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4 Reasons why the sky is not falling



By Dian Vujovich

In my previous blog I wrote that no matter what is being said about the current state of our economy the sky is not falling. Here are four simple reasons why:

1. Stocks are moving up. Forget about the downers over the past two years and if you look at the bigger picture you’ll see more sunshine than gloom. Even though the S&P500 hasn’t returned a dime to its investors over the past decade —in fact, investing in it has lost them money—the S&P 500 isn’t the only game in town.

Between 12/31/99 and 12/31/09, for instance, the S&P 400, a domestic mid-cap index, has had an annualized total return of 6.36 percent. Leave the US and if you’d invested in the MSCI Emerging Markets Index you’d have made money too. This international emerging market stock index’s annualized total return was nearly 10 percent (9.78 percent) over that same period of time.

Forget the indices and look at individual companies, one need look no further than Apple. Over the past decade it has split twice and grown by leaps and bounds from well under $50 a share to well over $260. Even Crox has gone up three-fold and those are hardly the only two examples of companies that have rewarded their shareholders handsomely during the first decade of this century.

2. Hiring is starting to pick up. According to a recent Mercer study, 27 percent of companies are expanding their workforce this year while 3 percent were cutting back. A year ago, 12 percent were hiring and 15 were cutting back.

3. Pay raises are coming. That same study showed that 98 percent of the companies surveyed plan on giving raises in 2011. While the raises might be small, like around 2 percent, a raise is a raise.

4. Our GDP is growing. According to the September 10 issue of “MoneyLetter”, GDP growth is happening. And even though many would prefer it were happening at a higher rate than roughly 2 percent, authors of that newsletter write: “Do not underestimate this development.”


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