I don't understand why the stock market is climbing.
 

I can understand peoples irrational exuberance in some situations, but what in the world has people driving up stock prices? I just can't fathom it.

Is it because companies are trimming their work forces, and folks are betting that the reductions in payroll will be sufficient to maintain profits? Is it because people can feel the bottom of the market firmly? Is it just Vegas night gambling (isn't it always...)?

Other than some Ford stock I bought earlier this year, I have not jumped back in. I don't understand why others seem to think we are out of the woods. Enlighten me.

.....And on a related note, what is going to happen to the construction industry when no one builds a new office building for 5-8 years because of we are so insanely over built at the moment?

To be clear, yes, I think we are going to see a double dip.

Investors right now are taking a lack of bad news as evidence that good news must be on the way.

I think they're wrong.

churn

I suspect investors are buying while shares are "cheap" - recession type prices, so in a year or two??? the prices will have gone up nicely should??? good times return.

Refer to the Economy In Charts thread. Leading indicators are rising, earnings estimates are rising, companies have cut costs hard, labor is cowed, inflation is nowhere. Valuations in Oct and Mar were at grossly low levels. For example, retailers were trading at valuations similar to 1933, depth of Great Depression. And we didn't have a Great Depression this time.

It's the bubble du jour.

Money is always going to flow somewhere seeking a profit, and it doesn't always do it based on fundamentals, or anything rational.

That is what I call 'Churn'....

Everyone's trying to make some money before the next big crash - which IS coming.

Still at 70/30...only 30% equities...

Other than the usual reasons (markets got unbelievably oversold, cheap valuations after considering non-existent inflation which lowers p/e ratios, shorts getting killed):

1. Everyone is bearish (including those posting on this thread).
2. The markets are discounting rising corporate margins as revenues incrementally climb with lower overhead/labor costs.
3. The dollar is getting decimated making US exporters attractive and investment holdings other than equities (e.g. cash) are trash.
4. Everyone is bearish.
5. Unthinkable 6 months ago, Obama's falling approval ratings and the historically-low Congressional approval ratings make the spectre of a Republican mid-term election rebound a possibility...hope for gridlock.
6. Everyone is bearish.
7. Most managers missed the early move and now must play catch-up.

Just a lowly hedge fund manager's opinion. 80% net long, 15% gold/silver

I hate to say it here but, as I see it, it's due to our Congress holding steady against the crazy-talk coming from cap'n zero.

I concur. Cash was king for about 12 months since last June/July, but those who still have big cash holdings will see very little real returns and will miss out on the equities market growth.

The weak dollar is also affecting other economies where commodity exporters are taking the hits.

Why are folks investing in the market and driving up prices?

1. As long as I am making money, I invest part of it in the stock market
2. Where else are you going to get similiar (long term) returns?
3. I am in it for the long term, and even this downturn hasn't put me off track
4. Buy low-sell high. It sounds simple but folks don't do it. They wait until they have a sure thing (market is high) before jumping in. I think the market is still undervalued.

so that is why I, as a small investor am doing it.

Good strategy...but do balance your portfolio as you age. I'm already retired, so more into income producing investments than gains in equities value. When I was younger I was more heavily into equities, did quite well over the decades. (edit)...once you reach my age (65), well...you hope for long term, but no guarantees. One indicator is the newspaper obits...when you begin seeing people younger than you listed of death causes other than war & accidents, it's time to rethink investment strategies.

LB Calif shipping containers going offshore have just increased from a lower point 6mo ago

one interesting point for me is that funds are re balancing to lower cap gains since early Sept which should put pressure on lowering stock prices?

if that's correct a market increase is more remarkable

So true, I know many investors who barfed up their equity holdings that final, ugly week in early March and have missed this entire move off the low by sitting in cash. People are their own worst enemy when it comes to investing and as I say to my wife almost daily, people always do the opposite of what they should do when it comes to investing. Unless you are living and breathing the markets daily most investors should simply do the following things:

1. spend less than you earn and put the difference into sensible investments (equity tilted portfolio and depending on your age some fixed income; use ETFs for low fees and tax efficiency, buy your investments through a dirt cheap broker like Interactive Brokers).
2. max any retirement plans
3. ignore the daily market noise
4. ignore all stock tips and financial media (including Cramer)

Simply doing these things will put you far ahead of 95% of the investing public.

[QUOTE=HardDrive;4912280]
Other than some Ford stock I bought earlier this year, I have not jumped back in. I don't understand why others seem to think we are out of the woods. Enlighten me.

./QUOTE]

You bought Ford stock this year? I think you answered your own question!

SmileWavy

Funny, I was a Finance major in college because I wanted to learn how money worked and get rich quick after college. I came to the exact same conclusion as you. I'm 31. I have no idea what my 401k or Roth IRA are worth right now, and it doesn't matter because I'm not touching it for decades. I did open the Roth IRA right at the market bottom though, I figured it was a good time to get in...

We haven't seen the bottom yet.

just wait ill the end of Sept.....................................

Actually i think we really did, and really do.

The debt this nation faces is other-worldly, and eventually Death himself is going to come a collectin'.

I think that when you view our situation realistically and take into account our massive debt and the long term consequences of that, that this last recession was just a small pre-quake tremor.

That is true but is it the case today?

I think most people would agree that the March lows were pricing in a complete market collapse.

But are todays valuations getting a bit lofty for the NEW economy going forward? Certainly the cheap easy money is not as accessible as it once was, at least to the general public. Since the consumer is 70% of the economy how great can we do?

Take this article for example on the housing market:
No Easy Exit for Government as Housing Market's Savior - WSJ.com

I have to figure that without government support housing prices could fall another 10 to 15% easily. It just seem to be that the real economy can't stand on its own legs. Yet people are buying stocks like everything is fine and dandy. Look at wells fargo. This is a bank in some serious trouble, and it is up to $30 a share. People are buying stuff without having a clue as to what they are getting into.

That is not even touching on the absolute irrational exuberance surrounding AIG. Unless the government just abolishes their debts this is a company that is selling assets just to pay interest costs. Yet people are out bidding the company up every day.

To me it seems like the cake is baked and everyone is just waiting for the frosting.

But I have been wrong before, and irrationality can last a long long long time.

(not trying to be argumentative, I am just asking what it is that has everyone so excited, cause I don't see it)

+1

Eventually the ROW is going to start asking the question, "why the hell should we bust our asses in sweatshops 18 hours a day for pennies, when we're the ones actually PRODUCING".

Ever see "A Bug's Life"? Why do you think the grasshoppers (the U.S. and west) are afraid of the ants (Asia, India, etc.) figuring out that they out-produce them 100-to-1 and outnumber them by 1,000-to-1?

I just don't see how the western world thinks we're going to "correct" out of this and everyone's going to be just fine with going back to the status quo where we consume 95% of the world's resources. There has been a paradigm shift. This recession is only the beginning evidence that things are not going to sustain themselves long term - certainly not in the way it has in the last 2-3 generations.

We have really painted ourselves into a corner as a nation. We've frittered away our manufacturing clout and our industrial power, we've squandered many of our resources and we still "expect" to be able to live like kings on the backs of the slave-labor practices of the rest of the world, while producing very little real value ourselves. This simply can't continue.

I've said this at least a hundred times in other posts - the notion that we can somehow "bring up" the rest of the world through artificially creating "better" societies (normally attempted through legislation) is a myth. We can't. We will be dragged down by 1,000 feet for every one foot we can "pull up" the rest of the world. We're hopelessly outnumbered by third world nations' populations and crushing poverty, and we can't escape the fundamentally disproportionate allocation of resources that has existed for the last couple of generations.

The party's over. The U.S. is heading down the one-way road to third-world oblivion.

A lot of people here were bearish back when the dow peaked too. It is just tough, because you can be correct in a real sense, but wrong when dealing with the irrationality of Mr. Market.


Heck the guy who owns this company was shorting banks, and publicly announcing it.

1+

1. Rebound from panic selling...another 15% to go

2. Lack of alternative investment vehicles, which includes the weakening value of the USD and all that it entails.

3. Institutional buying is what drives the market and not the retail market player.

4. Only an idiot would listen to the chatter, except for the sentiment expressed.


Quiet frankly most of you Boyz are clueless, you might as well be gambling in Vegas.

If you BOyz watched the Market everyday for 20 years you would get a feel for its direction. right now it wants to go UP.

I never left the market, and I was shytin in my pants...

corporate bond yields/values were bringing in ridiculous money because of the perceived (real or not) risk. lots of that money has been moving back into equities.

-b

I think one disconnect is that a lot of the bears are talking about things that will play out, if they ever do, over a fairly long period of time. Not a year or three, more like a decade or more likely multiple decades.

Those long-term bear scenarios have only limited impact on the stock market's moves "right now".

You think the USD will collapse into hyperinflation and the CNY or gold will take over as the world's primary reserve currency? Fine - but are you predicting it will happen in the next ten years?

"Eventually" and "someday" aren't very useful.

If healthcare nationalization gets passed, the markets will crash.

If war escalates in Afghanistan or starts in Iran, the markets will crash.

If the commercial RE market declines start resulting in the rampant foreclosures and bank failures a lot of analysts are predicting, the markets will crash.

If FDIC goes insolvent (it could), the markets will crash.

If the 4Q numbers are as bad as most people think they're going to be, the markets will crash.

If the 1Q/2010 numbers show a rash of new layoffs (they will), the markets will crash.

If China stops buying treasury bills, the markets will crash.

A lot can go wrong - certainly a lot more likelihood of stuff going wrong rather than going right in the coming months. Yes, the markets "want" to go up (people are sick of being depressed about this stuff and are looking for silver linings), but it is completely irrational. And FWIW I think we're past the point where payroll cuts (layoffs) are going to make investors feel good. Up to a point, yes - it makes sense that an individual company pares down its operating costs which results in increased profit margins, which helps the stock price. This is Stocks 101. However, we're now hovering around 18% (actual) unemployment. At some point, even the "individual company" investor is going to stop looking at job cuts as a good thing and look at it as destruction of the potential customer base.

The job numbers are not getting better anytime soon. It's anybody's guess as to how much worse they're going to get, or if the "tipping point" I describe above will be reached before any sort of perceptible turnaround. If it doesn't, it has the potential to be a HUGE confidence buster.

I just don't see how the market climbs can sustain themselves, even in the short term. We do not have a 10,000 DOW right now. You can cite all the flowery "recovery" talk you want. It doesn't change the reality that we still have very, very serious underlying problems in our economy and NONE of them has been solved in the last 10-18 months. Sooner or later, this reality will override any Polyannaish sentiment.

Perverse isn't it? But never the less true...the SM is rising and is going to keep rising as it has become disconnected from the fortunes of average Americans. They are simply going to be left beihind in the global economy. Cash for clunkers before very long almost evey Ameican isgoing to be driving a CLUNKER...

Here's the problem with trying to time the market. You never know when to get back in.

Personally I never left the market. I rode it all the way down and kept buying as it fell. Of course, my time horizon is 30 years so I looked at this downturn as my golden opportunity to put money away when prices were cheap.

I made a few good trades, I bought Ford stock at $3, sold it at $6. Then I bought GE at $10 and still have it at $17.

The market will probably keep going up short term, then move sideways for a bit until the next move up. Unfortunately those who have sat on the sidelines have missed a 40% move. Getting back in now is probably the right thing to do, but you missed your chance to really catch the upswing.

That's the problem with market timing, it never seems like the right time to jump back in until the move has already happened. If you look at the people who really make money in the market, none of them are market timers. Market timing is just another form of gambling.

I took a pause to keep from taking a bath in the market. I got back in some place not far from the bottom. As a result, I am nearly whole again. I don't see a bear market coming soon. Don't let your political view blind you to the reality. Everything got beat and there are lots of bargains out there and lots of cash wanting to chase them. Lets talk in six months and see, but I am in the market is its doing fine for me. I expect the growth to slow a bit, but this working out fine for me. Your mileage will vary.

The market is a forward measuring indicator its 6 to 9 months a head of the economy. The same with the federal reserve actions takes 6 to 9 months to see effects. In spite of our deficit spending and this political fight on health care america is still considered the most stable country in the world.