What’s Really Going on with the Stock Market Today?
Monday, September 8th, 2008
By Michael Lombardi, MBA for Profit Confidential
Have you heard the news?:
— The U.S. lost 84,000 jobs in August and the unemployment rate rose to a five-year high.
— Foreclosures of U.S. homes rose to a new 29-year high in the second quarter of 2008.
— The Federal government, after bailing out Bear Sterns this summer, announced this weekend that it will rescue mortgage giants Freddie Mac and Fannie Mae.
— Wall Street firms have written off over $100 billion in non- performing assets.
— More than 10 U.S. banks have now gone under in the aftermath of the subprime problem. Many mortgage companies have closed their doors and many homebuilders are going bankrupt.
Regardless of all the above, and despite calls that the current credit and housing crisis is the worst we have seen since the Great Depression, the stock market has failed to go down big.
As of Friday night’s close, the Dow Jones Industrial Average is up two percent from its July low of 10,731. This morning, in response to the government announcement of its action to bail out Freddie Mac and Fannie Mae, the Dow Jones is rallying by more than 200 points. If this rally holds for the day, the Dow Jones will close Monday up more than four percent from its July low.
So, why, in the midst of the financial havoc American is currently experiencing, is the world’s most watched index failing to fall? I don’t have an answer…and I doubt anyone has the answer. But the “why” is not as important as the “what” in this case. And “what” the market is saying is that it sees a future brighter than the pessimism currently circulating in the financial markets. We don’t have to know “why:” the market is performing like it does. But as investors we need to know “what” the market is telling us. Many great investors have made fortunes by following “what” the market does…the old “the trend is your friend” adage. Hence, I wouldn’t call this an all-out bear market until the July 2008 market lows are broken.
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Tags: bear market, dow jones, stock market
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
