CFAH

Crossing the 11,000 mark for the first time in five months, the Dow Jones Industrial Average closed the day at 11,006.48, up 10 percent over the past three months.
The S&P 500 closed the day at 1,165.15, up 7 percent over the past four months, a little over 9 percent year-over-year.
And while market volatility is down with the VIX having fallen 28 percent over the past four months, Goldman has started waving flags with respect to the economy over the next two to three quarters.
Dow Ticks Back Over 10,000: Bull Rally Or Bear Trap? [SocketSite]
S&P 500 Back To Even For The Year To Date As Skittishness Remains [SocketSite]
Goldman Says U.S. Economy Will Be ‘Fairly Bad’ or ‘Very Bad’ [Bloomberg]

Comments from Plugged-In Readers

  1. Posted by AMiR

    The equity markets have been a challengs since May or so, reflecting a subdued, choppy economy and chronic uncertainty.
    Although September’s run nicely compensated for August.
    While 11,000 is just a number, the psychologic impact seems to be even more important these days.
    At this level, it’s a tough to say if the markets are discounting greater economic growth in 6-8 months or are just counting on QE II in early November.

  2. Posted by diemos

    or if it’s a pump and dump leading up to the elections. I’m sure the “peepul” are most pleased to see their portfolios recovering.

  3. Posted by Brahma (incensed renter)

    The last link, the bloomberg.com article, reports on a Goldman Sachs forecast that the U.S. economy has a a 25 to 30 percent chance of dropping “back into recesssion” [sic]. Here’s what the Wall St. Journal reported on the 5th,Goldman Says Peak In Treasurys Is Past:

    Goldman Sachs Group Inc., hitherto one of the biggest Treasury-bond bulls on Wall Street, now says the rally has seen its peak and the best trade going forward is to buy stocks, not bonds…Francesco Garzarelli, chief interest-rate strategist at Goldman Sachs in London, said that the benchmark 10-year note’s yield has seen its bottom in the 2.45%-to-2.50% area…Mr. Garzarelli said that the 10-year note’s yield will trade at about 2.5% for the remainder of this year and then climb to 2.75% to 3% in 2011 as riskier assets outperform…”Equity offers much better return opportunity than bonds going forward,” said Mr. Garzarelli.

    Now, if you believe that the U.S. Economy Will Be `Fairly Bad’ or `Very Bad’, with a a 25 to 30 percent chance of recession implying more quantitative-easing measures on the way, which asset class would you rather be in, bonds or equities?

  4. Posted by NoeValleyJim

    Goldman Sachs is vast. She contains multitudes.

  5. Posted by m.j.r.

    Deimos – it’s interesting most of the sellers are owners, which is a rather one-sided phenomenon – there aren’t many directors trying to become owners of a company.

  6. Posted by diemos

    There is ownership and there is control.
    One of the core problems with shareholder capitalism is that when everyone owns something, no one owns it. So the “owners” have no actual control over what the company does. Control defaults to the directors who are then free to award themselves massive bonuses and generally loot the company for their benefit. Why would a director want to become an owner? How would it benefit them?

  7. Posted by Mark

    Diemos…I would recommend to you the book “Atlas Shrugged” (Ayn Rand – 1957) , but there are a lot of words and no pictures.

  8. Posted by ex SF-er

    Diemos…I would recommend to you the book “Atlas Shrugged” (Ayn Rand – 1957)
    hahaha. too funny. Atlas shrugged is a cute little fantasy book that has little to do with anything. it’s a fun little excuse for a dog-eat-dog fully-deregulated world.
    Ayn Rand was a product of a Communist environment and so of course she chafed at anything “socialist” and of course she idealized free market capitalism. Unfortuntately, just as Communism was a horribly failed concept when implemented so is “Free market capitalism”.
    both are utopian idals (communism and free market capitalism), and neither is possible in the real world. For instance: who was her chief disciple again? Oh yeah… Alan Greenspan.
    but it makes for good fiction. You can chafe along with her at the restraints put on the holy capitalists by the satan-spawn government. All that is evil comes from the government, all that is good from capitalism. A nice simplistic life with good and evil and no grey. You can then use cryptic messages like “who is John Galt?”
    of course you must ignore all the abuses of the DEREGULATED financial sphere, such as Credit Default Swaps and other complex financial instruments that brought the world to its knees. Or you can use the old tired argument of “well, they wouldn’t have done that except for government!”.
    Yes yes, in the Ayn Rand world, the Government is to blame for Everything, and the capitalists have no culpability for their actions, because you see the Government made them do it. nice and simple.
    all that said: Atlas shrugged doesn’t answer the very question that Diemos answered.
    Why would a director (like a CEO) have any interest in full ownership of their company? as it is they can milk the company for all it is worth. in good times they make out great. In bad times they make out better (gotta pay to retain “talent”).
    yes… I’m sure it’s like that because of the government.

  9. Posted by lol

    Ayn Rand’s nonsense is at the core of our current mess. Ayn Rand’s disciples point to government abuse to push for less government regulation. We have seen where that led us. The game of Monopoly was invented a long time ago and still rings true today. Unchecked, this game always ends with too-big-to-fails and too-poor-to-matters. I say regulate the sh!t out of Wall Street and the Banksters. Money is a means to an end, not the end itself.

  10. Posted by diemos

    Mark … try “Systems of Survival” (Jane Jacobs – 1994)

  11. Posted by sfrenegade

    “all that said: Atlas shrugged doesn’t answer the very question that Diemos answered.”
    Atlas Shrugged doesn’t answer any questions at all, really. If all of the Galtists moved somewhere else, who would sustain their economy?

  12. Posted by A.T.

    Altas Shrugged is the perfect tea party manifesto — a poorly written, disingenuous diatribe that rails against government intrusion because the fictional government is not intruding sufficiently in the ways that the monied class prefers. Hank Rearden invents some fictional super-metal but the government “lets” others “steal” inventions like this. Moochers! But using technology developed by others is the essence of free-market capitalism. Hank is really complaining that the government won’t artificially protect his monopoly strongly enough — he wants MORE government, as long as it is protecting his intellectual property interests and not others’ interests. Government is great when it works for me but terrible when it provides anything to someone else.

  13. Posted by Brahma (incensed renter)

    Perhaps Mark suggests the Ayn Rand novel because he doesn’t grasp the principal-agent problem, which is what diemos was really getting at in the 8:49 PM comment.
    Were any of the corporations described in the mentioned novel public companies? It’s been quite a while, but I don’t think so, if I recall correctly all of them were closely-held and family-owned. If there are any present-day, real world analogues to them, it would have to be Koch Industries.
    Mark, if you pick up any decent undergraduate textbook on business, you should be able to find a description of what diemos was referring to. General Web searches aren’t going to be as fruitful, because the same phrase, “principal-agent problem” is also used in political science.

  14. Posted by The Bunk

    Deimos – I don’t think the link you provided about corporate executives/ board members selling more stock that they are buying in their own companies has any significant meaning whatsoever. Why would Sergey Brin or Marc Benioff buy more stock in their companies? They already own billions in their own stock, then need to sell to finance their personal projects/life style and to have any attempt at portfolio diversification.
    I am in tech and I don’t know anyone that has significant options/shares in their company and also buys that company on the open market. It is rarely done, I certainly don’t do it either, it is putting all your eggs in one basket and anyone who was around in the dot com bust has learned to never do that again.

  15. Posted by Brahma (incensed renter)

    The Dow Jones closed at 11,559.49 today, its highest close since Aug. 28, 2008, a solid 5% over the closing level at the time of the above original ss post. I thought this was a cute quote, from MarketWatch, S&P 500 ticks higher for fifth session:

    “We’re not collapsing, but it’s not like everyone is saying let’s go out for Christmas and buy a home,” said Doug Roberts, chief investment strategist at Channel Capital Research. He was referring to data that showed the U.S. economy expanded at a 2.6% rate in the third quarter, faster than previously estimated but below what analysts had expected.

    We can wait for the appropriate CS numbers release to find out for sure whether or not people went out for Christmas and bought a home.
    [Editor’s Note: And volitility hit a three-year low as market activity winds-down through the end of the year.]

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