Thoughts on the Dow

The Dow is not the entire economy. In spite of all the joyful noises that I have been hearing from the Sunday talking heads, I suggest that you walk very very carefully if you are considering investments. Let us examine why the Dow flourishes. Interest rates are too low to bother with a savings account as a means of investing. The rest of the world is in more turmoil than the the United States. American companies are solid and sitting on a mountain of cash. These same companies have pared back their operations and are profitable. So where else are people going to put their money?

Now for the warnings. A few weeks ago, in another venue where I write a column, I commented on the Bernanke Bubble. For the record, I was there first with that sobriquet.  OK, Mr. Bernanke is keeping interest rates artificially low. If they should go up, the government is in very serious financial trouble because of the huge interest payments on borrowed money. Mr. Brenanke has inflated the money supply by printing, printing, printing. That money has gone into the banks. With interest rates low, they are not making loans. They are investing in equities. The least twitch downward and they are going to bail out as fast as they can move stock without starting a complete panic. Once again the small investor will lag behind and take a beating. That popping sound you hear is the Bernanke Bubble bursting.

There are other factors that make up the greater economy. The biggest one right now is employment. It was a big deal this weekend when they announced that unemployment is down to a miraculous seven point seven percent. Wow! Nirvana is at hand. Yes, that was sarcasm. They claim something like two hundred and thirty-nine thousand jobs created. Figures don't lie, but liars can figure. The economy lost around two hundred and ten thousand jobs. Net gain, twenty some thousand jobs. Over a hundred thousand people gave up looking for work. Ladies and gentlemen we are bouncing along the bottom of a muddy swamp of a jobs economy. There are fewer people employed in the United States than there have been since 1983. Hope and change. No. Hopeless change. 

People are buying new cars, right. Well yes. And that's good. But that is in comparison with three years ago. Not like back in the glory days. The housing market does seem to be improving. The one thing I fear there is that people are getting into houses that are too big and too expensive. Many years ago, when I was young, we looked to get into a small starter home. Now everyone wants to go right into a McMansion. I just hope people find it sustainable. One of the worst things that a family can face is losing their home.

I do not want to scare anyone. I just want everyone to understand that you do not always get the whole story. Look at the price of food. Look at the price of fuel. Double check all your investment ideas and talk everything out with your family. If in doubt get the opinions of people you trust. Especially the folks that you know that are less gullible in financial matters. Better to make a mistake toward the safe side than end up on that fast downhill slope.