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Obama, the economy and the recession


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Can I just point out what a ridiculous suggestion by bob and maxfly to invest in the market a few months ago.. The Dow is down to 7,500 I wouldn't start buying tip it hits 6000. The recession still hasn't fully hit and the stockmarket isn't gonna go up until there are signs things are improving

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No most of the recession happened because people spent money they didn't have..and the people on wall street used that to make themselves even more money..you can't suddenly pay off your mortgage and credit cards if u don't have the money.. There's no east fix here 2009 is gonna suck .. It will get a lot worse than it is now

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Can I just point out what a ridiculous suggestion by bob and maxfly to invest in the market a few months ago.. The Dow is down to 7,500 I wouldn't start buying tip it hits 6000. The recession still hasn't fully hit and the stockmarket isn't gonna go up until there are signs things are improving

Uh, I'd just like clarify, I made gains.

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Can I just point out what a ridiculous suggestion by bob and maxfly to invest in the market a few months ago.. The Dow is down to 7,500 I wouldn't start buying tip it hits 6000. The recession still hasn't fully hit and the stockmarket isn't gonna go up until there are signs things are improving

Actually, I stand by my earlier claim that now and the recent past has been a good time to invest in the stock market very carefully. Investing takes a great deal of research and patience. As I mentioned earlier, most companies are severely undervalued because of the economic atmosphere, but if you can find a company that has a strong business model, not to mention a great business, you may very well have found a company which will weather this economic crisis and will be a good longterm investment.

Take VISA... most people would balk at investing in VISA longterm. Most view VISA as a financial company/credit company, and many others still consider their entanglement with banks as an albatross. What most don't know or don't realize is that VISA is a tech company... They don't issue credit... they only facilitate the electronic transfer when you swipe your card. Their business will continue to grow as more and more people begin to step away from the use of cash and rely more on plastic... and no... that doesn't mean credit.... VISA also handles debit purchases made with bank cards. More and more people are carrying debit and credit cards and not cash... Nowhere is this more pronounced than overseas in developing nations where VISA has a huge marketshare.

Now, those are all the makings of a great company to invest in... it just depends on when you want to invest and how low you can catch their stock price at for purchase. My philosphy is this... at $40 a share, VISA is a severely underpriced company given the strength of their business... $40 would be a good price to buy VISA. Now let's say, due to the economic times, that VISA went down to $30, that would be an even better price to buy. However, if I'm investing longterm, I can't sensibly argue that buying at $40 was a bad purchase, because that price reflects an undervalued share. $30 would have been a better purchase, but it doesn't make the $40 dollar purchase a bad one.

This is the case with a lot of companies. Their businesses are good and their business models are outstanding, but their stock prices are undervalued due to the economic atmosphere. If you are a serious investor, you should be doing research as to which companies you can take advantage of.

The President is pushing for the creation of more high speed trains across the US and the construction and maintenance on roads and bridges... Look at some of these tech and manufacturing companies... Again... no one is saying that people should go out there and invest indiscriminately, but rather with careful thought and research. There are a lot of companies out there that have been hit because, and only because of the economic crisis, but their businesses are still strong. Those are the kinds of companies to look to make investments in. When you buy stock, you're really buying companies. Look for strong, safe, sensible companies.

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.. There's no east fix here 2009 is gonna suck .. It will get a lot worse than it is now

Puff 2009 already sucks, I almost finished College and I'm not going to find a decent job. Everyday people is losing their jobs, I can't imagine how this is going to be in some months from now.

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Dow drops below 7,000 for first time since 1997 By TIM PARADIS – 2 hours ago

NEW YORK (AP) — Investors' despair about financial companies and the recession has brought the Dow Jones industrial average to another unwanted milestone: its first drop below 7,000 in more than 11 years. The market's slide Monday, which took the Dow down 300 points, was nowhere near the largest it has seen since last fall, but the tumble below 7,000 was nonetheless painful.

The credit crisis and recession have slashed more than half the average's value since it hit a record high over 14,000 in October 2007. And now many investors fear the market could take a long time to regain the lost 7,000.

"As bad as things are, they can still get worse, and get a lot worse," said Bill Strazzullo, chief market strategist for Bell Curve Trading. Strazzullo said he believes there's a significant chance the S&P 500 and the Dow will fall back to their 1995 levels of 500 and 5,000, respectively.

The "game-changer," he said, will be the housing market and whether it can stabilize.

A recovery will also require signs of health among financial companies, but so far in 2009, it is clear that banks and insurance companies' losses are multiplying despite hundreds of billions of dollars in government help. The market fell Monday after insurer American International Group Inc. posted a staggering $61.7 billion in quarterly losses and as the government agreed to inject more money into the company. AIG will get another $30 billion in loans, on top of the $150 billion the government has already invested.

And it's not just U.S. companies that have Wall Street frightened. HSBC PLC, Europe's largest bank by market value, said Monday it needs to raise $17.7 billion. The company reported a 70 percent drop in 2008 earnings and said it would cut 6,100 jobs.

While the root of financial firms' problems lie with the bad bets they made on mortgages and mortgage-backed securities, now the recession is exacerbating their problems as it also forces millions of job cuts.

"The economy definitely has deteriorated since November," said Sean Simko, head of fixed income management at SEI Investments. "It's just the fact that we haven't seen signs of improving or stabilizing, per se, which is adding to the morass of the market."

According to preliminary calculations, the Dow fell 299.64, or 4.24 percent, to 6,763.29. The Dow last closed below 7,000 on May 1, 1997 and hadn't finished at this level since April 25, 1997.

The Dow's descent has been swift. It took only 14 sessions for the average to go from above 8,000 to below 7,000. So far this year, the Dow is down 22.9 percent.

Broader stock indicators also slid. The Standard & Poor's 500 index fell 34.27, or 4.7 percent, to 700.82. The index briefly traded below the 700 mark in the final minutes of the session. S&P 500 index hadn't traded below 700 since Oct. 29, 1996. It hasn't closed below that level since the previous day, Oct. 28.

The Nasdaq composite index fell 54.99, or 4 percent, to 1,322.85.

The Russell 2000 index of smaller companies fell 21.22, or 5.5 percent, to 367.80.

The Dow Jones Wilshire 5000 index, which reflects nearly all stocks traded in America, is down 55 percent since its peak in October 2007. That's a paper loss of $10.9 trillion.

About 16 stocks fell for every one that rose on the New York Stock Exchange, where volume came to a heavy 1.80 billion shares.

Bond prices jumped as stocks fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, tumbled to 2.88 percent from 3.02 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, slipped to 0.24 percent from 0.25 percent Friday.

Oil prices fell more than 10 percent to $40.15 a barrel Monday as investors worried that a weak economy will hurt demand.

The economic data have been mostly grim, adding momentum to the market's slide. Even when the readings show some room for optimism many investors have been quick to write them off as aberrations. On Monday, the government said personal spending incomes rose more than expected in January but that construction spending fell twice as much as forecast. A trade group said manufacturing contracted in February for the 13th straight month, but at a slower pace than expected.

More, and possibly unnerving, economic data are expected later in the week, including the government's report on unemployment and job losses during February.

"I don't think we find a bottom in the market until we see some sort of increased level of optimism and confidence among consumers and investors," said Jim Baird, chief investment strategist at Plante Moran Financial Advisors.

One measure of unease in the market has been rising after coming down from the fall. The Chicago Board Options Exchange Volatility Index, or the VIX, is just below 53. Ordinarily what's known as Wall Street's fear gauge might be in the 20s and 30s but it had near 90 in October.

Dan Deming, a trader with Strutland Equities, said the VIX indicates investors expect more volatility. He said more investors are resigning themselves to the fact that stocks will continue to push lower.

"The expectation is we're going to go lower," he said.

Market historians would be quick to note, however, that market bottoms often come just as most investors are prepared to give up in disgust or fear.

For investors, that will take several months of economic and corporate reports that point to signs of a turnaround in housing and job losses and signs that the economy is at least leveling off. Analysts are looking for indications that businesses and consumers are starting to boost spending after months of cutting back.

But the economic readings, and the news coming out of financial companies, are still so alarming that investors feel no alternative but to sell.

"I don't think we find a bottom in the market until we see some sort of increased level of optimism and confidence among consumers and investors," said Baird.

And even when the market finally reaches a bottom, it faces a long, long recovery.

"We do feel that things can improve but it is going to be years before we get back to levels we saw in the markets a year ago," said David Chalupnik, head of equities at First American Funds.

Last week, the Dow and the S&P 500 index fell below their Nov. 20-21 lows, reached at the height of the credit crisis. Many traders had hoped would mark the market's low. The Nasdaq remains 2 percent above its Nov. 21 low.

Even big name investors are cautious. Billionaire investor Warren Buffett wrote in his annual letter to investors Saturday he is sure "the economy will be in shambles throughout 2009 — and, for that matter, probably well beyond — but that conclusion does not tell us whether the stock market will rise or fall."

Many market analysts look to Wall Street's performance in past bear periods to try to determine when stocks will hit bottom. In the last 60 years, the S&P 500 index bottomed about five months before a recession ended and nine months before corporate profits reached their low or unemployment hit its peak.

The market could recover before the economy starts picking up steam but investors will need some sense that the worst is over — and that was hard to come by Monday



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Bonus furor may prompt limits on AIG bailout money

By PHILIP ELLIOTT, Associated Press Writer Philip Elliott, Associated Press Writer – Tue Mar 17, 10:56 am ET

WASHINGTON – The Obama administration says it's trying to put strict limits on the next $30 billion installment in taxpayers' money for insurance giant AIG amid questions about whether it responded fiercely enough to executive bonus payments.

President Barack Obama and his top aides expressed outrage at reports that American International Group Inc. went ahead with $165 million in bonuses even though the company received more than $170 billion in federal rescue money. Obama directed Treasury Secretary Timothy Geithner to see whether there was any way to retrieve or stop the bonus money — a move designed as much for public relations as for public policy.

"I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?" Obama said Monday, in announcing a plan to help small businesses.

The financial bailout program remains politically unpopular and has been a drag on Obama's new presidency, even though the plan began under his predecessor, President George W. Bush. The White House is aware of the nation's bailout fatigue; hundreds of billions of taxpayer dollars have gone to prop up financial institutions that made poor decisions, while many others who have done no wrong have paid the price.

The burgeoning controversy raged Tuesday as Sen. Richard Shelby, ranking Republican on the Banking Committee, charged that Geithner had known about the AIG bonus payments before they were made and failed to stop them.

"I don't know what President Obama knew about it," Shelby said. "I'd say he probably didn't know about it."

Shelby said that Geithner "either knew or should have known what was going on. We need to know, what are the details of this? When were the bonuses signed up? Who's getting it?"

The Alabama senator stopped short of calling for Geithner's resignation, saying "he's under fire from all sides now."

"I don't know if he should resign over this," Shelby said. "He works for the president of the United States. But I can tell you, this is just another example of where he seems to be out of the loop. Treasury should have let the American people know about this."

Administration officials said over the weekend that Treasury determined the government had no legal authority to block the current payments by AIG — which are part of a larger total payout reportedly valued at $450 million.

Instead, Geithner asked that the company scale back future bonus payments where legally possible, the administration said. Geithner was characterized as having called AIG Chairman Edward Liddy on Wednesday to demand that Liddy renegotiate AIG's current bonus structure.

In a letter to Geithner dated Saturday, Liddy informed Treasury that outside lawyers had informed the company that AIG had contractual obligations to make the bonus payments and could face lawsuits if it did not do so.

AIG got predictably raked over the coals at a Senate Banking Committee hearing on regulating the insurance industry.

"One way or another, we're going to try to figure out how to get these resources back," said Christopher Dodd, D-Conn., the panel's chairman.

"This is ridiculous," exclaimed Sen. Jon Tester, D-Mont. He said AIG executives "need to understand that the only reason they even have a job is because of the taxpayers."

Expressions of outrage across the political spectrum reached a new crescendo Monday when Sen. Charles Grassley suggested in an Iowa City radio interview that AIG executives should take a Japanese approach toward accepting responsibility for the collapse of the insurance giant by resigning or killing themselves.

"Obviously, maybe they ought to be removed," the Iowa Republican said. "But I would suggest the first thing that would make me feel a little bit better toward them if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide."

Grassley spokesman Casey Mills said the senator wasn't calling for AIG executives to kill themselves, but said those who accept tax dollars and spend them on travel and bonuses do so irresponsibly.

In another development, New York Attorney General Andrew Cuomo said he has issued subpoenas for the names of American International Group employees given bonuses despite their possible roles in its near-collapse.

Cuomo said his office will investigate whether the $165 million in payments are fraudulent under state law because they were promised when the company knew it wouldn't have the money to cover them. AIG reported this month that it lost $61.7 billion in the fourth quarter of last year, the largest corporate loss in history, and it has benefited from more than $170 billion in a federal rescue.

"When a company pays funds that the company effectively doesn't have, it's akin to a looting of a company," Cuomo said. "You could argue if the taxpayers didn't bail out AIG, those contracts wouldn't be worth the paper it's printed on."

News that AIG still needs billions in taxpayer dollars to prevent a collapse did little to build public confidence, Obama aides acknowledged. Seeking to turn the public tide, White House spokesman Robert Gibbs aggressively criticized AIG and said administration officials were working to put strict limits on the next $30 billion installment bound for the company.

"Treasury has instruments that can address the excessive retention bonuses, and add provisions to ensure that taxpayers are made whole," Gibbs said.

The AIG news overshadowed what Obama's aides had hoped to spend the first part of the week discussing: billions of dollars to help the nation's small businesses in the hopes of getting credit flowing again. Obama heaped praise on the little guys of American industry, often overshadowed in the blitz of government bailouts.

Two months into office, Obama's job approval rating is 61 percent, according to Gallup polling. That number has been relatively stable so far this month but has dropped from the 68 percent when the president took office. The major factor has been a decline in support among Republicans, from 41 percent to 26 percent.

A separate poll out Monday by the Pew Research Center put Obama's approval at 59 percent, slipping from 64 percent last month. The Pew poll found that a growing number of Americans see him as listening more to the liberals than to the moderates in the Democratic Party.

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Guys you may have made money now.. Good luck to you in this market.. but when even companies like Google are starting to take a hit, look out. We still haven't reached the bottom.

A US company called Sirius XM (a sattelite radio company) was at $0.06 a few weeks ago... The value of the company was hopelessly undervalued due to the fact that the stock price has been mercilessly shorted by shot sellers looking to drive the price down, and the subsequent threat of bankruptcy. Apple and Sirius recently announced a new application for the iPhone that will allow iPhone users to stream Sirius music and talk radio over the iPhone. Moreover, another media company had bought interest in Sirius, erasing the threat of bankruptcy. The price of Sirius right now is $0.274 after a bit of proifit taking. That's a 457% gain....

Had you invested just $1000 dollars in Sirius when it was at 0.06 dolllars, you would have had 16,666 shares of Sirius. If, right now, this minute, you chose to sell all of your shares of Sirius, you would have made about $3500 on the transactions. Again, you just have to be smart about what you invest in and do your research. You have to look at companies, look at viability, looks at the market they service, looks at profitability, try to account for unknown variables, and make as sound an investment as you can.

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The Dow's back up in the mid 7000s, and it will likely keep fluctuating. I fully expect it to hit the 6000s again, and go up and down, and up and down on every piece of bad news and good news that comes out about the economy. What people need to realize is that the Dow is nothing more than a very general indicator of what the market is doing. It doesn't mean that all stocks are doing badly if the Dow is down, and it certainly doesn't mean that people should shy away from investing if they have the capital and they're looking to invest longterm.

The Dow is made up of 30 of the biggest US companies, and it takes the average of their stock prices using a divisor to come up with a number... what we call the Dow Jones Industrial Average. The problem is that many of the companies on the Dow are financial companies or other companies that are or have been in free fall. When you're taking an average of a group of 30 companies, and many of the companies in the group have begun to perform badly, it will drive down the average, which will lead to investor fear, which then leads to further profit or loss taking, even of stocks that aren't on the Dow but belong to strong companies that are doing well.

On the Dow right now and late last year were:

AIG - Insurance, Finance (removed)

American Express - Finance

Bank of America - Banking, Finance

Citigroup - Banking, Finance

General Motors - Automotive

JP Morgan Chase - Banking, Finance

Boeing - Aviation

When those industries, and as a result, these companies, do poorly, it's inevitable that the Dow plummets and investors become as cautious as they have; after all, those companies play a big role in determining the DJIA.

But just because the Dow plummets doesn't mean that the stocks of companies in all sectors will crumble, and it doesn't mean that there are no smart investments. Again, people just have to do their research and due diligence.

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  • 5 weeks later...

Just an update... Sirius XM, the satellite radio company I mentioned a earlier, hit $0.60 a share today. If you recall, this was a company that was at $0.06 a couple of months ago. Had you invested $1000 dollars in Sirius when it was at $0.06 cents and sold this morning when it was at $0.60, you would now have a little under $10,000, making almost $9,000 dollars taking into account transaction fees.

Just make smart investments...

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