Election

What an election it was! Congratulations Barack Obama; America believes you are the one who will fix this country and bring true positive change to Washington. But how was the market on election day?

According to the New York Times "reduced volatility and easing in the credit markets helped give stocks their strongest Election Day rally in 24 years." The S&P 500 closed above 1000, the first time since Oct.13 and the Nasdaq continued its positive gain for the sixth time in a row. "At the close, the Dow Jones industrial average was up 3.28 percent, or 305.45 points, to 9,625.28."

It seems the volatility of the market had calmed on election day. Globally, international markets had risen as well. The Tokyo Nikkei rose 2.8 percent, according to the New York Times, and "he Dow Jones Euro Stoxx 50 index, a barometer of euro zone blue chips, rose 5.56 percent, while the FTSE 100 index in London jumped 4.42 percent. The CAC 40 in Paris gained 4.62 percent, and the DAX in Frankfurt was up 5 percent."

So what do you think America? Are the gains from election day reflecting the hopeful Americans who believe in Barack Obama? Has the "bear market" taken a rest and are the next 4 years destined for positive change?

Links

The information I gather are from various sources including the Washington Post, CNN, and MSNBC. Here some more links for you stock market scholars out there:

The CQ Researcher Blog provides in depth posts on current issues at hand such as the bailout. One post called "The New Report: Financial Bailout," posted on October 24, 2008, highlights the key points of the bailout and critically questions whether this plan will work and links to an overview of the issue. The writer states it's a "$700 billion rescue bill early this month. Part of a sweeping $1 trillion government plan to calm the stock market and unfreeze credit..." and "mortgage giants Fannie Mae and Freddie Mac, which together hold or guarantee $5.4 trillion in mortgage loans – 45 percent of the national total..." "Did Fannie Mae and Freddie Mac cause the financial crisis?" The answers to these questions can be inferred from the information provided on the CQ Researcher Blog.

The New York Times always has up-to-date articles regarding the economy and the stock market. From updating the status of today's global economic status to analyzing the Federal government's attempts at fixing the economic meltdown, the New York Times reports quickly and deeply on each issue. Just this past Halloween, the New York Times writes that there is second guessing on the already passed Bailout bill.

Business Week is just what is sounds like, it's straight up Business. Not only does this online magazine provide updated statistics, it also analyzes each presidential candidate's proposal on fixing the economic in a non-biased manner. "McCain wins fans in India...Indians have profited greatly from the Bush pro-outsourcing policies" They also provide the questions that voters and the American public need to think about: Are each of the candidates ready for presidency and to immediately jump on the economic crisis? Business Week provides the facts to make you think and know about today's markets.

There's no gold in them hills

In times of economic mayhem there has almost always been a safe haven for individuals: gold and silver. But this particular stock market meltdown has caused the value of gold to depreciate. How is this happening?

It's simple. The "Hedge funds and high-net-worth investors are liquidating highly leveraged precious metals derivatives contracts, options, and gold index notes to raise the capital to meet margin calls on their tanking stock and bond investments," says Roberta C. Yafie of Portfolio magazine. Basically the financial crisis has forced these investors to eliminate gold and silver investments in order to balance the money lost in the volatile stock market. Prices for gold and silver are down, however, the investor demand for gold is high.

The big money is in gold, which is why investors are so fond of it now. "An Exchange-trade fund buys exposure to gold, and the price is right," says metal consultant at the CPM group, Jefferey Christian. "People three to four years ago bought them at $300, $400 an ounce and made a lot of money." Gold today is trading for more than $750 an ounce, according to Yafie. "Investors who bought a year ago, when the price was $780, are a little underwater," Christian adds. "Those who bought two years ago are in pig heaven."

As Comex Gold Trust and GLD E.T.F have increased gold holdings worth $17 billon and $2 billion, respectively, investors continue to sell and the price of gold is estimated to drop another $100. But experts say, according to Yafie, that after the short selling of gold ends, gold could shoot up to $1000 an ounce. Although the credit crunch has halted supply of gold, people are lining up to the buy gold the second the selling stops. When that happens, the price of gold will skyrocket because of the extremely high physical demand.

So what do you think America? Is gold a worthwhile wait and investment? Or is the risk too high?

Who am I now?

Wow. From the beginning of this blog I really had no idea what the stock market really was and how it is a vital part to the complex global economic system. Honestly, I thought the stock market was a room filled with sweating suited brokers who screamed at billboards posted with constant changing numbers and wild graphs, and all they did was yell buy or sell. But my growth as a thinker on this issue has grown exponentially, especially since the dawn of economic peril in October 2008.

For those who were like me, let me clarify a little of what I have inferred about the basic function of the stock market and its tie with the economy. Stock is basically a part of the company. When you buy stock you buy part of the company and the price determines how well the company is doing. Each company is made up a shares, Microsoft has about 112 million shares. So, for example, if you buy 200 shares of Microsoft at $20 a share and the next day the price of each share has dropped to $18, not only did you lose $400, but the company may have had something going on whether it be a strike, poor advertisement, court cases, or any other factors. The price represents the worth and success of the company. So, again for example, if comparatively the price of Apple stock is $100 a share, then Apple is having higher success in the company through better sales of their products.

All these companies of products are under an umbrella of markets, aka stock markets. The most popular and focused American markets consist of the NASDAQ (national and capital markets), the New York Stock Exchange (NYSE), and the AMEX. Who buys the products of these companies? Consumers. It is a consumer driven market. Each market reflects an overall percentage gain or drop aggregated from each company's individual success within the market. If all the markets are being affected with a simultaneous plummet of percent, or points, then the underlying problems are sourced to the consumer. Anything that devastatingly affects the consumer is reflected in the stock market which then is reflected in the economy as large companies make up most of the economy. So since the mortgage crisis caused so many people to lose their homes and banks to be hollowed out, the consumer is driven into panic and halts buying of products; thus driving down the stock market and the economy.

So there you have it in a nutshell. Now the federal government is stepping in just like in past crashes and the Great Depression. The government issued a $700 billion bailout which has proved to be ineffective for short term success. What America needs is a long term solution; a solution to the source of the problem, the mortgage crisis.

It's all in the mortgage crisis. This problem which has spanned from a decade of debt, speculation, and deregulation is showing right now in this market. Target this problem. These quick injections of money into the economy are only serving as hopes for a quick fix, but as Meritt argues, "We are a society of quick fixes. With a bleach pen, a travel sewing kit, anti-itch relief cream we don’t have to worry about anything. With the economy, a system that entails all of our families’ and friends’ financial successes in life, a quick fix is nowhere near possible."

Before this blog research project I had no idea about the complexity of the economic market or any response to the stock market's volatility. My dad discussed with me the global market before this project. I would nod my head pretending to understand but I had no clue what was going on. He teaches in the college of business. I never had anything to talk to him about his work. He was too brilliant for me on that subject. But now I can have casual arguments over the primary cause of the stock market and propose passionate theories to fixing the economic chaos.

Now I am passionate to argue about the economy. I feel like I am spreading my education to the world not just through my blog, but through my thoughts. I will update friends on the current status of the stock market. "Hey did you see that the Dow dropped 782 points on October 6th?" "No I didn't" "Stay updated. This is our future!" I could argue with analysts or even presidential candidates about fixing the stock market and economy.

The world is now opened to me. I am now aware that I should be aware. I make sure I am aware of all the issues that will affect my future: college loans, the economic crisis, the presidential election, taxes, social security, oil, and alternative energy.

The History of the Dow

So everyone's been talking about this famous company in the stock market: the Dow Jones Industrial. Maybe you've heard of it? Well this company, along with Standard and Poor's 500, serves as a major reflection of the United States' stock market's status. Speculation has risen since the beginning of October for a market bottom, but analysts say that prices may even still drop. The Dow company has had a roller coaster of a ride the past 6 months, and the past 10 years, and even the past 78 years, but can this history predict a market bottom, or a bottomless market?

According to Adam Shell of USA Today, the Dow Jones has dropped 41% since its 13,000 point peak in April. But even after a devastating plumett of 700 points on October 10, 2008, the Dow managed to recover 128 points before closing. "Since then, many signs that have signaled market bottoms in the past have surfaced: record levels of fear; a surge in investor pessimism; and the fact that the Dow and Standard & Poor's 500 index have stayed above their intra-day Oct. 10 panic lows," Shell writes. But when a definite bottom will occur is the question.

Todd Salamone, an analyst at Schaeffer's Investment Research, says the Dow bottomed in October 2002 at 7200 points and March 2003 at 7500 points. "It's not inconceivable that we go back and test the lows we saw in 2002 and 2003," says Salamone to Shell. Even after the implosion of hedge fund Long Term Capital Management in September 1998, the Dow bottomed out between 7400-7500 points. And of course the epic low of the Dow in 1932 spurs a mixed emotions of hope and dread.

So what do you think America? Is there any immediate signs of the markets bottoming out? Or is the worst still to come?

Update on the Stock Market

Business Weekly writes today that the stocks have fallen to the lowest levels in five years. "The S&P 500 hit its lowest level in more than five years Wednesday amid weak earnings reports and growing worries about the U.S. and world economies." The Dow Jones Industrial Average plummeted 514.45 points, or 5.69%, to end at 8,519.21. The S&P 500 lost58.27 points, or 6.1%, to 896.78 and the giant Nasdaq fell 80.93 points, or 4.77%, to end at 1,615.75.

Oil continues to drop. On the NYMEX, crude oil dropped $4.80, and is at $67.38. International markets continue to plummet as the Indian stock, Sensex, closes at 9879 after losing 300 points according to the economic times.

What do you think America? Are we destined for a serious recession or is there any hope for a quick recovery? As the international markets fall and the stock market drops, lets hope the presidential candidates can stimulate some hope and confidence.

Can you handle the Fear?

So this is pretty interesting my fellow blogging blogspot blog readers of blogs. According to the New York Times, as people watch the stocks drop towards rock bottom, they are watching an "obscure index known as the VIX," writes Michael M. Grynbaum. "The VIX (officially the Chicago Board Options Exchange Volatility Index) measures volatility, the technical term for those wrenching market swings. A rising VIX is usually regarded as a sign that fear, rather than greed, is ruling the market. The higher the VIX goes, the more unhinged the market looks." So fear seems to be running the market instead of greed nowadays.

The VIX rose 70.33 points on Friday, the highest it has ever been since the VIX birth in 1993. But having this great index does not seem to help us according to Ryan Larson, head equity trader at Voyageur Asset Management. Grynbaum interviews him as he says, "The VIX is a self-fullfilling prophecy. It's almost adding to the problems." The VIX promotes panic among the stock holders as when the media picks up the record high fear points, every freaks out and thinks they have to sell their stocks.

But it's meant to endorse a new revenue stream and primarily. “The first purpose was the one that is being served right now — find a barometer of market anxiety or investor fear,” Professor Whaley, who now teaches at the Owen Graduate School of Management, Grynbaum writes. Apparently it has had a good record according to Grynbaum. "It spiked in 1998 when a big hedge fund, Long-Term Capital Management, collapsed, and after the 9/11 terrorist attacks." Bottomline the VIX is supposed to offer guidance for marketors and stock companies.

Now America, what do you think about this VIX? Is it a good index and a reliable source for stockholders? Don't discredit it right away because it has a negative impact. Do the benefits outweigh the risks? You decide. And by the way, vote early!