. They are not real markers of the strength of the economy per sey. And rarely have built in understanding of what will happen in the future, unless the company makes some statement about known write offs on the immediate horizon.

the first thing you have to understand is that when you have a hard crash like we had in early 2009, the psychology of a crash drives stock prices well below the real value of the business. That means a rebound will happen just to come back to level.

The second thing you have to understand is that publicly traded companies are most often evaluated on a year over year basis. So if a company tanks in 2009, their 2010 numbers can still be bad historically but if they are better than 2009, their stock price will reflect that as an uptick.

The stock market is not a very good indicator of where the economy is headed. It is more a reflection of where the economy is right now, with this time last year in view.

[ILG]

Originally Posted by Ferd

ILG, it is very typical of the Stock Market to rebound within a year of a major fall off. it really is not a reflection of the real economy. In fact typically within 10 months you see as much as an 80% rebound

http://stockcharts.com/charts/historical/djia2000.html

Stocks are valuations of businesses as a snap shot in time. They are not real markers of the strength of the economy per sey. And rarely have built in understanding of what will happen in the future, unless the company makes some statement about known write offs on the immediate horizon.

the first thing you have to understand is that when you have a hard crash like we had in early 2009, the psychology of a crash drives stock prices well below the real value of the business. That means a rebound will happen just to come back to level.

The second thing you have to understand is that publicly traded companies are most often evaluated on a year over year basis. So if a company tanks in 2009, their 2010 numbers can still be bad historically but if they are better than 2009, their stock price will reflect that as an uptick.

The stock market is not a very good indicator of where the economy is headed. It is more a reflection of where the economy is right now, with this time last year in view.

Maybe so. I just began to study economics (on my own) in the past few years and am trying to get a grip on what is happening here. Many believe we are going to have a double dip recession and that the stock market will crash again. They are saying to invest in commodities, precious metals and the like. It makes sense to me because unless the government gets really lucky and does things perfectly it looks like we are going to have some serious inflation and rising interest rates.

[Ferd]

Originally Posted by ILG

Maybe so. I just began to study economics (on my own) in the past few years and am trying to get a grip on what is happening here. Many believe we are going to have a double dip recession and that the stock market will crash again. They are saying to invest in commodities, precious metals and the like. It makes sense to me because unless the government gets really lucky and does things perfectly it looks like we are going to have some serious inflation and rising interest rates.

using Gold as a hedge against inflation is wise. but i dont know that it would be a primary invesment...

commodities are a realy dangerous investment and you better know what you are doing. LOTS of money can be made in it though. I suspect Oil is going to rise a lot in the near future....

As for double dip, I think it is more likely than not to happen but there are a number of things that have to happen to make it happen.

[ILG]

Originally Posted by Ferd

using Gold as a hedge against inflation is wise. but i dont know that it would be a primary invesment...

commodities are a realy dangerous investment and you better know what you are doing. LOTS of money can be made in it though. I suspect Oil is going to rise a lot in the near future....

As for double dip, I think it is more likely than not to happen but there are a number of things that have to happen to make it happen.

I think it is likely given that there is a second mortgate and commercial real estate crisis coming up.

I think gold is a good hedge. I think being diversified is best.

I have a book coming on commodities. I have never heard they are dangerous.