Positive Negativity

Good news: Everyone thinks the economy is only going to keep getting worse! It seems that when "everyone" knows something bad is going to happen the worst is often behind us. I was thinking yesterday, as some of the stock market indexes reached new lows in this bear market, about the price of oil just a few months ago. The price had reached about $140 per barrel and the talk was that it was bound to rise to $200 or $250. Very, very few "knowledgeable" people thought it would go down. Where is the price of oil now! Would you believe it has fallen about $100 per barrel to roughly $40. Bear markets generally begin to wane when "everyone" is sure there is no hope! In listening to what has been going on lately it would seem we may be close to that point. Yesterday, when the S&P 500 and the NYSE indexes reached new lows for this market downturn, I found that not many stocks were reaching new lows. This too may indicate that the market is getting to an oversold place and is only waiting for the time when the signal to buy emerges. I have read reports by some that the Dow will drop to 5500. This is possible. I have not been reading much from people who are saying the market could go to 10,000. I think that this, too, can happen. This may not be the bottom, but the sentiment is so bad, and so much negativity has already been built into the price of stocks that we may well be approaching the bottom. After a year and a half of being pessimistic about what is going on, I now feel optimistic! I don't think the ship is going to sink! Ed

Volatility and Interest Rates

For some time I have indicated my concern that, unless interest rates came down, this economy and the stock market would have a difficult time moving forward without excess volatility. Since the latter part of January, we have seen interest rates on both core and high-yield bonds rising again. The move has not been as significant as it was last year, but the trend is not what I'd like to see. During this same period, we have seen the stock market trending downward. In the last couple of days we have seen high-yield rates on bonds dropping a bit and the stock market moving upwards. What is most interesting is that this has come at a point when unemployment has been reported at 7.6% and the number of the newly-unemployed is the highest since 1974! What we don't know is whether government actions will have an impact on interest rates and business in the short run or whether it will take several years. Once again, we must remain patient and maintain the belief that things will get better eventually. As businesses become leaner through layoffs, it is concerning that more and more people become unemployed. We need to see efforts directed at creating new jobs and getting people back to work! Ed