When the price of oil goes up the market will also rise, that is until the next report indicating that such a rise while good for the energy component of the Dow will likely cause higher inflation in which case the Fed will raise interest rates, but that is unlikely because I predict that rates will remain unchanged throughout the rest of 2008, except if there is an increase in unemployment when the Fed may detect a cooling of the economy and thus initiate some stimulation. On the other hand, a growing concern about inflation is likely to cause a modest increase in interest rates. Of course, all of these predictions may be changed when I see the next inverted yield curve. Say what?
The DJIA will hit 13,000 by year-end unless there are circumstances that prevent that from happening. Oil will hit $200 a barrel unless it drops to the low $100s. There is a clear indication that the Fed is concerned about inflation because on the 34th page of the minutes from the last meeting the fourth word in the third paragraph was changed from Pastrami on rye to Bologna. Apple missed its earnings estimate for the first quarter by one penny based on the average consensus of analysts, so it is clear that a recession looms on the horizon. Did anybody ever think that perhaps it is the analysts who are wrong?
GE is buying all of the pharmaceutical companies in the U.S. and that bodes well for the ability of the federal government to negotiate lower drug prices by leveraging the price it pays for light bulbs. Thus, GE will be changed from hold to sell. Those new high efficiency twisty light bulbs are selling like hot cakes (perhaps more like day old bagels), but there is a fear on Wall Street that consumers will actually read the warning label and see the mercury warning. On the other hand, IBM missed its earnings target, the market was expecting 9% growth for the fourth quarter but it came in at only 8.9%, 12,000 workers will be laid off or relocated to China.
The recession will be mild unless there in fact is no recession in which case it will be non-existent. Economist agree that there is no clear definition for a recession although they also agree that the definition is two quarters of negative GDP growth which has not yet occurred during the current recession.
Investors are weighing the risks if oil heads lower; others are buying a new SUV. Hedge funds are about to be pruned and spiders are getting a leg, leg, leg, leg, leg, leg, leg, leg up.
Most economists, except those with a contrary view, believe that any increase in tax rates will cause people to pay more in taxes, but the impact on the economy is unclear until the results are known. There you have it, now you know, buy, hold or sell! That’s no bull, just grin and bear it.
My prediction for today, and you can count on it, is that the Dow will be higher or lower than yesterday, except for the stocks and mutual funds I actually own and they will all be down. But cheer up, so is consumer confidence down, consumers are watching too much television or buying too much with their now defunct home equity.
