Wednesday, November 24, 2010
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Investors Not Buying President's Plan

Since President Obama took office, the Dow Jones Industrial Average has dropped another 30% continuing a decline to 6,800 from a high of 14,000 just a few months ago.  The drop in the Dow Jones Average below 7,000 has many investors worried.  The 7,000 level represents a 50% decline from the high and is seen a key level for investors.  When the Dow closed at 6,800, many investors feared a 6,000 or even a 5,000 Dow in the coming months. 


Many individual investors have seen their 401K drop to a "201K" and are worried about a "101K".  The 700 Billion TARP and 800 Billion stimulus bills have not inspired investor confidence or consumer confidence.  One local investor told iSurf News that the only part of the Stimulus bill he will get is the bill.  This is certainly the case for banks.  Local banks are seeing the first wave of the TARP where FDIC insurance was increased to $250,000 from $100,000.  Local bank executives have told iSurf News that they have gotten the bill....a $300,000 INCREASE in their FDIC insurance payment.  No explanation of how banks will recover these costs has been made.

Investment managers seem as unsure as the rest of us about future stock prices.  Until consumer confidence returns, the business slump will continue and stocks will remain low.  Some local businesses are reporting that sales are improving but that doesn't seem to be the case across the country.  Unemployment continues to increase and the US Chamber of Commerce predicts a 9.5% unemployment rate sometime this year with a slow decline thereafter.   Most investment advisers have been telling people with 401K and IRA accounts to "hang on" and "weather out" the market.  Some advisors have been touting certain individual stocks as buying opportunities; while other advisors predict that the Dow will go to 3,800 by 2012 and get out at the next opportunity.  So what should you do?  Remember one thing: every time there is a seller there has to be a buyer and every time there is a buyer, there has to be a seller.  So obviously, the seller and the buyer have different outlooks on the stock they are trading.  There is much we do not know; but, we do know that trading is occurring at much, much cheaper levels than 18 months ago and we can only hope that the economy and markets rebound soon.We can only hope that President Obama's plan will work for our country and our investments. 


Ron SandersiSurf News


Madisonville Hopkins County Kentucky


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