A Stagger at 10000
BofA, IBM, and GE disappointed investors with sub par earnings this week. Yet, the Dow pierced 10000, but just couldn't hold on as it closed Friday at 9995. What is the significance of Dow 10000? Probably not much. It is a big round number and over the years, we have danced around this number quite a bit. The key now is to finally surmount the big round number and then hold it. Then the bulls can pump their chests out a bit.
Most economists have declared the recession 'over'. Maybe. Depends on the definition. Unemployment is still double digits and climbing. Foreclosures are still high. 99 banks have failed this year. The trio of companies mentioned above give a pretty good snapshot of reality. Banks are still struggling to find credit-worthy borrowers. IBM is of course the gorilla of technology and business. They are still not strong. GE? I read a stat one time that one out of every $100 dollars spent in the US went to GE. If things are really picking up, why are they not beating expectations?
Absent stimulus and subsidy, it still looks like a slippery slope back to prosperity. Maybe we can borrow our way back to the top of the mountain. Maybe we can print enough money to buy a ladder to get there. Maybe once our esteemed Congress and House manage to turn health care into a gargantuan taxation program the economy will respond for the first time in history with growth in the face of higher taxation. Maybe we should all believe in miracles.
In the meantime, patience is in play for now. We will have to see how the market responds to the 10000 level. So far, it has managed to ignore reality and valuation. Who knows - maybe the new market will decide that double digit unemployment is a good thing? Well, at least if we wait long enough, all those unemployed people will eventually run out of benefits and then they will just disappear. It's a patience game.