It is becoming more and more difficult to ignore the obvious. In mid-March there were glimmers of hope for the world’s economies. That was translated into higher share prices and consumer confidence. Things just started feeling better. And, while better reported numbers may have been some months away the stock market did it’s job as a discounting mechanism. It went up, anticipating better numbers down the road.
But every day, on every page of the financial press, one reads headlines that, under rosier circumstances, would shock. Even Harvard is cutting programs and personnel. State and local revenues fell 6% as consumers cut back and sales taxes decline. Corporate incomes have been decimated and that reduces government income. State parks are closing. State budgets are being slashed by as much as 20%. Bank of America tells us that 9.8% of all their small business loans are written off. Why would the bank want to expand this line?
Are things just beginning to deteriorate? Was the March stock rally a victim of poor timing? Should the market have deteriorated another 1000 Dow points to flush everything out? Are Goldman, Sachs’ and Well Fargo’s first quarter earnings surprises sustainable? How does one ignore Wal-Mart’s chairman when he says recovery is a long way off?
These and other unresolved questions reaffirms my resolve to be a renter of stocks, not an owner. Meanwhile I will search for income ideas to replace the cut or lost dividends over the last year. And pray that I can at least hold on to these for a while.
