How High is Up?

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How High is Up?

By David Glenn Cox


There are only two constants in the market: either the market will rise or the market will fall. So as the market nears the markets record highs of 2008, we must ask ourselves, why? Why is the market so high, with our domestic politics in disarray, our consumer economy in a shambles, and big box retailers in full decline?

First it was the fiscal cliff, and then the debt limit, and now it seems every week there is some new crisis, real or imagined, to the point that we've become numb to what we're being told. The statistics and counter-statistics mean, that without taking a week off from work and burying ourselves at the library, we're relegated to just taking an educated guess about who is correct.

According to the Bureau of Labor Statistics, the average increase in income for the average worker in 2012 was less than $20.00 per week. For retail workers the increase was less than $10.00 per week. Forget purchasing power, forget consumer electronics and forget the domestic economy.

In 2012, Ford Motor Company earned full-net year income to $5.7 billion, up almost $300 million from 2011. Ford sales rose 4.7% in 2012, while Ford margins increased to10.4 % from 8.4% in 2011. It would seem on paper, at least, everything is going along swimmingly. Only, Ford's profit increase is due to cost cutting, and not selling more cars. It is a car rolling uphill until gravity takes over.

What hasn't been said about big box retailer Best Buy? Bad management, too big too fast and supposedly, the Internet is killing them. That might well be so, and yet last year, 500,000 cable and satellite viewers cut their subscriptions in the fourth quarter. Now add in, that it was the best number in two years for cable and satellite providers. If you can't afford basic cable, you probably can't afford a giant 3D television set either. Cable and Satellite pricing has increased at twice the rate of inflation, while the average paycheck is barely treading water.

Now, if you're really interested in making some money in the market, invest in Facebook. Not the current Facebook, look for the next Facebook. It is almost as if Facebook management is trying to rile its customers. The other day, I was trying to log into a website and the site asked, if I would like to use my Facebook log in. For expediency, I answered, "yes". I was then asked; if my name and likeness could be used to advertise "Mother's Chicken Soup" or some such nonsensical product and I answered "no," and the log in door was immediately slammed in my face. 

The pressure is on to monetize the site, but the site is driven by younger users. User's who don't want to be affiliated with car wax, candy bars or pimple cream. Facebook doesn't have a monopoly on social networking. Management is intractable; you can contact anyone in the world with Facebook, except Facebook. Accounts are deleted with form letter explanations. I was recently chastised by Facebook for sending friend request to people I didn't actually know. Strangers for whom I had nearly 100 friends in common with and Facebook warned; I wasn't to do that anymore.

I mustn't reach out to people with Social Media, like Facebook. Management only approves of social interactions between people you already know outside of Facebook. Why that makes perfect sense, doesn't it? You mustn't use more bandwidth than products purchased or maybe it could be better phrased as, strangling the golden goose with both hands.

How high is up? How long can the market defy gravity? How long can Ben Bernanke flood the economy with cash? Helicopter cash, which only ends up in treasury bills or in market speculation; there was an old axiom from when I was in business which said, "You can't do business with people who ain't got any money." Mother used to say, "All that glitters isn't gold."

The market may glitter, but our populace has no money. Our politics are in disarray; our finances are in a shambles, our foreign policy is a disaste, unemployment and underemployment when combined with discouraged workers, account for nearly 24 million workers, nearly a 20% unemployment rate. The market is up, way up, the only question is how high can it go and how soon should you jump off…soon… very soon.

Daveparts has no position in any stocks mentioned. The Motley Fool recommends Facebook and Ford. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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