Session 12—Dow 14,296.26…A New ALL Time High…Does anybody care?

BillBy golly, the folks at CNBC sure do.  Even the folks at end-of-the-world-as-we-know-it Fox News are celebrating.  In the case of CNBC that is all that they have been chattering about the past two days.  We have repelled from the fiscal cliff, survived the Chinese tightening their property regulations and endured the first few days of the dreaded sequester.  Yet, as one of their commentators said Wednesday, “there is a pervasive skepticism….a wall of worry” that seems to grip the market.  First of all, that “wall of worry” is a good thing, as Bull Markets tend to climb them. Secondly, it is not hard to understand the lack of enthusiasm for stocks on this new record for the Dow.

Lest we forget, the Dow Jones Industrial Average is composed of only thirty blue chip stocks.  If you happened to own the NASDAQ composite index, you are still well below its lofty closing peak of 5048.62, attained March 10, 2000.  That index went out today at 3222.37, a mere thirty-six percent below where it was thirteen years ago.  And if you had been a buyer of the of the Dow at its former peak in 2007, you would just be a couple of hundred points to the good after six years.  So it is understandable why there is not much “joy in Mudville”.  To a lot of people the market has still struck out.  I might say this is a very healthy sentiment picture for those who dare to be involved. The crazed enthusiasm for stocks that abounded at the beginning of the first decade of the 21st century has been dashed, just when they may be one of the most attractive investment opportunities available.

Although it is very difficult for me to do, I spent some time watching the coverage on CNBC today, and they did not disappoint me.  It was a mass of excitement and cautionary statements.  Should you buy, or should you sell?  Is Google a buy, or is Amazon a short, or reverse the question?  One negative, cautionary soul mentioned that there were a lot of crosswinds, in particular the issue of the continuing resolution that would expire March 27th.   A continuing resolution needed to be passed to keep the government funded after March 27.  Evidently sometime earlier today, according to Huffington Post, that resolution had been past (good until the end of this fiscal year in September).

The best part of the day was a segment that was announced by a video of a blaring air raid siren and reported by Michelle Caruso-Cabrera entitled; “Threats to The Market Lurking in The Shadows”.  Keep that fear and distrust bubbling just under the surface.

Here is what Michelle had to say that we should be concerned about:

  • The quality of the economic recovery is questionable.  It is all about the Fed.  What happens when they take the punch bowl away?  (We address this in kortsession 9).
  • Geopolitical shocks are lurking….maybe an oil shock brought on by an unexpected consequence of the “Arab Spring” or Iran and the Nukes. There are always going to be unexpected, fearful events.  (The markets have weathered all of the scary, surprise events that have happened in my lifetime-since 1946-, including September 11, 2001.)
  • Complacency about Europe. Why not be complacent? Every European crisis in the last three years was a buying opportunity.  (They muddle through.)
  • The change in government in China.  (Hmm? We’ve just replaced the old central committee with a new one.  It would appear that they will do whatever it takes to maintain growth and stability, and they don’t need a majority of 100 Senators and 535 Congressmen to agree on a program before they implement.)
  • Finally economists continue to worry about the impact of the sequester.  (Give me a break!)

Let me say unequivocally, I cannot predict the stock market, nor can I tell you with any certainty what factors move the market, minute-to-minute or day-to-day.  This is what the media tries to do with often-laughable results that may be harmful to your investment success.  I do reflect on those factors that might affect the market on a longer-term basis…government policy, as well as fiscal and monetary policy, here and abroad.  Finally, I believe that when we invest in stocks we are buying businesses and that much of the fluctuation in stock prices in general has little to do with the underlying values of those enterprises.  The purpose of this blog is to help you deal with the noise and keep focus on the real reason you are involved in the market.

Your comments and critiques are welcomed.

The information presented in represents my own opinions and does not contain recommendations for any particular investment or securities.  I may,  from time to time, mention certain securities for illustrative purpose, names where I personally hold positions.  These are not meant to be construed as recommendations to BUY or SELL.  All investments and strategies should be undertaken only after careful consideration of suitability based on the risks, tolerance for risk and personal financial situation.


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