Since there’s so much attention paid to the stock market today my post this morning to give a little perspective on the Dow Jones performance over the past thirty years.

The DJIA is not a bell-weather indicator of our economic performance.  Rather it’s a whole bunch of money managers and individual investors playing what I call “Las Vegas East” with the value of public companies stocks.  Some of it’s based in the actual value of the company, it’s products, research and development, future plans and the like.  And there’s a lot more of it these days based on emotions.  One manager gets scared, sells off a block of shares, and many others follow right out the door. 

So while I know that we will pull through this, I understand also that many are completely “freaking out” over the stock market.  I suppose if you’re 63 and all of your investment is in your previous employers stock your fears are warranted.  I’m 43, have a substantial amount invested in various mutual funds, and I’m looking at 20 years down the road.  And if you’re in my shoes, you should too.  Here’s why:

• Thirty years ago the DJIA stood at …………$818.85 – 6/30/78
• Twenty years ago it stood at………………$2.104.02 – 6/17/88
• Ten years ago the DJIA value was………..$8,712.87 – 6/19/98

Given the $10,984.00 DJIA value when I gathered this info on 6/24/08, this represents an increase of:

• $10,984 (1335%) since 1978
• $9,703.00 (461%) since 1988
• $4,024.39 (51.73%) since 1998

In that span of thirty years our economy has had its share of ups and downs, but as investment managers will tell you to keep your eyes on the long-term (assuming you’re of the appropriate age to do so).  Put your money in solid, diversified portfolio’s, and go play tennis, ride your bike, enjoy life. 

This is certainly a time for us to learn from our mistakes, prepare for the worst, but keep moving forward with a positive attitude about our economy.  Remember, this great country has conquered a whole lot worse than what’s going on now (see “The Great Depression”), and we’ll weather this storm as well.

This is not investment advice.  I’m not a money manager.  Which is why I invest my money with good money managers.  Do your research, and pick a fund(s) that reflect where you are in your life, and what your plans are for the future.

From an AP article I read over the weekend I learned that historically when consumer sentiment is low, the S & P 500 responds with a big return the following year.  Sonsumer sentiment is usually a lagging figure meaning that by the time consumer sentiment is reported low, the economy is already on the uptick. 

The most recent consumer sentiment index was reported, according to this article, in June at 56.7.  Compare this to May 1980, when the same index sat at 51.7%.  The following year, the S & P provided a 1-year return of 19.6%!  Again in October 1990 after the index saw 63.9, the next year’s return for the S & P 27.5%. 

“Since 1978, following the 10 worst readings in the Reuter/University of Michigan’s Consumer Sentiment survey, consumer-discretionary stocks have risen more than 40 percent, on average, over the ensuing year.  The Standard & Poor’s 500 index has risen 20 percent,” says Thomas Lee, JP Morgan strategist in the article.

He goes on to warn that history may not repeat itself, since spiking oil prices could further sink stocks.  But my point is that historically we’ve pulled ourselves out of the gutter of a recession.  This down-turn is not the end of our economy.  Hardly.  This is a period when we as a nation are being forced to re-think the way we live, how we drive, consume, and it’s going to lead to some great things for our country. 

I believe, and have said so before on this blog that this is going to lead to new technologies.  A new sector to spur investment.  New energy is going to be a focus for companies…be it wind, solar, battery, hydrogen…you’re going to see companies racing to develop new products.  Not only for how we transport ourselves, but think of all the other applications that are going to benefit… longer lasting-batteries etc…we just don’t know HOW it’s going to benefit us in other ways.  But I’ll guarantee you it will!

So don’t throw in the towel on our economy. History shows us we’ll be ok.  Keep our eyes on the future, and not glued to the evening news, where we know all we’ll be fed is our daily dose of “the sky is falling!”

Source, Stan Choe, Elizabeth flach, Associated Press

The Gross Domestic Product was revised up for the first quarter.  Initially the gain was reported at a .9% annual rate.  The final number came in at 1.0% annualized.  Consumer spendings final number was revised upwards as well from 1.0% in the first quarter, to 1.1%.

These are small increases I realize.  However, any upward revision is very good news for our economy, which struggles like it hasn’t since the recession of 2001.

Read the full story…

http://www.reuters.com/article/businessNews/idUSMAR64567120080626?feedType=RSS&feedName=businessNews

Even after taking into account the tax rebates, retail spending beat Wall Street’s expectations.  Read more at Reuters.

http://www.reuters.com/article/businessNews/idUSN1125552220080612?feedType=nl&feedName=usbusinessearly

Over 50% of economists from a recent poll now believe we will not, and have not entered a recessionary period in the US.  And while they believe the slowdown will be protracted, we will dodge the “R” word.  This is not only positive news for our economy, but good economic news globally.  Many other economies depend upon US consumption.

http://www.reuters.com/article/businessNews/idUSN0926134920080610?feedType=RSS&feedName=businessNews

Having lived through the Jimmy Carter era, and enjoyed the boom of Reaganomics, and having studied economic history at University of Louisville, I can tell you this.  Our economy has always been, and always will be…cyclical.

That means that the boon days can’t live forever, neither can the depression… Which is why I can remain positive about our economy.  It has always been the dominant economy in the world, and always will be, until other countries can duplicate our capitalistic system, and deal with the fallout, and education process that it brings.

So while the evening news no doubt will now start to beat the recession drum again remember this…we’ve been through much tougher times, and our economy has bounced back.  This may be a time to spend more money on groceries than eating out, but as long as we are consuming, there will be jobs.  And as long as there are jobs, there will be consuming.  The equation is a simple one.

70% of our economy is consumption based.  So if we continue to consume, we’ll be ok.  Don’t judge your actions by what happens on Wall Street.  What goes on there has very little to say about the state of our economy.  It’s emotion-driven reaction to stock brokers trying desperately trying to make us rich in our retirement.  They focus on short term results, we need to keep our eyes on the lighthouse far away, and not be swayed by the evening news that tells us we’re going to hell in a handbasket…We’re far better than that.

Keep it positive!!!

This supports many that claim we may skirt a recession.  Lowest number of new jobless claims since mid-April.  I realize that it’s not all pie-in-the-sky right now.  But, the fact that given all the bad things going on, we’re retaining our tendency to consume, which by-the-way is 70%!! of our economy…consumption…

http://www.reuters.com/article/businessNews/idUSN0532108120080605?feedType=RSS&feedName=businessNews

This is what I figured would happen.  The stimulus checks have started hitting bank accounts and mailboxes and it’s helping.  Hopefully this short-term boost will belay fears of the American consumer, and keep us on the path of moderate growth.

That concern, coupled with the fact that department stores aren’t responding in kind.  This may reflect people turning to discounters like Walmart and Costco as other costs rise.  But the bottom line is…we beat Wall Street’s expectations!

This is very positive news for our economy.  Let’s see if any of the mainstream media picks it up.  I’m betting we hear little about it… if we do, the story will be centered around Saks or Macy’s struggles…Read the entire story here:

http://www.reuters.com/article/businessNews/idUSWNAS713820080605?feedType=RSS&feedName=businessNews

Only 26% of CEO’s polled (a whopping 255 of a zillion out there), say they are optimistic about our economy.  However, these same CEO’s report expected growth for their companies in 08 (77%), and 47% are predicting double digit growth.  In addition, 62% are expecting to add to employment rosters.

If double-digit growth is what economy-negative sentiments results in, then I’m going negative!  I would understand “cautiously optimistic” but leaders of companies need to remain upbeat.  If the captains of industry start hand-wringing, and sweating the brow, the trickle-down effect can be quite compounding.

So leaders, remain positive about our economy.  White it’s not all “pie in the sky” it also is not doom and gloom.  It is up to us, as leaders, CEO’s, Presidents and the like to show the people that work with us, that we expect positive things to happen.

http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=117c7da0-bcfb-4ae9-8233-1e2218df7494