The Dow Jones Industrial Average closed the day at 12,040.16, its first close above the 12,000 mark since June 2008 while the S&P 500 closed the day at 1,307.59, its first close over 1,300 since August 2008.
Market volatility has fallen 15 percent since October 2010, down 37 percent as compared to this past June as measured by the VIX.
∙ Dow Crosses 11,000 As Market Volatility (A.K.A. Skittishness) Wanes [SocketSite]
∙ S&P 500 Back To Even For The Year To Date As Skittishness Remains [SocketSite]
I think March 2009 was the low for houses in SF, with the Dow below 7000 at the time. I’d found a property to buy then, and it was a nasty, brutish process to get the loan. I’d banked for years with First Republic, which billed itself as SF’s premier bank, and they just about grabbed me by the neck and threw me out. They were effectively bankrupt and were running scared. Every time I see one of their crowing advertisements today, it gives me the creeps.
A couple of other banks gave me approval letters, but with 30 conditions. Sterling was ready to lend, but at high rates and fees. Finally I was able to get a good loan from a foreign bank that didn’t have bubble exposure. It was ugly back then, and a heck of a lot better now.
unwarrantedinlaw wrote:
> I think March 2009 was the low for houses
> in SF… it was a nasty, brutish process
> to get the loan. I’d banked for years with
> First Republic, which billed itself as SF’s
> premier bank, and they just about grabbed me
> by the neck and threw me out.
Not to make excuses for First Republic, but it should be noted that management was in the process of buying the bank back from BofA in early 2009 and the “financial crisis” was making things a lot harder. Management was in a “let’s close the deal” mode not a “let’s do new loans mode”.
almost every day is up.
volatility continues to plummet.
there is a reason for this:
Fed Reserve monetization
Fed Reserve and govt backstops
war against saving (negative real interest rates)
does anybody really think that people are evaluating RISK these days? I think not, especially with such low volatility.
this is hardly a GOOD thing.
To me, this data is not surprising.
I’ve predicted for some time that the Federal government and Federal Reserve’s efforts to reflate the economy would invariably lead to a mini echo-bubble in stocks and commodities… and here we are.
Our leaders still either fail to see the issue or they are being disingenuous. they seem to believe that reflating the stock market will lead to an improvement in the economy and jobs outlook. IMO there little (and very weak) data that would support this claim
it’s the tired old “trickle down theory” meme combined with the “mental recession” meme.
if we can only boost the stock market then people will feel richer and they’ll spend again bringing us out of recession!
of course they ignore that stock market gains go to mainly the affluent and high income earners. (sure 70% or more of Americans own equities, but most own negligible amounts. most equities are owned by the high income/affluent). they also ignore that companies are just sitting on cash and not rehiring.
why re-hire when you can outsource or automate?
why re-hire when the stock market is easy money?
our leaders as much as TOLD us that they would not let the stock market fall, that it’s their number 1 priority. Bernanke is trying to monetize anything that isn’t being held down. (all covertly of course).
thus, investors and speculators are taking this free money with a govt guarantee and simply speculating on the stock/commodity market.
if it works, everybody is rich (except clients of course). if it fails, another bailout… and as we’ve seen, the financial houses do better when they fail than they do when they succeed!!! Whoo Hoo!
Food and energy prices are skyrocketing? Who cares. Only the poor are affected by this. besides, it’s leading to Freedom across the globe as starving people revolt against their dictators.
I and others are anxiously watching this spring… specifically around April and May when some Fed programs will either expire or roll of or be extended. That is the next big test. QE3 here we come!
@ex-SF — Keep in mind that the normal unit of measure for the Dow and S&P is the Dollar. So a rise in market levels in nominal (i.e. Dollar) terms can represent a combination of a “real” rise and a fall in the unit of measure, the Dollar.
Some of the ISM data today could be construed as inflationary.
“QE3 here we come!”
If only QE2 were followed by KC3 (or KG7) or even KW5 like in England. Anything would be better than QE3.
Re Dow & house prices:
http://homepage.mac.com/ttsmyf/RD_RJShomes_PSav.html (or click name link)
Summary: to reach historical levels housing prices need to drop 17% and the Dow needs to drop 40%
@lyqwyd — Many people find it useful to use CPI less shelter to inflation adjust housing prices.
Also, most data I’ve seen puts the total real stock market return at 6-7%/year over a long time frame. This includes dividends, but note that both direct dividend payments and stock buybacks have the effect of returning cash to shareholders. But stock buybacks have the effect of boosting share price, since the same company is now split into fewer shares. Tax and other temporal factors can pre-dispose companies to favor one vs the other in different periods of time.
So for long term trends, total return can be more informative then just price changes.
I’ll certainly agree that the link is not the be-all and end-all of analysis, just an interesting perspective.
I don’t really know if there’s any value in looking at the above ratio, just some food for thought.
Personally I think we are in the midst of a finance bubble created by the massive amount of easy money, the failure to fix the TBTF bank problem, among other things. I don’t know when it will pop, but the longer it goes on, the worse it will be when it does.
What does this have to do with housing prices? Short term I think they will continue to drop, as mortgage lending is still very tight. If the finance bubble hasn’t popped in a year or two, prices will start going up again nominally if for no other reason than high inflation. Long term prices will go up, but I doubt there will be real gains (inflation adjusted) as housing value generally doesn’t rise any faster than inflation (when looked at in aggregate over the very long term).
In summary, now is an OK time to buy for the long term, but not a particularly good time to buy.
There’s an old joke about a stockbroker. He calls up a rich client and says “I have just the stock for you. Practically no volume. I think you alone can spark some interest in this stock.”
So the client says “I’m in. Buy a million dollars worth”
Stockbroker calls back the next day and says “It worked. The stock doubled. You’ve made 1 million dollars in one day”.
So the client says “sell”
The broker says, “To whom?”
Moral of the story: if you “create” inflation by taking money from yourself and giving it to yourself, and then buying lots of stuff with all that money, that ain’t inflation.
Sorry to be the one to inform you.
@Redfin… I’m not sure if you are responding to me, and I’m not sure if you have a point, or what it is. Your example is price appreciation, not inflation. Here are a couple definitions of the meaning of inflation:
Wikipedia:
“a rise in the general level of prices of goods and services in an economy over a period of time.”
Investopedia:
“The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.”
Yes, I was responding to this:
“prices will start going up again nominally if for no other reason than high inflation”
There is no inflation. Just a bunch of bubbles blown to mask the fact that a lot of jobs are gone.
That doesn’t produce any real inflation.
I certainly agree we are in a massive bubble, but that doesn’t preclude inflation. I think by the definitions I provided above that inflation is clearly in effect.
ex SF-er wrote:
One solution to the “heads we win, tails taxpayers lose” scenario is a bank levy, like they did in the U.K.:
Germany and France are doing things along the same lines.
We could have done this, and even the much-loathed Obama Administration proposed a levy for large banks in January 2010, but it wasn’t included in the final version of Dodd-Frank for some reason.
I expect that after a respectful period following his retirement, the former Senate Banking Committee Chairman from Connecticut will glide into a newly-created position as a senior adviser and board member at Citigroup, J.P. Morgan Chase or some other similar outfit for seven figures yearly.