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Wednesday, March 31, 2010
Stocks Soar, but Many Analysts Ask Why
The unemployment rate remains locked in a range that recalls the economic doldrums of the early 1980s. Housing is stuck in a ditch, with foreclosures rising. And consumers are still reluctant to part with the little cash they do have.
Yet the stock markets are partying like it's 2003, when hiring was brisk, real estate was booming, wallets were fat -- and the major stock indexes started a four-year rally that would double their value and push them to new heights just before the financial crisis hit.
Judging from stock prices alone, one would think the economy was poised for a roaring comeback. But the federal government plans to unplug the economic life-support programs that stimulated production, kept interest rates low and placed a thick cushion under the real estate market.
Some analysts see ample reason for caution in equities, with many economists, including those at the Federal Reserve, forecasting tepid growth in the near term.
"The market is as overvalued now as it was undervalued a year ago," said David A. Rosenberg, chief economist and strategist for Gluskin Sheff, an investment firm. "There's a very high degree of complacency."
The incongruity of it all can be seen clearly in an analysis of price-to-earnings ratios, a gauge of how expensive stocks are relative to their performance.
Ratios in the Standard & Poor's 500-stock index are hovering about 13 percent above the average since 2005; a year ago, they were about 40 percent below the average. That suggests that investors are betting on robust earnings through the end of the year, a view that many economists do not embrace.
"The stock market has priced in a bit more than what we've got so far," said Jeffrey A. Hirsch, editor of The Stock Trader's Almanac. "We're due for a pause."
Recent rallies have been narrow, with a modest number of stocks reaching 52-week highs even when the broader market surged. There is a sense in some corners that stock prices will decline: investors are betting more on stocks' falling now than they have since July.
Mr. Hirsch, citing historical patterns, predicts a 20 to 30 percent dip in the markets before they can climb again. The Dow Jones industrial average is more than 60 percent above its lows a year ago, flirting with 11,000 for the first time since the onset of the financial crisis, though it remains more than 3,000 off its prerecession peak.
The S.& P. 500 is up nearly 75 percent from a year ago, and the Nasdaq is up nearly 90 percent.
The first part of this year had glittering reports on fourth-quarter earnings and mildly upbeat news on economic indicators like retail sales and orders for durable goods.
In response, the broad-based S.& P. 500 has climbed 4.6 percent this year. Autos, consumer electronics, regional banks and home builders -- all losers in 2009 -- have led the way. Banking stocks, which drove much of last year's rally, continue to surge, with many regional banks up more than 40 percent.
Even during some of the stock markets' better weeks, jitters have seemed to lurk just beneath the surface. The Dow rode a rare eight-day winning streak this month, but trading was light and day-to-day gains were small, casting doubt on the significance of the uptick.
During much of the financial crisis, traders clung to bond funds for safety. But as the appetite for risk has returned, investors have begun snapping up stocks: over the last several weeks, new cash has poured into American equity funds at a brisk pace, and mutual funds have shown particular strength.
Many market participants expect the momentum to continue, with stocks ending the year 10 to 20 percent higher. While few expect strong economic growth this year, investors believe that the recovery is intact and that earnings will continue to grow.
"A lot of people believe the government will just keep pumping money into this," said Doug Roberts, chief investment strategist for Channel Capital Research.
There are signs that some of investors' optimism may be excessive.
Interest rates, kept at historical lows by the Fed during the financial crisis, are starting to rise because of the flight from bonds and concern over rising debt, particularly that of the United States.
Standard mortgage rates hovered near 5 percent last week after auctions of seven-year Treasury notes were met with weak demand, sending yields higher. A sustained rise in interest rates would crimp growth by making borrowing more expensive for consumers, businesses and governments. It could also attract some investors away from equities and into bonds.
Another concern is the nation's intractable unemployment rate, which has hampered consumer spending and worsened a foreclosure crisis in the housing market. Employers are still not adding jobs, though the rate of job losses has declined in recent months, raising hopes that a turning point is at hand.
Consumer confidence has improved modestly from its low a year ago, but spending is still weak.
Some clarity may come to the market on Friday, when the government releases its monthly snapshot of the labor market. Forecasters expect the data to show 200,000 new jobs, with the unemployment rate holding steady at 9.7 percent.
When first-quarter earnings results begin trickling in next month, investors will be looking for signs that companies have put cost-cutting behind them and strengthened revenue.
"We've managed to at least temporarily suspend the financial crisis," Mr. Roberts said. "The question now is, 'You've gotten past the first act; what's the encore?'"
Stocks Soar, but Many Analysts Ask Why
The unemployment rate remains locked in a range that recalls the economic doldrums of the early 1980s. Housing is stuck in a ditch, with foreclosures rising. And consumers are still reluctant to part with the little cash they do have.
Yet the stock markets are partying like it's 2003, when hiring was brisk, real estate was booming, wallets were fat -- and the major stock indexes started a four-year rally that would double their value and push them to new heights just before the financial crisis hit.
Judging from stock prices alone, one would think the economy was poised for a roaring comeback. But the federal government plans to unplug the economic life-support programs that stimulated production, kept interest rates low and placed a thick cushion under the real estate market.
Some analysts see ample reason for caution in equities, with many economists, including those at the Federal Reserve, forecasting tepid growth in the near term.
"The market is as overvalued now as it was undervalued a year ago," said David A. Rosenberg, chief economist and strategist for Gluskin Sheff, an investment firm. "There's a very high degree of complacency."
The incongruity of it all can be seen clearly in an analysis of price-to-earnings ratios, a gauge of how expensive stocks are relative to their performance.
Ratios in the Standard & Poor's 500-stock index are hovering about 13 percent above the average since 2005; a year ago, they were about 40 percent below the average. That suggests that investors are betting on robust earnings through the end of the year, a view that many economists do not embrace.
"The stock market has priced in a bit more than what we've got so far," said Jeffrey A. Hirsch, editor of The Stock Trader's Almanac. "We're due for a pause."
Recent rallies have been narrow, with a modest number of stocks reaching 52-week highs even when the broader market surged. There is a sense in some corners that stock prices will decline: investors are betting more on stocks' falling now than they have since July.
Mr. Hirsch, citing historical patterns, predicts a 20 to 30 percent dip in the markets before they can climb again. The Dow Jones industrial average is more than 60 percent above its lows a year ago, flirting with 11,000 for the first time since the onset of the financial crisis, though it remains more than 3,000 off its prerecession peak.
The S.& P. 500 is up nearly 75 percent from a year ago, and the Nasdaq is up nearly 90 percent.
The first part of this year had glittering reports on fourth-quarter earnings and mildly upbeat news on economic indicators like retail sales and orders for durable goods.
In response, the broad-based S.& P. 500 has climbed 4.6 percent this year. Autos, consumer electronics, regional banks and home builders -- all losers in 2009 -- have led the way. Banking stocks, which drove much of last year's rally, continue to surge, with many regional banks up more than 40 percent.
Even during some of the stock markets' better weeks, jitters have seemed to lurk just beneath the surface. The Dow rode a rare eight-day winning streak this month, but trading was light and day-to-day gains were small, casting doubt on the significance of the uptick.
During much of the financial crisis, traders clung to bond funds for safety. But as the appetite for risk has returned, investors have begun snapping up stocks: over the last several weeks, new cash has poured into American equity funds at a brisk pace, and mutual funds have shown particular strength.
Many market participants expect the momentum to continue, with stocks ending the year 10 to 20 percent higher. While few expect strong economic growth this year, investors believe that the recovery is intact and that earnings will continue to grow.
"A lot of people believe the government will just keep pumping money into this," said Doug Roberts, chief investment strategist for Channel Capital Research.
There are signs that some of investors' optimism may be excessive.
Interest rates, kept at historical lows by the Fed during the financial crisis, are starting to rise because of the flight from bonds and concern over rising debt, particularly that of the United States.
Standard mortgage rates hovered near 5 percent last week after auctions of seven-year Treasury notes were met with weak demand, sending yields higher. A sustained rise in interest rates would crimp growth by making borrowing more expensive for consumers, businesses and governments. It could also attract some investors away from equities and into bonds.
Another concern is the nation's intractable unemployment rate, which has hampered consumer spending and worsened a foreclosure crisis in the housing market. Employers are still not adding jobs, though the rate of job losses has declined in recent months, raising hopes that a turning point is at hand.
Consumer confidence has improved modestly from its low a year ago, but spending is still weak.
Some clarity may come to the market on Friday, when the government releases its monthly snapshot of the labor market. Forecasters expect the data to show 200,000 new jobs, with the unemployment rate holding steady at 9.7 percent.
When first-quarter earnings results begin trickling in next month, investors will be looking for signs that companies have put cost-cutting behind them and strengthened revenue.
"We've managed to at least temporarily suspend the financial crisis," Mr. Roberts said. "The question now is, 'You've gotten past the first act; what's the encore?'"
U.S. Congressman Cantor: I've been threatened because I'm Jewish
U.S. Congressman Eric Cantor said Thursday that he believed many of the threats leveled against him since he assumed office may be in part to the fact that he is Jewish.
"There's been a lot of reports of threats and the potential for violence against members of Congress," said Cantor, who is the only Jewish Republican Congressman and serves as the minority whip in the House.
"Let me be clear, I do not condone violence. We condemn violence - period," he said. "I've received threats since I assumed elected office not only because of my position but also because I am Jewish. I have never blamed anyone in this body for that - period. Any suggestion that a leader in this body would incite threats or acts against other members is akin to my endangering myself, my wife and my children."
Cantor said that recently he was "directly threatened" on Monday, when someone shot a bullet through the window of his campaign office in Richmond, Virginia.
"I?ve received threatening emails," he continued. "But I will not release them, because I believe such actions will only encourage more to be sent. It is reckless to use these incidents as media vehicles for political gain.|
"Security threats against members of Congress is not a partisan issue and they should never be treated that way. To use such threats as political weapons is reprehensible," he added.
"I am not naive enough to think that letters, statements or press releases will prevent anyone disturbed enough to commit violence from acting," said Cantor. "But I do know that such letters, statements, and press releases can very easily fan the flames. By ratcheting up the rhetoric, some will only inflame these situations to dangerous levels."
With the reconciliation bill sent back to the House of Representative for the final vote and the controversial healthcare reform marking its first days after President Barack Obama's signature as law of the land, Congress democrats are expressing concerns over their personal security - and the security of their families.
Some of these concerns were made public following Wednesday?s meeting of the Democratic Caucus with representatives of the FBI and the Capitol police.
Some lawmakers received threats by fax, phone or email; a brick was thrown through the window of the Democratic Party?s Cincinnati office; while the House Majority Leader Steny Hoyer (D-MD) told reporters that: "The incidents of threats whether in person or through telephones or through other communication devices, have given great concern to members, for the safety of themselves and their families."
House Minority Leader John Boehner issued a statement saying: "I know many Americans are angry over this health care bill and that Washington Democrats just aren't listening, but, as I?ve said, violence and threats are unacceptable. That?s not the American way. We need to take that anger and channel it into positive change. Call your congressman, go out and register people to vote, go volunteer on a political campaign, make your voice heard - but let?s do it the right way.?
Cantor, meanwhile, called on the Democrats to stop using those threats as a "political weapon".
"There's been a lot of reports of threats and the potential for violence against members of Congress," said Cantor, who is the only Jewish Republican Congressman and serves as the minority whip in the House.
"Let me be clear, I do not condone violence. We condemn violence - period," he said. "I've received threats since I assumed elected office not only because of my position but also because I am Jewish. I have never blamed anyone in this body for that - period. Any suggestion that a leader in this body would incite threats or acts against other members is akin to my endangering myself, my wife and my children."
Cantor said that recently he was "directly threatened" on Monday, when someone shot a bullet through the window of his campaign office in Richmond, Virginia.
"I?ve received threatening emails," he continued. "But I will not release them, because I believe such actions will only encourage more to be sent. It is reckless to use these incidents as media vehicles for political gain.|
"Security threats against members of Congress is not a partisan issue and they should never be treated that way. To use such threats as political weapons is reprehensible," he added.
"I am not naive enough to think that letters, statements or press releases will prevent anyone disturbed enough to commit violence from acting," said Cantor. "But I do know that such letters, statements, and press releases can very easily fan the flames. By ratcheting up the rhetoric, some will only inflame these situations to dangerous levels."
With the reconciliation bill sent back to the House of Representative for the final vote and the controversial healthcare reform marking its first days after President Barack Obama's signature as law of the land, Congress democrats are expressing concerns over their personal security - and the security of their families.
Some of these concerns were made public following Wednesday?s meeting of the Democratic Caucus with representatives of the FBI and the Capitol police.
Some lawmakers received threats by fax, phone or email; a brick was thrown through the window of the Democratic Party?s Cincinnati office; while the House Majority Leader Steny Hoyer (D-MD) told reporters that: "The incidents of threats whether in person or through telephones or through other communication devices, have given great concern to members, for the safety of themselves and their families."
House Minority Leader John Boehner issued a statement saying: "I know many Americans are angry over this health care bill and that Washington Democrats just aren't listening, but, as I?ve said, violence and threats are unacceptable. That?s not the American way. We need to take that anger and channel it into positive change. Call your congressman, go out and register people to vote, go volunteer on a political campaign, make your voice heard - but let?s do it the right way.?
Cantor, meanwhile, called on the Democrats to stop using those threats as a "political weapon".
TSA Introduces New “Hot or Not?” Naked Body Scanners
In the wake of the Moscow subway bombing, the Naked Body Scan Industry expects to supply their equipment to subway stations, bus stops, malls, schools, hospitals, movie theaters, and more. In an effort to overcome resistance to such unconstitutional invasions, they have announced a new feature by which other passengers, guests, or visitors could rate each other as “hot or not”.
Not hot but packin'
“No matter what they say, people like looking at pictures of naked people,” said Don LeBureau, spokesman for the new ThinkPink scanner, expected to launch later this year. “The old technology really provides poor quality, like sex videos shot in night vision. We’re going all the way with ours, so now people will no longer be bored standing in line for an hour or so.” The new scanners will project actual naked pictures to the public. “People might resist this at first, but when they find out they can vote “hot or not” and compete for great prizes, like Target gift cards, Omaha Steaks, and Zune mp3 players, that resistance will melt faster than my penis looking at a nude Kirstie Alley,” said LeBureau. “Hot people obviously will be very popular and the voting should be as intense as American Idol, but Not Hot people will also have a chance to win. Those who correctly pick the Hottie of the Hour will also be eligible for prizes. That’s really democraticish. We really gotta thank those Black Widows who bombed Moscow for helping our marketing. I love those guys.”
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