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The Stock Market Will Rise When Ben Bernanke Let’s It Really Rally

Read more articles on Finance and Life and Politics and Investing.

February 27, 2008

Posted by neillevine

About This Editor: I am a writer. Have been writing for other sites, but expect to do most of my future work HERE! My expertise extends from the esoteric such as burning hydrogen to the unpredictability of the stock market and my writing makes me a jack of all trades and exasperated master of none. I have had some influence over national wildfire and water policy and there are hints of a change in energy policy, BUT as Samuel Goldwyn once said, "A verbal promise is not worth the paper it is written on."

         

With the stock market closer to twelve thousand than fourteen thousand as measured by the Dow, headline writers and other news sources are making it clear that financial markets will not truly rally towards the fourteen thousand benchmark and probably beyond until Federal Reserve Chairman Ben Bernanke, who in essence has power over this because he controls interest rates and money supply, says it will rally.  That is why he is such an important economic figure.  The buzz word used is power.  While he has lowered interest rates so existing loans are more affordable, he has not increased the money supply.  In other words, funds are tight.  Liquidity is not there.  Mr. Bernanke is making it hard to make money, believe it or not.

He is suggesting that a further interest rate cut is likely, probably helping corporate profits and the financial institutions.  Ironic how LOWER interest rates can be more profitable for the banking establishment casting aspersions on the theory banks are gouging customers.  Of course, this allows Mr. Bernake to posture as a good guy.

With this in mind, I think it should be pointed out that many good stocks are comparatively lower than they have been recently.  But a fewer are relatively higher like IBM, IBM, at around $114 per share.  It has provided a decent 8.4% return for stock holders over the past ten years.  So for long term investors it still has promise.  Then there is Yahoo, YHOO, at around $28l, which is the object and beneficiary of Microsoft’s, MSFT, business interest.  Both are trying to compete with Google, Goog, but their strength is display ads, the commercials that sit on a page as you surf.

While both are making money with this type of commercial, Google, on the other hand, makes money by posting ads when a search is conducted.  It has a big lead in this are but Google is a stock that is currently comparatively low.  It is under $500 on micro-examination of its last quarterly report that came in pretty much on the numbers and a poor recent report on clicks that possibly cast doubt on its projection of earnings of over $20 a share for the fiscal year.  Should Google continue to put up its projected financial numbers, however, it will be worth far more than $500 a share.  It has been over $700 a share so with the internet still growing it has upside potential.

There are a lot of other stocks that are comparatively low, making them potentially good investments, but one thing the prosperity of the market hinges on is how much faith investors have in Federal Reserve Chairman Ben Bernake.  The Congress keeps asking him easy questions and the stimulus package that was enacted should also be helpful. 

Last 5 Entries by neillevine

• Tax Cuts Follow The Bouncing Interest Rates - November 3rd, 2008
• Fund Raising, Jobs, The Future Of The Economy - October 24th, 2008
• Term Limits, Debates, Speaker Pelosi Investing - October 17th, 2008
• Economics=Dismal Science. Budget Deficits Balance Of Trade - October 14th, 2008
• Cam Getting Osama Bin Laden Boost Confidence - October 8th, 2008

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