10/29 Chilly San Diego
Looking over the rally we have seen in the market over the past 6 months it seems that the size of the economy has a very lagging and behind the scenes effect on the market. In the second quarter of 2009 the economy shrunk the most it has in a long time. But during this decline, the market was rising in price. All based on the announcements of fund managers and government officials. Also some minor reports on housing sales and consumer confidence.
While I have no problem with the market and economy expanding, I am afraid that the current rise in the market is a little bit premature. I think banks are still in trouble. There have been no real fix for all of the lost revenues from teh default loans besides the stimulus package from the government. I don’t think this has solved all of our problems. Also, there is still a huge unemployment problem that will have serious repercussions on the economy once the holiday season rolls around and funding for home and car buyer credits run out.
I see the only options for truly stimulating the economy at this moment is to lower taxes for consumers as well as businesses so they can consume more and create more jobs respectively. Unfortunately this is not the policy of the current government and I expect them to raise taxes over the net few years. While this may be a good plan in the long term, creating public welfare and what not, this will not help the economy or the market.
Having said that we need to really look into some strong household name stocks that have good dividends. Here are a few I like:
NSC
PG
These look good, but they were both heavily involved in this last rally so we need to look for the next drop to find a good value for these stocks.
