Dow at intraday high 14,000+ on expectation of “loosening of credit crunch.”

[schizo2buyORnot]

http://www.rttnews.com/sp/mktTrends.asp?date=10/01/2007&item=10

Looks like at least some on Wall Street that the worst of the “credit crunch” AS IT RELATES TO availability of financing for M&A has passed. What impact this will ultimately have on the “credit crunch” as it realtes to housing remains to be seen.

[cr]

Is this the bull’s last hurrah?

The market jumps, so is the FED still going to cut rates?

[NeetaT]

If the market continues to move up on bad news, what’s going to happen when good news arrives? I give up!

[patientlywaiting]

I think the Dow will hold up despite the housing downturn, so long as we don’t have a recession.

The global financial system is working for the mutinational. Foreign earnings now convert to more dollars to nicely pad the income statement and balance sheet.

[Omega Point]

Did Wall Street pull a fast one on the Fed? They got a 50 basis point cut in Fed Funds and 100 basis point cut in the Discount Rate. Yet, GDP in the last quarter was strong, initial claims have been low, reported inflation is trending lower, and the Dow is at a record high. Seems the economy is in pretty good shape but yet the Street is asking for more cuts and will probably get them. Huh??

[HereWeGo]

I don’t think the 50 bps cut was not targeted at the stock market. If the credit market has settled, there’s no need for further rate cuts, regardless of the opinion of the stock analysts.

[cr]

Days like this make me wonder.

Where does this value in the stock market really come from? Yes globalization, emerging markets, world trade, serivce and tech industry growth have added to this. But at the end of the day, it all ultimately relies on consumers spending money. The only true abillity of that, income, has not grown this much. Can world consumption have grown this much since 1980 or 1990?

Look at this 80+ history of the DOW.
[img_assist|nid=4993|title=Dow|desc=|link=node|align=left|width=466|height=198]

Stocks go up primarily due to EPS, which is the result of good company performance. Credit availbility has increased consumption, but that’s the point. How much of the stock market growth is based on debt, and at what point will people no longer be able to spend money they don’t have?

Seeing this chart I can’t help but wonder, are we right in the middle of one massive speculative stock bubble? Maybe not to the level of the late 20’s, but what is this “growth” really based on? Is it realistic, and more importantly is it sustainable?

[Borat]

If that graph isn’t price adjusted for inflation then it just shows how debased the currency has become since the 1970s when we went off of the gold standard. We’re all playing with monopoly money now. Pretty soon everyone will be a millionaire!

[Omega Point]

“at what point will people no longer be able to spend money they don’t have?”

They’ll continue to spend as long as they have a job. If unemployment starts to move up, watch out below but until then consumer spending will be just fine.

“If the credit market has settled, there’s no need for further rate cuts, regardless of the opinion of the stock analysts.”

The Fed is also cutting rates to halt the so-called slow down in the economy, which the data to date is having a difficult time supporting.

[kewp]

They’ll continue to spend as long as they have a job. If unemployment starts to move up, watch out below but until then consumer spending will be just fine.

Actually, they’ll continue to spend credit as long as there is someone to lend it to them. Unless defaults are high enough to make this not profitable, I suppose this can continue forever.

[cr]

That’s the point kewp. Will there be a point where banks/businesses realize burying families and their future generations in debt only hurts their own business in the long run?

I see days like today and think the stock market is completely disconnected from the consumers. Maybe it’s been that way all along and I just now noticed.

I’m going to guess at the end of the week if the job numbers are down we will see any equally large drop, but what do I know…

[kewp]

Will there be a point where banks/businesses realize burying families and their future generations in debt only hurts their own business in the long run?

How is that bad for their business?

Burying families in debt *is* their business!

It’s free money for chrissake!

[asragov]

As the kind folks at Minyanville remind us (link below), banks and homebuilders are getting crushed. The section “too broke to sell” is another interesting note on how current market problems affect sellers without enough equity to close ….

“Biotech, Defense, Healthcare, Metals and Mining, Energy and Telecom” are doing well, thank you very much.

Although returns have been great recently on energy stocks, I am not so sure that is good news ….

http://www.minyanville.com/articles/Citigroup-S%26P-Dow-Nasdaq-Inflation-Lennar-Minyanville-Five+Year+Anniversary/index/a/14297

[poorgradstudent]

I find interest rate speculation to be the most frustrating part of the market. Mostly because it often prevents good buying opportunities from happening.

It’s a bad time to be a bull, and a bad time to be a bear. No wonder Bond Markets are active again.

Basically, as long as the stock market is high enough, they won’t cut rates. So there’s an odd cause-effect relationship right now.

I really hope they don’t cut any more in the short run. More liquitity would be like treating a hangover with shots of tequila… might make you feel better in the short run, but bad in the long run.

[tech_junkie]

A picture is worth a thousand words.

[img_assist|nid=4997|title=sds|desc=sds|link=node|align=left|width=466|height=262]

Can you say, short squeeze?

Actually, my question is where are all the short/inverse fund players these days. Seems like they went dead silent recently? Sorry, not gloating, just trying to point out the fallacy i think most people have. They thing they can outguess the markets (both pro bulls and bears).

[drunkle]

what does a fed rate cut have to do with the market? volatility = what’ll ben do next.

[Coronita]

what does a fed rate cut have to do with the market? volatility = what'll ben do next.

Well, it seems like the "rally" is already pricing in a rate cut. It will be interesting if the Fed doesn't cut rates. The only thing I think that could play out to sustain a rally is if the banks continue to report hairy news, consumer confidence takes a beating, unemployment goes bad to worse, and personal spending goes down. Such that the Fed will have to cut rates. At this point, it seems the bad news(to a point) is good news for a rally. The expectation is that things are bad, hence a fed rate cut is factored in.

 

Of course, there is the liquidity crunch, which hopefully isn't going to be a problem at the institution level. I think that's where the Fed is concerned about. They don't care about the average over-leveraged folk(s) if you ask me.  Don't think the fed is trying to save those folks.

[Coronita]

<deleted> because of duplicate.

 

 

[HereWeGo]

Trichet’s decision tomorrow could have an interesting impact. If the ECB cuts, I imagine the Dow hits 14,200. If the ECB hikes, look out below.

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