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Another amazing week on Wall Street. Although the market rallied
today, it was down for the week as a whole and subject to the kind
of 400 point whipsaws that have become the norm. The volume and
severity of these sell-offs begins to make it feel like we're
nearing that point called "capitulation." This occurs when the last
person who's not going to be able to hold on for the long run
finally throws in the towel. Market valuations (that is, market
value in relation to earnings and assets) are at the lowest levels
we've seen since the worst of the 1970s. There's huge upside
potential being built into these prices (in reaction to some bad
stuff, admittedly).
It's also good to remember that there's a symmetry to the way the
market moves; when the turn-around arrives, it is often just as
sharp and sudden as the downturn.
The government, meanwhile, continues to gear up its rescue
efforts. Public funds already committed, including the $700
billion bailout package known as TARP, look to be just the
beginning. Lawmakers are currently contemplating massive loans to
the Big Three automakers (although the word "big" seems a little
optimistic at this point, doesn't it?) along with a fiscal stimulus
package. While some worry about the rising tide of deficit spending,
these actions seem appropriate and proportional to the
circumstances. If the government doesn't "prime the pump" of
our stalled economy, its tax revenues will shrink and deficits
increase anyway as the economy contracts.
In the absence of government intervention the economy would still
return to its normal growth path in the long run, but as economist
John Maynard Keynes once quipped, "in the long run, we're all
dead."
In closing, allow me to share a note that I received from a
client this morning:
"In the last couple of months, I have found myself looking
forward to the weekends again. Something I haven't done since
I stopped working. A few days ago, I realized why. The markets are
closed."
Have a great weekend!
Dave
P.S. Expect to be receiving an invitation by email shortly for
the live webinar we'll be hosting on Thursday, December 4. At
that time, we'll be summarizing what we're thinking and what we're
doing. This webinar will be recorded and available fro
download from our website.
David B. Yeske, CFP®
YESKE BUIE . . . Live BigSM
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