Who is out of touch with reality?

John R. Hall

I know I sometimes ask too many non-wethead questions so pardon my intrusion again. I was just looking at the Dow Jones and see that it is inching toward 13,000 again. I am not a financial or Wall Street brainiac but for the average Joe like me, this doesn't seem to make sense. If things are so bad now with oil prices, non-existent new construction, and the mortgage crisis, why does Wall Street seem to ignore the economy? Are they out of touch or are we taking all of this too seriously? I know that $3.75 a gallon is serious but are we hitting the panic button when we shouldn't?

I'm just curious as to what other Wallies think because all of these economic trends affect your bottom line, especially gas prices.

Thanks for your indulgence for a curious journalist.

CC.Rob_4

probably...

While a fair bit of it is likely due to overall stupidity and greed of Wall St, and the fact that they never learn (see dot-com and real-estate bubbles as recent examples), it's probably also due in part to the DJIA not being a particularly good metric for gauging the overall US economy due to its composition, weighting scheme, and other factors.

Look at the 30 companies in it, and a number of them are making money in this economy (ExxonMobil and Chevron; drug companies...) or are somewhat immune to the present state of the economy because their demand is fairly inelastic (Microsoft, Intel, Coke) for whatever reason.

Some also are doing well because of non-US driving forces (Boeing is building planes for overseas airlines -- so much so that domestic carriers can't even get on the schedule for certain planes until 2012 or so). This one in particular is a pain for US consumers. Some domestic airlines have very old fleets. These planes are fuel pigs compared to modern aircraft. So as fuel prices go up, so does airfare, fees for extra bags, etc. Meanwhile, the companies would like to invest in new, more efficient aircraft but can't because a) they don't have the capital because profits are down and b) they can't even get on the build schedule for 4 years.

Kinda like being stuck with your old Arcoliner because Viessmann can't build you a Vito for another half-decade. But you can't afford it anyway because you're paying through the nose for fuel to run the Arcoliner....

Just some thoughts. I ain't no market analyst. Just another victim of market forces along for the ride....

Brad White_185

Value of the Dollar

Keep in mind that stock market levels are just an opinion. The collective and absolute opinion of a herd of stampeding buffalo.

Consider the value of the dollar (versus the Euro or currency of your choice) or compared to the output of the GDP, the real indicator of monetary value in any economy. That dollar fluctuates and recently has taken a dive. When that happens, it costs more dollars to buy a particular commodity, be it bread, socks or stocks.

Let's not forget the traditional pegging of petroleum prices to the dollar. When the dollar value goes down the number of dollars per barrel goes up in a sort of circular reference. Oil based on dollars, dollar drops, oil price rises, in addition to normal supply and demand market forces.

Top off the sagging dollar with a Federal Reserve that wants to cut interest rates (I think... dang if they can make up their mind lately), balancing economic stability with a weakening or cheapening of the dollar. Short term middling effect, long term inflation as the money supply goes out to chase too few goods.

But, back to your stock market issue, some stocks have dropped to the bargain level lately and the decline of the dollar also means that 13,000 is not what it meant six months ago.

Keith_8

weak dollar

The weak dollar should translate into greater demand for our goods in a global economy.

A weak US economy/wek job market usually translates into US corporation layoffs, employee benefits reductions and cost cutting. Wall Street sees greater company profits for the next quarter.

The American people still don't have the stomache for a big economic correction so the goverment will continue to spend/stimulate our way into debt. In an election year should we expect anything different?

As far as Wall Street and the American people not learning from past bubble collapses. It's called Optimism! Would you prefer that people are afraid to invest and take chances? Not me, life is too short to sit on the side lines and be afraid.

Keith

Dave Yates (GrandPAH)_2

Who is out of touch with reality?

Anyone who complains about the cost of gas per gallon that willingly pays $12.50 per gallon for water!

True story: while doing the self-serve thing at a gas pump, the immediate neighbor was juicing up their H3 while sipping on the vended $1.50 pint of bottled water. When the gasser remarked he was perturbed by the cost for gas, I had to suppress the reaction I would have dearly loved to give as a response.

Tony_23

Why ?

Why suppress ? I'd gently, with a smile, have told him the per gallon price of water

jackchips_2

John

our economy is not that bad and that is one of the reasons for the increase.

Read as much of Ben Stein as you can find. A man with common sense who puts an excellent perspective on what is happening in this great country.

Two simple reasons why many people think things are worse than they are: Election season and negative news sells ads.

People can either get on the train or watch it go by.

:-))

Jack

Tony Conner_2

It's...

... driven by baby boomers looking for a return on their retirement nest eggs. For all the interest you get on banking your money, you might as well keep it under the mattress.

If you haven't read "Boom, Bust & Echo", check it out. I haven't read it for a few years, but I thought it was excellent. Something a lot of people don't realize (I didn't, until I read the book) was that the only countries that had a post WWII baby boom were Canada, the US, Australia, and New Zealand.