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Today is the one-year anniversary of Lehman Brothers’ cataclysmic failure. In other words, this time last year, the you-know-what was hitting the fan.
Lehman announced it was done on a Sunday. Amazingly, the S&P 500 opened down only a point down on Monday, at 1,250. By the end of the day, the S&P had lost 58 points. Stock prices swung wildly the rest of the week. It wasn’t until
It was Monday, October 6, when celebrity investor Jim Cramer made his now-famous Monday "Whatever money you may need for the next five years, please take it out of the stock market right now, this week…" declaration on NBC’s Today Show.
I always have mixed feelings about Cramer. He’s a great showman. But his advice is not always reliable. That day, however, Cramer was right in alerting American investors to what a dangerous situation we were facing. The S&P 500 was trading at 1,097 when he made his "sell everything" call.
The S&P is still below that level. So in that regard, Cramer’s timing was right. But he was wrong that that there would be no opportunity for 5 years.
******As we’ve seen, government stimulus efforts have restored stability and confidence to the financial markets. Right now, the only perceived threat to growth is the unemployment rate. All the other bearish catalysts – commercial real estate, toxic assets, rising foreclosures, weakening dollar, inflation – are essentially being ignored.
So how much do we discount stocks for the unemployment rate? From its peak at 14,000, can we say the Dow is fairly valued for 10% unemployment at 10,500?
Sure, why not?
Looking at this 10-year chart of the Dow Industrials, 10,500 doesn’t seem outrageous. And I would also argue that at the present moment, there’s no need to overcomplicate things.
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