Stock market sure is acting strangely these days...After all, didn't the economy shed 2.6 million jobs in 2008? That was the most since 1945. More tha...
Stock market sure is acting strangely these days...
After all,
didn't the economy shed 2.6 million jobs in 2008? That was the most since 1945. More than 11 million Americans are now unemployed, the most in 25 years. The U.S. unemployment rate now stands at 7.2% and President-elect Obama predicts another three million job losses this year -- bringing the unemployment rate to over 10%.
Funny thing is, on news of the bad employment figures this past Friday, the Dow Jones Industrial Average only gave back 143 points. As a leading indicator, does the stock market know something we don't? More importantly, has the stock market already discounted the worst for the economy?
I've never seen so much pessimism out there as I see today about our economic future. This negativity is happening on the backdrop of some moves by world central banks that I thought I would never see in my lifetime. American Express receiving a bailout? Yes, to the tune of $3.4 billion. We have the Bank of England reducing its benchmark interest rate to the lowest level since 1694. We have Larry Flint, the "Hustler Magazine" publisher, even asking for a government bailout, because he claims sales of his sex magazines have been hit by the economic downturn. The latest in business vogue: asking the government for a bailout
Here is my million-dollar question for my beloved PROFIT CONFIDENTIAL readers:
When have governments ever been right?
If we listen to the governments of Canada, England and the U.S., all we hear is: (1) the economic situation will get a lot worse; and (2) we are going to get close to a Great Depression if the government doesn't move quickly with reduced interest rates, lots of monetary liquidity and plenty of government bailouts.
Fortunately, or unfortunately (I don't know which), the government has never been right in my lifetime in their predictions. And I certainly didn't see anyone with the government predicting this economic mess.
Only the stock market has proven to predict the future correctly six to 12 months out. And if we look at the stock market today, with the Dow Jones Industrial Average up 16% from its 52-week intraday low, the stock market is playing a different beat than the gloom-and-doomers. What if President-elect Obama is wrong in his opinion that the economy will get a lot worse in 2009? What if all the efforts of the Federal Reserve to turn the economy around will have the wanted effect? Well, then maybe the stock market's recent actions are justified.
From 2005 to 2007, when no one would listen, I went against the pack predicting the worst economic times ahead in years (go to www.profitconfidential.com and click on "What We Predicted in Profit Confidential and What Actually Happened"). To join forces with the all the dire economic "gloomers" of today, the stock market needs to talk to me with lower numbers. And, until I see the Dow Jones get back to its November 2008 low, I guess I'll play the contrarian once again.
Profit Confidential
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