The Rule of Nines

On a day like this,  I am reminded of something I suggested could come to pass in the not-too-distant future: a Dow of 9,000; oil at $90/barrel; and unemployment at 9%.  Or if one is not quite so negative: a down of 10,000; oil at $100/barrel; and unemployment at 10%. Of course, we are practically there for all practical reasons, so this is no great shake, but it has to be a nightmare for the administration if things continue to go in the direction they seem to be going.

Again, if one is an agile trader (I am not) one should be able to do very well in this very volatile market. On the other hand, long term investors holding shares in companies paying nice dividends should be happy with some of their returns, and another opportunity to accumulate shares that are on sale.

Watching this economy and the politicians flounder (or is it "founder"?) reminds me of many classic country/western songs and their great hooks. Maybe some more of that later.

There is an interesting op-ed piece at MarketWatch today. I am particularly buoyed by the third myth, that the US is sliding into socialism.

For a system allegedly being strangled in its bed, U.S. capitalism seems to be in astonishingly robust shape.

Numbers published by the Federal Reserve a few weeks ago show that corporate profit margins have just hit record levels. Indeed. Andrew Smithers, the well-regarded financial consultant and author of "Wall Street Revalued," calculates from the Fed's latest Flow of Funds report that corporate profit margins rocketed to 36% in the first quarter. Since records began in 1947 they have never been this high. The highest they got under Ronald Reagan was 30%.

And that's why I like to a) accumulate shares in good companies when I can; and, b) accumulate shares in companies that pay robust dividends. On a day that the market plummets, those companies are still going to be paying their dividends, and if one is able, can use the dividends to buy shares on sale.

There is more and more talk of deflation. I see suggestions of deflation in the fast food restaurants and not-so-fast restaurants as I travel around the country this summer. I honestly don't know how some of these restaurants continue to survive; the competition is severe.