Thursday, January 17, 2013

Reflections Of 2007 In Stock Market Rally

As the markets rally his morning I feel a bit of deja ve, we have seen this all before. Way back in 2007 we saw all stocks moving in unison, always upward, often ignoring both the news and reality, note, it is happening again. This is a reason for caution! When these trends start they can go on for quite some time, as this one has. While it is hard to predict when this will end by historical standards this bull market is getting a little long in the tooth. This article was written earlier in the year when the news coming out was weak, for an example see the news blip below,

WASHINGTON (MarketWatch) -- The Philadelphia Fed's manufacturing index went negative in January, slipping to -5.8 in January from +4.6 in December. Economists polled by MarketWatch expected a 5.0 reading. The new-orders index fell to -4.3 from 4.9 in December, and the employment index fell to -5.2 from -0.2 in December.

A Gallup survey on jobs released recently showed that the percentage of workers working part time but wanting full-time work was 10.1% in February, an increase from 9.6% in January and the highest rate measured since January 2012. Gallup notes "Although fewer people are unemployed now than a year ago, they are not migrating to full-time jobs for an employer. In fact, fewer Americans are working full-time for an employer than were doing so a year ago, and more Americans are working part time, all indications are that this is not by choice.

The disconnect between the market and Main Street has grown huge, considering the new records being set few people would think America and much of the world was locked in slow growth and running massive government deficits. I contend all is not as rosy as the media is reporting. It seems that optimistic souls have embraced the new normal and that anything other then horrible news is reason to take the market ever higher. Money is rushing into risky investments in search of higher returns, this is not healthy and cannot go on forever, can you say bubble?

Footnote, I added a new post that explores the possibility of a major decline in stock prices;

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