Where is the Economy going?

[tw]

With the slightest positive economic improvment, the George Jr administration will hype claims that the economy is getting better. So let's see how well the economy has performed in the past 4 years. Below is the Dow Jones Industrial Average for the past 4 years. Only good news is that stocks did finally improve in this past year. And yet still with that remarkable gain, the DJ average still remains down over the past 4 years:

[tw]

Considered a better indication of the overall American economy is the Standards and Poors 500. S&P 500 is even worse over the past four years - no matter what the administration spin said:

[Undertoad]

Stcok prices are a terrible measure of the economy.

[tw]

Originally posted by Undertoad
Stcok prices are a terrible measure of the economy.

So we should use employment figures? Still does not look good. Or maybe Greenspan's comments. He says today that prices are remaining low due to so much unused resources. This economy is stagnant even with interest rates at record lows, oil prices stable, and a war that means more demand for weapons, etc. Maybe the problem is too much aids in the porn industry - it just depresses everyone's outlook? Just a little humor that still can't give this economy a rise.

to hell

[Undertoad]

The question really is, what are you trying to measure and why?

Typically economists use GDP to measure economic activity.

Some use things like unemployment, poverty rate, inflation, etc. to make statements about the nature of the economy.

The stock market represents what money managers think is going to happen to the stock market in the future. The Dow Jones is an index of stocks (30 industrial, for example) that some people feel is important. It includes such tw regular targets as GM, Boeing, Verizon, Honeywell, Disney, IBM.

Was that what you intended to measure and promote as an indicator of the health of the economy? The stock price of 30 major multinational corporations? You, tee dubya?

[xoxoxoBruce]

Originally posted by Undertoad
The stock market represents what money managers think is going to happen to the stock market in the future. The Dow Jones is an index of stocks (30 industrial, for example) that some people feel is important. It includes such tw regular targets as GM, Boeing, Verizon, Honeywell, Disney, IBM.

If that's true then couldn't the market be manipulated to climb in the lead up to the election, by money manager for Bush?

[TheLorax]

Whether or not the economy is improving depends on your situation. If your name is the one on the building, then you’re doing fine. If you work in a cubicle then changes are your raises over the last couple of years have lagged behind the normal 3% increases in the cost of living.

“It's a recession when your neighbor loses his job; it's a depression when you lose yours.” Harry S Truman

[Undertoad]

The market's too big and the stakes too high. They don't really care whether Bush wins; what they care about is whether the capital gains and dividend cuts, the "rich people" tax cuts, remain in place. Those are the cuts that affect stock prices.

(I think)

[tw]

Originally posted by Undertoad
The market's too big and the stakes too high. They don't really care whether Bush wins;...

Stock market must have some opinion. After all, market has been negative the first year any Republican became president since WWII. Sounds like a either a pattern or something akin to astrology.

No president and his friends are going to manipulate the S&P 500. Too many companies. Too wide a perspective of the US economy. One way they may make markets boom is to cut taxes while increasing spending. 1) It was already done - the results displayed by those graphs. 2) Such games then to result in less growth and lower stock markets - the hangover - years later.

[mrnoodle]

It's not just the big-money guys that play in the stock market now. My parents (dad was a university professor, mom's a homemaker) had most of their retirement income in the markets. They lost almost all of it a couple of years ago. Now they're doing better. The uptick across all the markets in the last year, in spite of a war and gloomy employment numbers, is a signal that a recovery is on the way, because it means that more ordinary people are investing.

Thus says someone with no financial background whatsoever.

[elSicomoro]

I like to look at the Sycamore Economy Index to see where the economy is really going.

The high point of the SEI was in late 1999...almost at the 20,000 mark. The low point was in early 2003, when it was in negative territory. It now stands at about 8900...a strong comeback, though nowhere near 1999 levels.

[jaguar]

People who directly invest the majority of their savings on the stockmarket should be wacked upside the head, repeatedly. Even in funds that are the majority in such unreliable equities are a stupid idea. There is this strange idea out there that the market in the long term only goes up and up and up. It goes up, it goes down and in the life of a 10, 20 or even 50 year diversified portfolio the market can start and finish at the same point, it's happened in the past and it'll sure as hell happen again.

[xoxoxoBruce]

It's not just the big-money guys that play in the stock market now.

Don't most Mom&Pop investors generally invest in mutual funds? Wouldn't that would give the fund manager the clout to nudge the market?

[tw]

Originally posted by xoxoxoBruce
Don't most Mom&Pop investors generally invest in mutual funds? Wouldn't that would give the fund manager the clout to nudge the market?

Only a fool would invest in mutual funds. First, mutual funds are below average returns compared to the S&P 500 averages. Of course. These are expensive money men whose primary interest is themselves and the money games they were taught to play. Second, if investing in a low performance stock instrument, then better to invest ony in index funds which typically only underperform according to the broker's commissions and that typically out perform other mutual funds.

Love those who "play" the market. They leave money on the table that only enriches me. Smart investors look at the product line - invest based only upon the years of that product line. Never invest without planning to be in that stock for years. It is how one makes big bucks.

Successful investors such as Peter Lynch and Warren Buffet do it by learning products - don't play money games. They only invest in companies whose products they understand. For example, MacDonalds made bad food over the past few years. Buffet invested, realized his mistake, and got out quickly. Wendy's made better food which is why Wendy's was a better stock. INtel was clearly making best processors cmopared to competition such as IBM, Zilog, Motorola, and later AMD. Furthermore, their other product lines were routinely successful. That is why Intel was such a great investment.

GM is classic of a bad company. So we look at their stock performance over the decades - since 1971. Notice the S&P 500 average in red rises substantically whereas GM stock stagnates. But then we have more than sufficient information even in the Cellar to see that would be true. GM's long term performance verse S&P 500 displayed - and why only fools invested in GM - because GM has long had bad products: