According to Wikipedia, Americans consumed 138 billion gallons of gasoline in 2006. Now that gas is down about $2 a gallon, that puts $276 billion extra in the hands of consumers relative to what was expected earlier this year. Combine that with reductions in the price of home heating oil, plus reductions in the price of other imported commodities, and the benefit to consumers dwarfs the $150 billion stimulus package enacted earlier this year, which had the downside of coming out of the U.S. Treasury. Meanwhile, 10 year Treasury bonds are yielding under 3.4%, a potential boon for people looking to take out mortgages or refinance. (I read somewhere that the S&P 500 is now yielding more than the 10 year T-bill for the first time in many, many years; probably a great buy signal for stocks for those with courage and a long-term perspective.)
That doesn't mean that all the doom and gloom is wrong. But the declines noted above are a bright spot, at least for the U.S. economy.
corn and soy have pulled back hy000ge, which means cheaper food prices for consumers. the retail foods tend to be a little sticky vis a vis the commodities trends, but the correlation is still there.
"stuff" in general is cheap. it's a buyer's market.
real estate (in many areas) has seen a return to something approaching value (still waiting for greater seattle area to show more weakness though), stocks are seeing some decent valuations if you seek value, commodities have pulled back, and interest rates are low.
i LOVE this market.
When what I think you mean is gas is down #2 a gallon.
Wait, you can now get a gallon of gas for a #2 pencil? /smartass
138 * 2 = 276. And I did it in my head. So there. Morans.
Or has demand for the 10-year T-bill gotten so high that people are paying so far over face value that it leads to a negative yield? I'm admittedly a pinhead, but that's the only way I can see the statement being correct, given where the S&P 500 has gone this fall.
the t-bill does not have a negative yield. otoh, when traders bid up the price, the yield correspondingly goes down.
note that the bond markets (notes, bonds, etc.) is MUCH larger than the stock market(s). most people would think otherwise.
the obvious difference between notes/bonds etc. and stocks (in regards to yield) is that the former are "guaranteed" but not the latter.
distressed companies can lower their dividends (yield) but unless the entire govt. implodes and the US govt. doesn't honor it's bonds/notes, they are guaranteed.
what i think you are failing to understand is that - ceteris paribus - as stock prices fall, yield goes up.
this is true for individual stocks, and for an index. the s&p happens to be a cap weighted index.
the OPPOSITE is true with bonds. as bond prices go UP, yield goes down.
look at an individual stocks. assume that stock ABC pays a .25 dividend 4 times/year
it's stock price is $50
that would be a 2% yield (.25*4)/50
you are getting $1 for every $50 (one share) you buy/yr
however, if ABC stock goes to 25, you get a 4% yield.
(.25*4)/25 = your 4% yield.
so, in this market, where stock prices have been crushed (dow was 14k+ not too long ago. is now about 8k), yields have gone up. it's an inverse relationship.
one thing value investors look at is P/E. another is yield (of the S&P).
this is a contrarian indicator. iow, "buy when there is blood on the streets" not a momo (momentum) indicator, where people chase trends.
fwiw, as a longterm investment vehicle, you can use SPY, the ETF for the S&P 500 to buy the S&P.
i greatly prefer the RSP, which is the equal weighted (vs. cap weighted) S&P 500.
i could give a 10 page dissertation on WHY, but I'll leave it at that.
one method (which i use in one of my accounts) is the 'dogs of the dow' method. there are several variations of the dogs of the dow, but the basic methodology is to periodically (set period) assess what are the dow stocks that have taken the biggest "hit" so to speak and buy them. one metric to use is yield, when using dogs of the dow.
historically, dogs of the dow is a contrarian and value strategy.
it has also outperformed the classic dow by ~3% per annum (last 30 yrs of data).
of course past performance is no predictor of future results bla bla bla
We can do this environmentally safely now. Why aren't we?
anybody with a brain saw the housing bubble was unsustainable and was going to collapse.
ALL BUBBLES POP
period.
the operative questions are when, how much, and for how long.
ALL BUBBLES POP
the scariest words in investing are when you hear "it's different this time"
sorry. it isn't.
bubbles have occurred for as long as capital markets have existed - tulips, gold, oil, sugar, coffee, salt, stocks (many times), etc.
my two favorite bubble signs were
1) CNBC interviewing a real estate investor in miami, who claimed "you can't lose" and that all you have to do in real estate is buy, then sell 6 months later for guaranteed profit
2) CNBC interviewing two vegas strippers who were now rich real estate flippers. seriously.
i have a coworker who claimed that "seattle is different" and that our real estate market would NEVER pull back. it might stabilize and be stagnant, but "it's different here".
this was about 6 months before...
wait for it...
seattle real estate started dropping
plus ca change d00d
*googles*