June 12, 2009
The stock market is one of the best leading economic indicators. And investment grade U.S. stocks continue in a Bear market. (1) Dow Jones Industrials, down 0.1% (2) Dow Jones Transportations, down 5.6% (3) Dow Jones Utilities, down 7.6%. By contrast many International Indices are soaring (1) Brazil up 42% (2) Canada up 17% (3) Hong Kong up 26% (4) Japan up 11% and (5) Singapore up 32%. Moreover with a 25 p/e (based on 2009 estimates) and only a 3.3% yield the Blue Chip Dow Industrials simply do not offer compelling value. It is true that the speculative NASDAQ index is up 16% YTD and the small stock dominated unweighted Value Line 12%. These gains, unsupported by compelling valuations, register speculators hope and hope is not a strategy. In the meantime, savers scan the financial landscape and do not like what they see. Money market funds yield but 1.3%. T-Bills offer just 3.1% and five-year CDs only 2.6%.
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