PRE-INAUGURAL VOTE AGAINST GOVERNMENT BAILOUT!
--Headline News. Did you read it anywhere else?--
January 18, 2009
THE STOCK MARKET AS JUDGE
The market is a vast voting machine. It is forward looking. It assesses all that is known and expected. It votes by price. Rising prices are approval: a vote FOR what it sees ahead. Falling prices are a vote AGAINST what it sees ahead.
Last week the market voted vigorously against what the government has been doing. It judges the future results of those actions to be bad, very bad for those companies whose shares felt the worst wrath of the market's judgment.
This table demonstrates the magnitude of distaste the market had for the financial sector last week on the last trading day before the festivities of a landmark inauguration and celebration begin.
Two of the most favored for aid, Bank of America and Citigroup were down over the past two weeks -50% and -51% respectively.
Missing in action is AIG (American International Group), a former premier financial company before the government came to its aid. It failed to make the cutoff value for the table because of its current low price of 1.42, down from its all-time high of 103.50.
One-week Price Change as of January 16, 2009
Stock prices greater than $3 per share
|
CLASSIC PORTFOLIO |
% change |
|
American Express |
-11.5 |
|
Bank of America |
-44.7 |
|
Citigroup |
-48.1 |
|
JPMorgan Chase |
-12.1 |
|
Morgan Stanley |
-18.2 |
|
|
|
average |
-27.0 |
|
PARADIGM PORTFOLIO |
|
Apple Inc |
-9.1 |
|
Garmin Ltd |
-12.2 |
|
Jabil Circuit |
-15.2 |
|
JDS Uniphase |
-18.0 |
|
SunMicrosystems |
-14.8 |
|
|
|
average |
-13.9 |
|
|
|
S&P 500 |
-4.5 |
The table contrasts the market's opinion of companies with bailout aid--and the strings attached--with companies with no bailout visible--so far. It's about two to one in favor of no bailout. The Paradigm Portfolio is made up of technology companies (list here). It is saying that they will do much better than the Classic Portfolio (list here) when the recession nears its end--which the market will anticipate ahead of time.
Absurd . . . or terminal: fully nationalized big companies with the apex of controlWashington, D.C. Who would have believed it? . . . the land of the free and the home of the brave . . .
The S&P 500 price drop is discounting a falling economy and lousy earnings ahead. So far, it does not reflect wider government takeover of U.S. corporate business up to this point. But, careful. The handwriting may be scribbling on the wall, mene mene tekel upharsin.
Posted
1/18/2009 5:30 p.m. EST
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© 2009 The 2000 Corporation.
All Rights Reserved.
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