thevicenarian.com

Today’s Equity Market Conundrum

Posted by T.W. Hanson - Feb 26th, 2008 at 19:02

Despite two bad economic numbers, the market moved higher today. We learned that home values continue to plummet and that prices are going up at the wholesale level. Apparently IBM’s announcement of a large share-buyback and positive guidance was enough for many to justify buying equities, not me.

The producer price index (PPI) was up 7.4% from last January. When prices rise at the producer/wholesale level, the increase is either passed on to you the consumer or their businesses profit margin decreases. Although not everyone reading this is a big fan of corporate America, a large contraction of company margins would have an effect on vicenarians. An unprofitable business is far more likely to fire you than hire you.

Second, only because the data came out a bit later than the PPI, is the dreadful house price data. Across the country, home prices were 9.1% lower in December than they were last December. The last three months of data indicate that house prices are falling at an annualized rate greater than 20%!!!

With all of this, the stock market went up…

As we have be writing, don’t try to time the market.