|By Michael Lombardi, CFP, MBA — Today’s Profit ConfidentialcolumnDo you believe in luck?I do. And today could be our lucky day.
You see, only a year ago, the financial world was coming to an end. The Dow Jones Industrial Average fell to 6,440.08 on March 9, 2009.
|Thousands of jobs were lost at stock brokerage houses and investment banks that closed their doors. Retirement plans were squashed with the collapsing stock market.It really looked like the bull market that started in 1982 had come to an end. After all, Lehman Brothers went bankrupt, Bear Stearns needed to be sold to stay alive and even the once mighty Merrill Lynch was absorbed by a traditional bank; it looked like Wall Street was doomed.But in the depths of investor fear, the stock market started to slowly climb in March 2009. As the months since have passed, the market has actually roared back. Looks like Fed Chairman Ben Bernanke et al. did a masterful jump with their easy money policy (and a bunch of other tricks) to save the economy.It is astounding to note that the Dow Jones Industrial Average is up 70% since March 9, 2009. For the investors who were smart enough to jump into the stock market last March, the returns have been truly outstanding. (And that’s how the bear likes it — more on that in a
minute.) Can you believe we had 35 stocks we picked last year that doubled in price?By February of this year, it seemed like the stock market rally that started last March was coming to an end as stocks faltered. I guess I looked like a fool as, after predicting Dow Jones 10,000, I started to predict Dow Jones 11,000. But guess what? Stocks came back
strong. And this morning we sit a measly 30 points away from 11,000 on the Dow Jones.
The bottom line is that bear market rallies (which is what I believe we are in right now) do not end with investors anticipating and fearing the rally is over. Bear market rallies end when investors believe all is well with the economy and that stocks are a safe place to be again. And the bear is doing a wonderful job these days of creating that positive environment. With 160,000 jobs created in March, is the economy not on the right track again?
What we need is for the bear to bring the Dow Jones over the 11,000 level to convince even more investors that it is okay to get back into stocks. Being April 7, 2010 today (“lucky seven”), could it happen today? I hope so. But if the Dow Jones doesn’t gain that extra 30
Michael’s Personal Notes:
I’ve been receiving e-mails from readers asking questions about the rising yields on
Well, for the first time in over a year, 10-year U.S. Treasuries hit a yield of over four percent. While you have heard market analysts say the Fed can manipulate short-term interest rates, but not long-term rates, this is correct.
The fear is that the rise in 10-year U.S. Treasury yields is a signal of higher interest rates ahead. This is also true. I’ve been writing for months now that interest rates are headed higher. The breakout by the 10-year U.S. Treasury over four percent is the first proof of the
With 162,000 new jobs created in the U.S. in March, rising oil prices (oil is at $86.00 a barrel this morning), corporate profits rising, the stock market rising, the economy doing better than expected, inflation getting ready to explode, and the U.S. government needing
Where the Market Stands:
The Dow Jones Industrial Average opens this morning up 5.2% for the year. My opinion is that we are in the midst of a bear market 0rally that will continue to take stocks higher in the immediate term before the second leg of the bear market takes hold.
What He Said:
“Prepare for the worst economic period ahead that we have seen in years, my dear reader, as that is what I see coming. I have written over the past three years how, in the late 1920s, real estate prices fell first before the stock market and how I felt the same would happen