Commentary

George Chamberlin

GEORGE CHAMBERLIN has been associated with The Daily Transcript at SDDT.com since 1998 and became Executive Editor in 2006. He is responsible for the development of editorial strategies for the newspaper and website. He has introduced video and audio into the editorial products and is the public face of the company at many community events. George regularly chairs industry roundtables and conducts video interviews of participants for use on the San Diego Source. He writes two daily columns, "Money in the Morning" and a daily stock market wrap-up.

George, a long time resident of North County, lives in Vista with his wife Terry.

From the Executive Editor

An important threshold gets crossed. The two-point gain in the S&P 500 index yesterday was hardly anything to write home about. But it was just enough to take the broad-based index to a close above 2,000 for the first time ever. The continued absence of sellers has steadily pushed stock prices up for more than a month and has shattered the old adage “Buy in October, sell in May." The Dow industrials started May at 16,500 and finished yesterday at 17,106. Anyone who followed the conventional wisdom has missed a gain of more than 600 points on the blue chip index. The S&P 500 began May at 1,883 and is now at 2K. Tell that to all the bears who keep begging for a crash.

Stock prices were little changed Wednesday as trading slowed ahead of the Labor Day weekend.

SP2K. Just as Y2K struck fear in the hearts of techies everywhere, fearful the world would end Jan. 1, 2000, bearish investors seem equally afraid of what's in store now that the S&P 500 has broken through the 2,000 barrier. The major stock market indexes have put together a very good August after a failed effort to take stocks down at the end of July. The Dow industrials were up 76 points, making gains in five of the last six sessions, and the S&P 500 closed at a new all-time high at 1,998. The index traded above 2K for most of the day but slipped slightly at the close. To be sure, 2,000 is just another number for the markets but it is a psychological barrier that will have to be dealt with. As often happens, the level has been approached and rejected several times lately, but once resistance is crushed it is common for the index to run to the upside.

A better-than-expected reading on consumer confidence and durable-goods orders helped move stock prices higher on Tuesday.

2000.02. It is just another number, but how the S&P 500 stock index got there and where it goes is an interesting journey.

The big one could be coming. Yes, the Napa earthquake is a stark reminder a similar shakeout could be coming to the stock market. Of course, like the earthquake that many expect to break California off from the United States, floating it into the Pacific, no one knows when the crash will hit Wall Street. But one thing is sure: The bears love to talk about it even as stocks climb higher and higher. Pundits can now add a major earthquake to the forecasts along with a massive sell-off in stocks. What they won't tell you is when either will happen.

It all comes down to jobs. Fed Chairwoman Janet Yellen is laying it all out this morning in her speech at Jackson Hole, Wyo., and has made it very clear that future actions by the Fed will all be based on employment conditions. In keeping with the dual mandate of full employment and manageable inflation, Yellen says her group is closely watching 19 different labor market indicators to determine the true strength of employment and when higher wages could begin to fan the flames of inflation. But she said there is no "simple recipe" for reading these reports and also suggested the recent drop in the nation's unemployment rate could overstate the real labor market conditions. She is being very cautious in suggesting when the Fed will begin raising short-term interest rates to manage inflation.

Next Sunday, Aug. 31, marks the 38-year anniversary of “Bogle's Folly.”

Going for four in a row. Anyone who plays blackjack knows how tough it is to win four hands in a row. Ditto for the stock market. So, it will be very interesting to see if this week's winning streak will continue today. The Dow industrials have been up every day this week, gaining about 310 points in the process and starting today only 20 points away from regaining the 17K level. The S&P 500 is just a few points away from a new all-time high, breaking the old record set way back on July 24. Sam Stovall of S&P Capital IQ says there is still more room for growth from the current level of 1,988. "We see fair value around 2,100 a year from now, based on EPS growth forecasts, the expectation that inflation will remain around 2 percent, and that we get a meaningful digestion of gains along the way," Sam said.

Reports showing shorter unemployment lines, rising home sales, improving economies in Europe and optimism that the Federal Reserve is committed to supporting a strengthening economy combined to extend the stock market rally Thursday.

A report from the Federal Reserve suggesting higher interest rates are still well off in the future helped hold stock prices steady Wednesday.

The hits just keep on coming. The Dow industrials added an additional 80 points yesterday, bringing the two-day gain to more than 250 points and pulling the index to within 200 points of its record high sent in mid-July. Of course, the media just can't stand that stocks have once again avoided a major correction. Yesterday, one of Wall Street's biggest cheerleaders, professor Jeremy Siegel, went on CNBC and said he can see the Dow hitting 18,000 before the end of the year from its current level of about 16,900. The comments sent anchor Kelly Evans into a screaming panic. "With all due respect ..." she said to Siegel, a guy who has suits older than she is. Evans countered by saying another professor, Robert Shiller, is warning that stocks are "very expensive." While Siegel is not a glib as Shiller, he calmly explained the flaw in Shiller's logic. Of course, Evans would have none of it and, in so many words, called Siegel a heretic for being bullish. By the way, his book, “Stocks for the Long-Run,” is an absolute classic and has recently been revised in a fifth edition.

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