Friday, July 23, 2004

We're back to a four-digit Dow.
U.S. stocks fell on Friday, dragged lower by disappointing results from Coca-Cola Co. and a softer profit outlook issued by Microsoft Corp..

For the second day in a row, the Dow Industrial Average slipped below the psychologically key 10,000 level. The blue-chip index dropped below the mark several times in the previous session in volatile trading, but rebounded to end the day higher. . . .

"I think the market is disappointed with what they've seen out of the earnings season and with the economy potentially slowing in the second half ... That implies if earnings are only ordinary in the second quarter they can only get worse in the third quarter," said Peter Boockvar, equity strategist at Miller Tabak & Co.
The Dow dipped all the way down to 9,906.62 on Thursday before bouncing up to close at 10,050.33. That was the first time since late May that the Dow was under the magic 10,000. Since hitting its recent peak in mid-February, the Dow has been on an inconstant downward slide, suggesting the still-outrageous P/E ratios built up over 2003 were, just as in the late 1990s, built on dreams and sand.

All this makes those forecasts of 2004 GDP growth put out by the "experts" look more and more foolish. Not as ridiculous as Dow 36,000 mind you . . .


At 1:51 AM, Anonymous Anonymous said...

Regarding the predictions by others (who are stakeholders BTW), in an environment where incomplete & imperfect information is prevalent & this is known, psychology and "you know that I know that you know" type of thinking are important, and are a strong part of the market feedback loop.

So it is not surprising that Greenspan and various other stakeholders are trying to paint a rosy picture, in the hope that it will "turn around" economic activity in their favor. The hedonic adjustments and other, well, intricacies of GDP & CPI, as well as other economic indicators, are part of this general approach. It's not just bullshit to paper over bad performance, but meant to increase motivation and thus ultimately performance. Does it work? To some extent always, but people can be fooled only so much, and when the money is gone from the pocket, it's gone.


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