New Jersey/Philadelphia had a freakish ice storm this week. A sheet of ice still encases the leaves on the rhododendron out front, and all of the sidewalks are impassable sheets of ice. The local lake is frozen over for the first time in years. Our yard is littered with shards of ice broken off from the trees above. Winter has finally arrived!
As to Big Al's Casino this week, the bulls keep charging along. The Dow Jones has climbed into record high territory, 12767 for the week. NASDAQ on the other hand is at 2496, at 50% of it's all time high in March 2000, but still moving upward for the year. Housing prices are coming down. Companies involved in subprime loans (loans to risky customers) are experiencing large losses. This gives me pause - if homeowners are defaulting on mortgages, doesn't that create additional pressure on the credit markets? More defaults means less money means less credit, meaning less spending? Less spending means slower growth in consumer goods at least, or big ticket items. At the very least isn't it possible that investors who are overly leveraged (in debt) in the housing area will pull money out of their mutual funds and stocks because they need the money for day-to-day purposes? No matter how good the stock market might look in terms of growth, and earnings it still needs investors to participate. I don't think this housing decline is over, though it is more of a regional phenomena.
Personally, I am inclined to shift a little more nest egg into fixed income.
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