By: Todd Wheatley
(c) IQ-2k   10-27-09

The Dow Jones Industrial Average first hit 10,000 on Oct.29,1999 and climbed beyond 13,000 before the start of the Great Recession in September 2008. The subsequent market free fall plunged below DOW 7,000 before finding its bottom in March of 09. The DOW Jones Average has since climbed off the bottom to once again reach the psychologically important threshold of 10,000. That occurred two weeks ago (Oct.14,2009). Today the DOW is at 9800 and change.

By late July of this year what looked to be a simple "bear market rally" was actually a sustained market rally. Moreover DOW 10,000 had again been reached. Obvious "green shoots" for the financial sector despite topping the 100 mark in bank failures for the year (the most since the S&L crisis). But what of the broader economy? What of employment? What is the real long-term trend?

Conventional wisdom holds the stock market (vis-a-vis the DOW) as a leading indicator for the broader economy. Though given the level of economic uncertainty the stock market is an island unto itself. While the market most likely "oversold" during the free fall any future gains above DOW 10,000 (to me) indicates an overly optimistic view. Again, the conventional trend puts the DOW 6 to 9 months ahead of the general economy, but with job loss projected to continue for at least that long it seems overly optimistic to continue buying into the market rally. Perhaps that is why the market has stalled for the past two weeks.

It's also likely that the "smart money" is taking profits on the past few months runup while waiting for the Christmas season. Only then can consumer sentiment be gauged in dollar value. However polling wise, consumer sentiment dropped for the second straight month as the numbers showed today. Oddly the weather maybe working against the recovery just as it did in the Dust Bowl days of the Great Depression. Only this time with rain and snow. For more than a month much of the country has been saturated with wave after wave of wet weather. Though fortunately no mass migration has evolved as it did during the Dust Bowl. And while agriculture will likely suffer the damp weather may be leading to damp spirits. Therefore consumer confidence will sink as well. At least through November.

Finally the slow death of the health care debate may lift Republican spirits and provide plenty of ammunition for the upcoming election cycle. Yet beyond the psychological importance of the U.S. elections the elections overseas are of far more economic importance. Surprisingly a runoff election will soon be held in Afghanistan. While the Iraqi elections are still set January. Yet as predicted, violence in both countries is increasing. However any significant flare up will critically derail U.S. troop redeployment. Thus war costs will increase as will the budget deficit. The future of the economy, I believe, will be measured by peace. No peace ... no economy.

The war in Afghanistan is an F_ing money pit. There is nothing to be won. Continuing to risk the lives of military personnel more than adds insult to injury it threatens to collapse the very economy they seek to protect. They will have fought and died for nothing. For less than nothing. The politicians are spending blood and money as though both were endless and the next market crash is likely just around the corner for that very reason. Honor the soldiers by bringing them home while they can still recognize it. The war will not lost. It will be concluded! BECAUSE THERE IS NOTHING TO WIN!!!!

Happy families spend money. Think about it.

(c) 2009    DR-KNOW
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