skippy the bush kangaroo: is it obama's economy yet?

Wednesday, October 14, 2009

is it obama's economy yet?

dow hits 10,000 for first time in more than a year - bloomberg:

u.s. stocks rallied, sending the dow jones industrial average above 10,000 for the first time in a year, on better-than-estimated earnings at jpmorgan chase & co. and intel corp. oil climbed, while the dollar index slid to the lowest level since august 2008 and treasuries fell.

jpmorgan added 3 percent as a surge in fixed-income revenue helped the bank increase profit almost sevenfold. intel, the world’s largest chipmaker, rose 1.8 percent after its sales forecast topped estimates by as much as $1 billion. macy’s inc. and nordstrom inc. gained on a government report that showed retail sales fell less than economists forecast last month.

the dow jumped as much as 130.52 points, or 1.3 percent, to 10,001.58. the standard & poor’s 500 index increased 1.4 percent to 1,088.26 at 3:02 p.m. in new york as financial and technology shares led gains. the msci world index of 23 developed countries added 1.6 percent.

let's be clear here, tho. firstly, there's no guarantee the dow won't drop precipitously again; this is, after all, october, the scariest month for the stock market. etfguide:

in finance, black monday refers to monday, october 19th, 1987. but did you know there were actually three black monday’s?

1) black monday, october 19th, 1987: the largest one-day percentage decline in recorded stock market history. the dow plummeted 19.65% in one day.

2) black monday, october 28th, 1929: this black monday was one in a sequence of black days that ushered in the great depression. the dow jones (nysearca: dia) closed down 11.70% that day.

3) black monday, october 6th, 2008: the dow jones (dji: ^dji) fell as much as 819 points intraday.

as you can tell, all black mondays occurred in october and none of the black mondays came announced.

in fact, last year’s october 6th black monday came on the heels of a respectable summer rally. the dow had gained nearly 1,000 points and the much anticipated bailout was expected to fix the financial system.

and secondly, just because wall street is looking better doesn't mean main street is. cnnmoney:

but even economists who agree the economy is in recovery say that growth will be slow and difficult, with continued job losses, tight credit and further declines in home prices. and even some who believe that the current dow 10,000 level is justified say there's still a significant risk that the economy will take a step backward.

"one of the great challenges is whether consumers and small businesses come along with this recovery," said john silvia, chief economist with wells fargo. "if they don't, you either sit at 10,000 or slip back to 9,500. to sustain another double-digit (percentage) gain to dow 11,000 is asking too much from this economy and the risks we still see out there."

there are also economists who question whether the economy is truly in recovery, given that it continues to lose about a quarter-million jobs a month. they say the more than 50% rally in the dow since it closed at a low of 6,594.44 on march 5 is only a reflection that the fear of the economy toppling into a full-fledged depression has abated.

we're not holding our breaths for a recovery just yet.

posted by skippy at 3:28 PM |

2 Comments:

My theory is that they keep telling us that the economy is improving because for the 20% of the population who hold 80% of the wealth, things are getting better - look at that stock market go up! Yay!
That the other 20% of the nation's money (and the 80% percent of the population affilliated with it) isnt doing so well isnt really a problem for them, so long as no one is rioting or doing other things that make the stock market fall. (or really bad things, like raising taxes or cutting bonuses, that would be very bad for "the economy".)

commented by

daveawayfromhome, 9:53 PM PDT

The first thing to do is understand the terms. To say "the economy is improving", "the stock market is up", or "the recession is over" is to say three different things, any one of which can be true without the other two being true. They are interconnected to some extent. However, the stock market can go up during a recession. The economy can improve during a recession without the recession actually ending, and so on.

Right now, there is data indicating the recession has ended in 79 metro ares (see here), but jobs have not rebounded. The stock market is down today but up overall for the year and for the month.

It's all very complicated and I don't have the economics chops to play that tune, but even if the recession is ending and the market is up and the economy is improving, we are on shaky ground because of the jobs issue.

commented by

DBK, 8:42 AM PDT

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