Thursday, October 15, 2009

Dow Hits 10,000 as Storm Clouds Gather

Excerpts from Larry Kudlow's article of same name.

Profits are the mother's milk of stocks, business, and the economy. And top-line sales revenues now appear to be bolstering the corporate cost-cutting effort. As long as these earnings keep coming in strong, stocks will keep rising. My hunch is that we'll move back to pre-Lehman levels - to over 11,000 on the Dow and over 1,200 on the S&P. Backed by an easy-money Fed, the economy will probably grow in a mild V-shape of something like 3 to 4 percent for the next year or so.

But storm clouds are gathering.

One of the biggest clouds out there is the sinking dollar. What we're witnessing right now is a big global shift out of dollars and into commodities. The dollar is quickly losing its reserve status to the yen and the euro. The proof is in the pudding: Earlier today, the greenback notched a new 14-month low against the euro. This is not good.

Meanwhile, in the second quarter ending in June, central banks around the world invested 63 percent of their new cash reserves into euro and yen, and put only 37 percent into dollars. And over the past six months, the greenback has lost 15 percent while gold has climbed nearly $150. If this trend continues, spiking inflation and interest rates will choke off the stock market rally and do serious damage to the economy. It could happen very fast.


  1. Okay, this article displays some accurate facts. However, I find it very silly for the article to display such a negative outlook. It is true that if bad trends continue, bad things will happen (i.e. the gold increase). Yet, if you focus on only what bad can happen, in return, you easily can lose sight of what good can happen.

    From the wall of knowledge was a quote that explained how it's bad to panic during a crisis-- and you could identify this current time as a "crisis." While it is certainly a bad idea to FAIL to understand what is really happening around you by being overly optimistic, I don't understand how a positive result would come out of reading this article. If one believes--and I assume that someone could-- that such bad trends WILL happen --even if the article claims it only COULD happen--, then the situation doesn't exactly turn out to be anything but someone in panic.

    I wonder why something inconsiderate to what I've brought up would be posted on the blog. If something positive can be done, we should be talking about that.


    P.S.- and I haven't set up an account yet.

  2. Cameron, reality and pro-active intellectual forcastng with economic principles are the only thing that can protect this nation from collapse. If thats pessimistic, then we all better get involved and quick to get the glass half full.

  3. "... we all better get involved and quick to get the glass half full."

    That's a good idea for a blog! Explaining how you believe that everyone can get involved to turn a negative forecast into a projected safe haven.

    Anyway, I agree with your first statement. This article MAY have displayed reality, yet there are no descriptions as to how we are to cope with this possible reality. Therefore, it is not proactive-- this being the point of my first comment.