February 13, 2009
moving up and down all day, the markets finally closed somewhat lower.
After the close, Congress passed the current stimulus bill, readying it
for the President's signature.
markets fell today and then rallied sharply in the last hour
of trading upon rumors that the administration is floating a means-testing
mortgage relief plan..
Composite increased 7.35
the Dow dwindled
points (-1.04%) to
end at 7,850
and the S&P
to close at 827. Oil
while gold dropped $7.00
hopped to about 43.00.
Paul Krugman has
written Permanent Link to Ownership society watch,
in which he cites the just-published statistic that U. S. family net
worth, adjusted for inflation, is less than it was in 2001. He continues,
"You may remember that a few years ago there was a lot of talk about
how only bubbleheads paid attention to our low, low savings rate, because
the truth was that Americans were getting steadily
wealthier thanks to rising asset values."
The stock market continues to trade in a fairly narrow
range between 800 and 900. It's clear that the markets registered a major
bottom last November 20th. At the time, mention was made of the fact that
a couple of 9-to-1 up days would be required before a bottom could be
confirmed. I don't know whether that ever happened and I just didn't see
it, or whether it failed to happen. If you can read anything meaningful
into market action, then it would appear that professional investors are
on the fence regarding whether the stock market is going to go down again
or is going to go back up. If the November 20th close was a cyclical bear
market bottom and is to be followed by a two-to-three year bull market,
then the economy should hit bottom sometime between late May and late
August. Also, the economy, while still deteriorating, should be
deteriorating slower and slower--and in some ways, that's what's
happening. But it's also worth observing that (1) sentiment is too bullish
for a bull market advance, (2) As Mark Hulbert points out tonight, P/E
ratio making a comeback, the trailing 10-year average P/E ratio stands
right now at 14 compared to an average long-term P/E ratio of about 16. By
contrast, in the 1973-74 bear market, the 10-year trailing average P/E
ratio stood at 8.3, suggesting that we have a way to go before the current
market hits bottom (like S&P 500 = 500?).