Investors Hope 2009 Brings New Hope For Wall Street

As volume is slowly returning back to the market, we experienced our third day in a row of green trading as the market ended up almost 3% at Friday's close. Many are cheering this three day streak, hoping it is a sign for new beginnings for Wall Street and that maybe we can see positive growth after seeing the market get demolished in 2008. However, as I say time and time again on this site, I believe this "hope" is more like a prayer, as in my opinion, it's a long shot for anything positive to come out of 2009. Let's examine the facts.

Everyone is talking about the biggest thing in 2009. Obama taking over the presidency. Sure, this event is bound to stir up some positive movement (which maybe is behind this recent rally, a bit early in my opinion, but maybe), but I don't care if it's Gandhi, I can't see one man turning around this economic crisis anytime soon. Sure, the damage can be lessened, but there will be pain and struggling. That's what comes with a cyclical economy.

The market cheered Friday, as Obama spoke of a strong, aggressive stimulus plan to be passed ASAP. People think that as soon as he takes office, money will be handed out to everyone. Even if it is, to an extent, that money is going to have to come from somewhere and it's certainly not coming from tax dollars, as no one is making money these days (except bankruptcy attorneys). So even if new money is printed to support the economy, that event in itself will eventually take a toll on the economy.

I wanted to share a portion of an interview that CNBC conducted on Friday with Martin Feldstein, a very well respected economist that has seen much in his days. In times like these, we really do need to listen to these old dogs, who have seen times near to the ones we are currently in. I do feel like these times are like none other we've been in, but I also think there is wisdom to be learned from mistakes of our past. This is what he said:

"I think we'll be lucky if by this time next year we see the economy having hit the bottom and starting up, and that's still going to leave us at a very low level of economic activity even if the turn has come at that point," Feldstein said during a live interview. "But there's no guarantee that all of this put together is going to achieve that."

Government will have to change the tax structure for capital gains and corporations while also exercising caution against inflation, added Feldstein, an economist at Harvard and president emeritus of the National Bureau of Economic Research.

"We are facing an economic downturn that is worse than anything I have seen in the post-war period," Feldstein said. "American households have lost more than $10 trillion of net worth in the stock market and housing prices. They are cutting back on their spending...Where's the demand going to come from?"

He also addressed the severe problem of these home mortgages and that a process needs to be taken to get these loans re-written. Either way, he feels we are a long way from even hitting bottom! These are why I like these old guys, they stick to facts. They are not easily wavered by the emotional wind that blows the markets. In the end, fundamentals will show through.

This coupled with the the lowest manufacturing data we've received since 1980 (ISM index hit 32.4 on Friday) still makes me a bear in 2009. Sure, I plan on buying some stocks here shortly, to take advantage of some short term Obama gains, but overall, I don't see us out of the trenches yet.

This is a great time to get into this market and prepare to make some money. If you aren't in, I would encourage you to consider tracking it and think about getting in soon. If you don't have an account, Zecco.com is a great place to start as they offer free monthly trades and incentives for new investors. A lot of money will be made in the next three years. As for an update on my mission with Lending Club, I have submitted an application for a lender (they have a reviewing process to make sure my credit is good enough). As I start lending, and hopefully make some good gains, I will keep you all updated. Keep up the comments, I enjoy hearing other voices in this market. Have a good weekend and we'll see you Monday.

7 comments:

  1. Anonymous Says:

    That picture of Obama is photoshopped. There is no shadow of the cigarette on his face, while the rest of his face leaves a big shadow.

  2. Anonymous Says:

    Hi,

    What is your point of view about the S&P hitting magic number 920? Do you think it will continue to run up till 1000 because of technical buyers?

  3. Finance Fanatic Says:

    Anon1, I also believe it is photoshopped, I just liked the picture and the significance of it.

    Anon2,
    the 920 was a momentum point for that point in the market. It is like a snap shot. As the momentum shifted, so did that point. So the 920 number at this point does not have any significance.

  4. Dave Says:

    While 920 may not be the "magic number" anymore, the S&P did break through 2 resistance levels and did a MACD crossover last week. Under normal conditions, S&P 1000 is a given.

    That said, it WAS "amateur week" - when this same type of thing happened during Thanksgiving week, the big boys came back on Monday and said "I don't think so!"

    We'll have to see how the pros react on Monday...

  5. David Says:

    How 'bout that good ole DXD today? Dow drops .91% and DXD rises .83% - and has lost a bit of that in aftermarket so far. None of the inverse ETFs I watch ever have a problem falling enough to match their target’s gain.

    SRS did that last Friday - DJUSRE closed down 3.14%, SRS closed up 2.74% instead of 6.28%. Today, DJUSRE down 2.06%, SRS up only 3.81% instead of 4.12%. That’s not so bad, but SRS could try a little harder in it’s 2X inverse attempts. Price decay is enough without your own team letting you down.

  6. Toys Exporters Says: This comment has been removed by the author.
  7. Dushan Marc Says:

    It is good too see a hope for investor in ukbestessay service and in other business and they should not miss this chance but they should think before investment because this investment can be dangerous for them and they can face big loss.