T Nation

Dow at 14000

The DOW hit 14000 yesterday. S&P also set a record. Fairly big news in the world of finance.

[quote]hedo wrote:
The DOW hit 14000 yesterday. S&P also set a record. Fairly big news in the world of finance.[/quote]

The S&P 500 has gained over 300 points, up to about 1550 or so. Looks a hell of a lot like a bubble to me. I’m shifting somewhat to t-bills.

[quote]Headhunter wrote:
hedo wrote:
The DOW hit 14000 yesterday. S&P also set a record. Fairly big news in the world of finance.

The S&P 500 has gained over 300 points, up to about 1550 or so. Looks a hell of a lot like a bubble to me. I’m shifting somewhat to t-bills.[/quote]

You may be right. There is a bit of a dot-com 2.0 bubble going on with the slew of web 2.0 startups popping up like crazy.

The problem is, from what I have been reading, is that the housing issue has the potential to devastate people as mortgages start coming up for refinancing at higher interest rates. This correct or not?

[quote]

hedo wrote:
The DOW hit 14000 yesterday. S&P also set a record. Fairly big news in the world of finance.

Headhunter wrote:
The S&P 500 has gained over 300 points, up to about 1550 or so. Looks a hell of a lot like a bubble to me. I’m shifting somewhat to t-bills.

Ren wrote:
You may be right. There is a bit of a dot-com 2.0 bubble going on with the slew of web 2.0 startups popping up like crazy.

The problem is, from what I have been reading, is that the housing issue has the potential to devastate people as mortgages start coming up for refinancing at higher interest rates. This correct or not?[/quote]

I don’t think the Web 2.0 “bubble” has affected the public markets very much, though the valuations and investments on the VC side for web 2.0 private companies are looking pretty frothy. The public markets may be being pushed more by a private equity bubble, but I don’t know if there’s consensus on that point.

The Fed seems convinced that the subprime mortgage fallout won’t be nearly as bad as advertised.

For me, I’m more concerned about the worldwide credit market having been too easy over the past few years – and the dollar’s stability.

Forgot to mention the China Bubble – that is very worrisome. Particularly if they have to massively revalue their currency and it turns out there’s not as much underlying their run up as has been supposed due to shoddy accounting and other such issues.

[quote]BostonBarrister wrote:
Forgot to mention the China Bubble – that is very worrisome. Particularly if they have to massively revalue their currency and it turns out there’s not as much underlying their run up as has been supposed due to shoddy accounting and other such issues.[/quote]

China’s broad market was up 70% for the year a few weeks ago. If that’s not a classic bubble, then I don’t know what is.

Scenario: The Chinese market hits a major selloff. With equity falling, Chinese investors begin cashing in US T-Bonds and bills, to remain liquid. The dollar begins to fall. Everyone then decides to head for the exits.

Yikes!

[quote]Headhunter wrote:
China’s broad market was up 70% for the year a few weeks ago. If that’s not a classic bubble, then I don’t know what is.
[/quote]

As of today, they increased interest rates to cool it down a bit.

On an unrelated note, what do you make of the Euro hitting a record 1.38 Dollars yesterday?

[quote]lixy wrote:
Headhunter wrote:
China’s broad market was up 70% for the year a few weeks ago. If that’s not a classic bubble, then I don’t know what is.

As of today, they increased interest rates to cool it down a bit.

On an unrelated note, what do you make of the Euro hitting a record 1.38 Dollars yesterday?[/quote]

This means letting the of the world pay for Washingtons fiscal irresponsibilty.

Hardly a first and only possible because 70% of all dollars are not held by US citizens.

[quote]orion wrote:
Hardly a first and only possible because 70% of all dollars are not held by US citizens.[/quote]

Do me a favor and reference that figure please. Not questioning your knowledge in economical matters, merely trying to be more confident when quoting you.

Of those 70%, something tells me a substantial portion belongs to Arabs.

[quote]lixy wrote:
orion wrote:
Hardly a first and only possible because 70% of all dollars are not held by US citizens.

Do me a favor and reference that figure please. Not questioning your knowledge in economical matters, merely trying to be more confident when quoting you.

Of those 70%, something tells me a substantial portion belongs to Arabs.[/quote]

In some South and Central American countries, the dollar is the primary currency. I’ve read that in Uruguay, the people have actually used their local currency as napkins.

I guess, relatively, European, Canadian, and US currencies are regarded as more stable, though the Yen and Aussie dollar are also pretty good currencies.

My take is that the Euro is rising because Europeans working together (in terms of a common currency) are way more productive. If you don’t need to mess around translating Austrian Schillings into Belgian Francs, life is easier.

[quote]Headhunter wrote:
In some South and Central American countries, the dollar is the primary currency. I’ve read that in Uruguay, the people have actually used their local currency as napkins. [/quote]

Duh! The exact same thing takes place in Algeria or Lebanon to cite only a few.

No. Got less to do with stability of the currency than it has to do with the ability to convert the currency, say Algerian Dinars, in the international market.

That’s one side of the coin (pun not intended). I’m pretty certain the Dollar is falling as well.

[quote]lixy wrote:
Headhunter wrote:
In some South and Central American countries, the dollar is the primary currency. I’ve read that in Uruguay, the people have actually used their local currency as napkins.

Duh! The exact same thing takes place in Algeria or Lebanon to cite only a few.

I guess, relatively, European, Canadian, and US currencies are regarded as more stable, though the Yen and Aussie dollar are also pretty good currencies.

No. Got less to do with stability of the currency than it has to do with the ability to convert the currency, say Algerian Dinars, in the international market.

My take is that the Euro is rising because Europeans working together (in terms of a common currency) are way more productive. If you don’t need to mess around translating Austrian Schillings into Belgian Francs, life is easier.

That’s one side of the coin (pun not intended). I’m pretty certain the Dollar is falling as well. [/quote]

Fiat currencies are always relative. The dollar is falling relative to the Euro because (1) Europe spends less defending itself. It gets protection as a gift from the people of the United States. (2) Capital is fleeing towards the ‘center’. By this is meant that less investment occurs in 3rd world countries, because security of investment is falling.

If the local mullah or tribal chieftain can confiscate investments (cf. Venezuela) without repercussion, money will not be invested there. The people suffer because of the head thug-in-charge.

[quote]Headhunter wrote:
(1) Europe spends less defending itself. [/quote]

Defending itself? From who? The boogeyman?

The US spends a lot of money waging unnecessary wars. It benefits a certain elite. The rest is history.

The problem with taking your money out and investing in T-bills is you take the opportunity to make the gains off the table. from a regular brokerage account you are going to pay the taxes on your gains then you are going to invest in a t-bill to match inflation.

historically the market when it has dropped has not stayed down for very long. those who run scared when it is high or run scared when it is low miss out on massive gains. your best bet is to forget market timing, fluctuations, and just let it ride.

btw following the dow is risky as it consists of so few companies. the s&p is a much better track of how the market is going and if you look at it in the long run it has just now fully recovered (points wise) from the drop during the tech bubble. but do you think people have not made any loot while it recovered to the same score?

I wonder how much of the 14,000 is attributed to inflation. Everything has gone up in price with the exception of the average paycheck Oh Hippies smell good:)

Oh, anyone else noticed the US Dollar hitting 1.03552 Canadian Dollars?

[quote]lixy wrote:
Oh, anyone else noticed the US Dollar hitting 1.03552 Canadian Dollars?[/quote]

Of course. Actually on the weekend I noticed signs on cash registers were saying the restaurant/store would convert at a rate of 0% (par). First time I’ve ever seen it.

It’s great for imports, but so much of the Canadian economy has been build up on exports (primarily to the US) that many areas are being hit hard.

[quote]Ruggerlife wrote:
lixy wrote:
Oh, anyone else noticed the US Dollar hitting 1.03552 Canadian Dollars?

Of course. Actually on the weekend I noticed signs on cash registers were saying the restaurant/store would convert at a rate of 0% (par). First time I’ve ever seen it.

It’s great for imports, but so much of the Canadian economy has been build up on exports (primarily to the US) that many areas are being hit hard.[/quote]

Over the course of my career I have purchased hundreds of thousands of dollars of Canadian fabricated steel products and process equipment but nothing lately.

It must be a boon for all the shopping malls on the US side of the border. I remember how busy they would get with people just trying to avoid the GST. Now that the Canadian dollar goes further it must be crazy.

The Dow’s PE, as well as the S&P 500, are all still way too high.

A quite nasty correction (if we’re lucky) is in the works.

Buy defense stocks (Fidelity has a fund for that), gaming stocks, and t-bills. Swiss Francs also, for those with $$$$$$$$$$$$.

Bump.