Dwight Watt - Watt Thoughts #148 1/23/2008

#148 - Stock Market Movement (Watt Thoughts)

We are truly in a new time period for the stock market. Today's movement would have not been possible until very recent times.

Until about 1972 the Dow Jones Industrial Average had never reached 1000. (I recall delivering the Washington Post as it approached and past that magic number).It did then and barely broke it and then was years before climbing above it again. Then in the mid and late 1990s we watched it go through the roof and break 10000. Then 2000 occurred and it fell back to 8000 while the NASDAQ which was new in the 90s had climbed to 5000 fell to 800. Since 2002 we have watched both climb back with the and unemployment rates fall to levels that I was taught in economics in college in the 70s that were not possible on the national level of being less than 5%.

For years everyone thought 5% was basically full employment and now we have reached the point that we are concerned about a high unemployment rate in December of 5%. It does not count the chronically unemployed but that is the way we have always counted unemployment in the 20th century so it makes at least a fair comparison of years.

Given that in not long ago the highest the DJIA ever got was 1000 the swing today is unbelievable. The stock market was down by almost 300 points (which is a huge drop even by today's numbers) when I went to teach a class off campus today and when I got in my car after class and went to return it was up by almost 200 points (a huge increase by today's numbers also, having only normally occurred several times a year). That means it rose by about 500 points while I was teaching a class.

What does this swing tell us. Not much. The main thing is that obviously nobody knows where the economy is going, no one knows if bear or bull market (both today), what the Federal reserve is going to do next week (morning bet was stay put on rates and afternoon was expecting they will cut another half point then) or what oil prices will do (they have declined several weeks expecting oil usage slowdown in US and world as economies slow down. It may be a sign slowdown will just be that or that it was a last grasp to sell out in morning and steal bargains in afternoon or that oil prices or housing will still cost more jobs and economy. And the last question is whether Bush and Congress will really work together on stimulus bill and whether that will be good in long run (more jobs and spending ) or bad (higher deficit and more inflation, which I hope I never see late 70s part of that again, although the music was great).

If you are playing the stock market (notice you play stock market and practice medicine and law, which is scary as the three affect our money, health and freedom) grab something and hang on. I suspect we have more days ahead that will feel like stock market is a hurricane or tornado.



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