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FOR GROUP INTEREST? Also, can someone please provide some
dates/time periods for the one other Presidential impeachment in
US history? Thanks.
Charles
> For those of you who are concerned about how the market may react to both
the
> Iraq bombings and the impeachment proceedings, I've culled together a few
> pieces of information from Investor's Business Daily over the last couple
of
> days which may help place things in perspective and provide food for
thought
> and discussion:
>
> Military Operations:
>
> The U.S. has launched 25 military operations since 1942, ranging in scope
from
> the historic Normandy invasion in World War II to the downing of a pair
of
> Libyan warplanes in '89. That total includes the military action begun
> Wednesday against Iraq. On the first day after military operations, the
> market rallied 17 times, according to Bill Noble, chief strategist at LIM
> research.com, a Chicago-based market research firm. In other words,
stocks
> advanced 68% of the time after the U.S. went to battle. That's well above
the
> norm of the stock market. On any given day, the odds of a market advance
run
> about 50-50.
>
> Based on those 17 rallies, the average next-day gain on the Dow was 0.7%.
By
> that standard, Thursday's 1% rise amounts to a respectable showing. The
war
> effect also shows up over somewhat longer time frames. During time frames
of
> several weeks, the market shows a positive gain 60% to 70% of the time,
Noble
> says. The odds of a strong market in the three weeks following a U.S.
military
> attack are even higher. During the three-week periods following the 24
> military operations (excluding the current Desert Fox), the market scored
> advances on 21 occasions, or 84% of the time. The average gain was 3%.
>
> Impeachment Proceedings:
>
> Even though the analysis of military operations and the markets above
seem to
> favor the odds of an increase, it's difficult to say what effect an
> impeachment proceeding may have because we've never had one in our
lifetimes.
> It seems to me the markets have already assumed that a vote for
impeachment
> will be approved and go to the Senate where it will not pass the 2/3 vote
> needed. Yesterday's IBD had some statistics showing how stocks have
reacted
> to recent crises (some of the S+P returns may be off a couple percentage
> points as I interpolated them from graphs):
>
> Crisis: %change in S+P S+P return S+P return
> 6 mos later
> next year
> Korean War 50-53 -15% in 5 wks +32% +36%
> Sputnik 57 -10% in 3 wks +8% +30%
> Steel price rollback 62 -20% in 8 wks +12% +25%
> Arab Oil Embargo 73 -17% in 9 wks -2% -26%
> Nixon resignation 74 -19% in 5 wks +30% +28%
> Gulf War 91 -12% in 3 wks +11% +25%
>
> So what can you make from all of this? I don't know if we are heading
for a
> crisis or not but it seems to me that when a crisis leads to a quick
drop, the
> markets generally rebound. And, eventually, it's the underlying economy
and
> company profit growth patterns (fundamentals) which have the most
influence on
> the market. The one thing I'm not sure I can gauge is the effect of
foreign
> holdings of US securities. To the extent that impeachment may drive the
US
> Dollar down, that would lead to diminished returns for their portfolios
and
> liquidating these would certainly affect the supply/demand equation
causing
> lower prices.
>
> As an individual investor, you can interpret this information in several
ways.
> It's hard to say which way the market may head but I suspect we will see
a lot
> of volatility. Those who are skittish to swings may want to stand aside
until
> things work their way out. Long-term investors may want to put less
emphasis
> on the news and closely observe how the economy is unfolding and the rate
at
> which corporate profits are growing. If these are stable or growing,
> corrections can be great buying opportunities. And you short-term guys
who
> play both the up and the downside are probably going to love all the
commotion
> and may stand to make a lot if you're not wiped out by being on the wrong
side
> at the wrong time and haven't employed good stops or money mangement
> strategies.
>
> Anyway, the above represents only my interpretation and I'm no soothsayer
and
> don't advocate any one strategy versus another. I'd love to hear what
the
> rest of you think about what's going on, especially those with opinions
> different than mine. As I've said before, I'm not concerned about being
> right, just about making money.
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