All Blog Posts from Econwatch

This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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I should have expected the massive stock market rally - after all, at the end of March, I had heard that the guy who I consider one of the great "contra-indicators" (let's call him "Mr. Wrong") was predicting a steep decline to Dow 5000. Before you brush aside that notion as nonsense, remember that at that time, we were still worried about the implosion of the financial system.

But when I heard that Mr. Wrong was predicting massive riots in the streets and falling equity prices, I forced myself to consider the bull case for stocks. I had made the mistake of betting against massive liquidity once before - in 2002-03, I remained underweight in risk assets for too long and paid the price. I'm pretty sure that Mr. Wrong is making the same mistake and here's why: there still remains deep pessimism over the recovery and the stock market.

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This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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I love this chart (see here) from this morning's Wall Street Journal article. It's a quick comparison between today and 1983, which was the last time the unemployment rate was 10.2% (and the last time I was considered a formidable power forward on the basketball court).

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This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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The Dow Jones Industrial Average came within 70 points of breaching 10,000 yesterday. Whether it's today, tomorrow, next week or next month, it's worth noting what got us to this place and more importantly, what you should do now that we're here. I spoke about Dow 10,000 with Maggie Rodriguez on The Early Show this morning.

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This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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The US stock market was down the first two days of October, which has been a month of some scary markets for investors. Sure, statistically speaking, September has actually been the worst month for stocks, but October has seen some wild rides.
There was October, 1929 and October, 1987 when stocks had single day crashes. But last year, stocks dropped by 15% in October. But it's also worth noting that October can be a turnaround month, like in October, 2002, which marked the end of the 2000-2002 bear market.


What is it about October? According to market historians, October's financial woes date back to agrarian times, when changes in the markets could be linked to the crop cycle. During the harvest, money would leave the major banks to pay for food and grain, which in turn, put pressure on financial markets, making them vulnerable to panics.

That doesn't explain the modern October phenomenon - some pin that to earnings season. October is the month when companies report 3rd quarter earnings and perhaps of greater importance, provide their outlooks for the 4th quarter and the year ahead.

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This post by John Keefe originally appeared on CBS' MoneyWatch.com.

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The Dow at 10,000. Does it mean anything? It may be just fodder for financial writers: a Google search that also specifies September 2009 returns five million results. But it could be that the Dow Jones Industrial Average at 10,000 coincides with some extreme in valuation, and is a "destination" for the market. Otherwise, it's just a number, like one of those small, frequent mile markers that tick by on the interstate.

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If you want to make yourself a little nuts, read about America’s Bailout Barons. The Institute of Policy Studies released its annual report on compensation and the results are staggering. Here’s one of the more disturbing sentences: “From 2006 through 2008, the top five executives at the 20 banks that have accepted the most federal bailout dollars since the meltdown averaged $32 million each in personal compensation.” Yes, that was through 2008.


I never expected that the government could really address this issue, even with the appointment of Kenneth Feinberg as “Pay Czar”. Despite the clamor earlier in the year after the AIG bonuses were awarded, there were too many other issues for the Obama administration to tackle. Wall Street banks soon realized that the easiest way to escape the Pay Czar would be to repay TARP funds and a bunch have done so. For the rest, I have a sneaking suspicion that financial innovation will be alive and well.

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The economy may be showing signs of recovery, but the stock market is still a long way off from it's pre-recession highs of October 2007 and it may take new bubbles in the energy and credit markets to bring them back, according to a Wall Street Journal report ($) Wednesday.

Neither, of course, would be desirable, the paper notes, so investors may just have to deal with a slower-than-desired market rebound.

The report points out some impressive numbers:

Despite a 47.5 percent rally since March, the Standard & Poor's 500 index is down $4.8 trillion in market value since October 2007. It would need a 57 percent gain to return to that level.

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Is the worst of the economic storm behind us?

Consider the evidence: the Dow Jones Industrial Average leapt about 7.3 percent this week to its biggest weekly gain since March. Positive earnings or upbeat remarks from Intel, Goldman Sachs, and JPMorgan Chase have contributed to the optimism. During the past five days, stock market bears have been roasted alive.

Yet. And but. There is another side to the story, which is the lackluster state of much of the rest of the economy. Heavy consumer debt loads have not vanished. Neither have the housing market's woes, and still-to-come price declines in many areas. CIT Group's potential demise -- for once, a Wall Street firm that didn't get a bailout -- is further evidence that the plague of financial contagion has not run its course.

On the earnings front, the Wall Street Journal reminds us that analysts predict all 10 of the major industry groups represented in the Standard & Poor's 500-stock index will experience a second-quarter decline in profitability from 2008 to 2009.

A Goldman Sachs report says: "We find that under reasonable parameters of supply and demand growth, it will take at least two years, and probably more like three to five years, to eliminate spare capacity in the manufacturing sector... In the labor market, the unemployment rate is likely to remain above the current concept of 'normal' for an even longer period."

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Two perennial corporate titans are being replaced on the world's best-known Wall Street barometer.

Dow Jones is pushing out newly bankrupt automaker General Motors and financial giant Citigroup from its industrials index in favor of Cisco Systems and Travelers Companies, Inc., respectively.

The move will be effective June 8 and reflects the two companies' turbulent recent history.

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A few hours after President Obama took office on January 20, the Dow closed down 332 points to close at 7949.09. Remarkably, yesterday the Dow closed very close to that number at 8016.95.

In between however, as we all know, the market saw an even deeper dip in the midst of this recession. The low was on March 9th when the market closed at 6547.05. As we noted then, that was leading into Mr. Obama's 50th day in office -- an 18 percent dip since he took office.

The high for Mr. Obama's presidency so far was 8375.45, which occurred a few days after he took office on January 28th.

The graph below shows the ups and downs of the market over the past 100 days. You can also see more detailed information here at CBS' MoneyWatch.com.