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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Full disclosure: I'm genetically programmed to be a bear. My father, who traded for three decades on the floor of the American Stock Exchange, passed this gene on to me, along with the ability to put a soccer ball in the back of a net.


My natural inclination to distrust markets has served me well - it's prevented me from jumping on bull market bandwagons and becoming ensnared in a bear trap. But I've also missed some golden opportunities. But that's the deal - you can't have it both ways and for over two decades, I've found that losing less on the downside is better for me than making it big on the upside.

But I started to sense that the tide was turning during the spring. In fact, right after I wrote about soaring stock prices, I had a sober conversation with inner-bear. The discussion led to this video.

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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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This post by Nate Hardcastle originally appeared on CBS' MoneyWatch.com.

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One thing seemed clear during the darkest days of the recession and bear market: The rules of investing had changed. Investors of all stripes, from big guns at giant financial institutions to the guy chatting you up at the cocktail party, were trying to figure out how to operate in the new paradigm. Pimco CEO Mohamed El-Erian dubbed it "the New Normal," and GMO money manager Jeremy Grantham, who'd warned us all that this was coming, looked forward from here and saw "seven lean years."

But is it really different this time? From a big-picture perspective, the stock market to this point actually has behaved pretty much as it usually does in recessions: falling in anticipation of the economic downturn and rebounding hard before the economy starts growing again, with cyclical sectors leading the way down and back up. "With the benefit of hindsight, the market really did perform as you might have expected," says Todd Salamone, senior vice president of research for Schaeffer's Investment Research in Chicago. "The game hasn't changed."

The investing climate is surely different than it was pre-crash. But the fact that the market mostly has followed the usual script through the recession suggests that long-term investors shouldn't throw the old wisdom out the window. To the contrary, their recent experiences should help them use that wisdom. "Today's investors now have a once-in-a-generation bear market and recession under their belts," says Jim Stack, market historian and editor of the InvesTech Market Analyst. "They can draw on what they’ve learned to make better decisions in the future."

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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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By S.L. Mintz of CBS MoneyWatch.com.

Today’s cautious optimism sure beats the despair that gripped the stock market a few months ago, says chief economist Diane Swonk (at left) of Mesirow Financial. In her view, the markets reached a turning point in the second quarter, or one is imminent in the third quarter, driven more by the tapering off of bad news than the arrival of good news. But net job creation won’t revive before December or January, “if we’re lucky.”

Swonk has a front-row seat on the nation’s economy, sitting on several advisory committees to the Federal Reserve Board, its regional banks, and the Council of Economic Advisers for the White House. Most recently, she was reappointed to serve on the Congressional Budget Office’s panel of economic advisers, and Swonk is also past president of the National Association for Business Economics (NABE), a title that Federal Reserve Chairman Alan Greenspan and several other Federal Reserve presidents have also held.

Here she discusses whether she thinks the market’s recent rally is sustainable, which market sectors look good and which don’t, and what could derail a recovery.

The markets are now about 50 percent off their lows. What do you think is going on?

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