For the first half of 2010, almost two thirds of money managers are bullish, according to Barron's. In fact, 54% are bullish, and 5% are "very bullish." Responses suggest that the Dow Jones Industrial Average is expected to gain another 5% by the end of the year.

According to Barron's, "Today's bullish investors see the major stock indexes making steady progress through next June, amid signs the U.S. economy is on the mend after a searing recession."

We've watched stock market numbers bounce around for two years. Unemployment stats have served as unpleasant reminders that, for some, leading indicators haven't translated to reality. We look for so many ways to understand the brutal economic environment with which we've had to contend, and all the choices can make your head spin. So, let's make it simple. Here are eight ways to tack a label onto the financial world in which we live.

1. Lost market value
Total stock market losses from October 2007's top to March 2009's bottom: $11.2 trillion
Total gains in the stock market since the bottom: $4.6 trillion
Lost ground: $6.6 trillion

2. Bad days
Percentage of the 10 worst days in history for the Dow Jones Industrial Average that happened in 2008, by point drops: 60%
Percentage of the 10 worst days in history for the DJIA that happened in 2008, by percentage drops: 30%

3. Mutual funds
Value of mutual fund assets at the end of 2007: $6.5 trillion
... and a year later: $3.7 million
Lost value: $2.8 trillion

But, it got a little better at the end of August 2009: $4.5 trillion (value of assets)

No one can deny the horror that was General Motors' (NYSE: GM) first quarter financial results . . . even if it did beat estimates. The automaker reported its eighth consecutive quarterly loss today -- this time in the amount of $6 billion. It also burned $10.2 billion in cash, its sales plunged 40% and it lost market share pretty much everywhere.

On that note, it's not surprising the guardians of the Dow Jones Industrial Average, The Wall Street Journal editors, despite trying to keep to a minimum any changes in the component stocks, are finally considering removing the lowest priced stock on the index.

John Prestbo, the editor and executive director of Dow Jones Indexes, said in an interview with Bloomberg Wednesday: "There are two choices for GM: bankruptcy or increased government ownership. Definitely the trend is in the direction that would force us to remove it."

Plenty of investors have been calling for General Motors Corporation (NYSE: GM) to be removed from the Dow Jones Industrial Average (DJIA) as the automaker hovers on the brink of bankruptcy. But, like it or not, GM's rock-bottom share price isn't justification enough to oust the stock. GM still represents a major chunk of our industrial economy.

However, GM's nationalization would more than justify its removal from the Dow. After all, that's why American International Group (NYSE: AIG) got the boot last fall -- once the government took a controlling stake in the insurance giant, Dow Jones wasted no time adjusting its blue-chip lineup.

Earlier this week, something a bit odd happened. With beleaguered General Electric shares (NYSE: GE) retreating sharply, the company's market cap has declined. As of Thursday morning, it's at $70.7 billion, placing it, for example, below Apple Inc. (NASDAQ: AAPL), with a market cap of $81.19 billion. That's right ... the venerable conglomerate, maker of aircraft engines, locomotives, and a host of other products, has been outsized by a personal computer company.

While this development may just be a blip on the radar of a very tumultuous time in the stock market, it signals a changing tide that began decades ago. GE is the last member standing of the original 12 members of the Dow. Founded in 1896, the average represented 12 of the most significant American companies. Here's what has happened to the rest of them:

The Dow Jones Industrial Average is in the headlines everyday, but few people actually understand how it's calculated. The DJIA is the sum of the value of one share of each of the 30 Dow components divided by the DJIA divisor, which is currently 0.1255527090. It's adjusted every now and then for spin-offs, dividends and splits. For geeks, the image at right shows the formula: p equals the price of the shares and d equals the DJIA divisor.

So what exactly is wrong with this formula? A ton. Critics have been pointing out forever that weighting the average based on stock price makes no sense because different companies have different numbers of shares outstanding. For example, if Berkshire Hathaway (NYSE: BRK.A) were part of the DJIA, its $70,000+ share price would dwarf the influence of all the other components combined. It would make much more sense to use a more holistic measure like market cap or enterprise value.

Yesterday, the market had a swing of over 900 points as indexes hit new lows for the year and then pushed upward to close 6% or so higher. Overnight, markets in Asia and Europe staged rallies of their own.

The stock market may march up for a while, but that can't be sustained and the odds are likely that it will crash and make new lows again before year's end.

The fiction is that the markets trade based on what they see six months into the future. Perhaps they see GDP recovering by then. Not a chance.

George Soros said yesterday that there is some chance that the world economy will enter a depression next year. That may be extreme, but a majority of business leaders and economists who want to be heard on the subject say that this is the most significant downturn of their lifetimes.

There is a view that falling housing prices are at the core of the disaster that has overwhelmed the financial structure of the country and is now hurting everything from retail sales to tech company revenue. Housing may be helped by government programs, but if unemployment hits 8% or better next year, the number of people who have to give up their homes could rise sharply. Lower interest rates do not help people out of work.

Another misconception about the future is that oil prices will continue to fall. With some OPEC nation's facing budget deficits due to crude dropping from over $140 to $55, the cartel will have to cut production to meet demand. That may mean a huge cut, but OPEC can match the drop in the global need for oil with a paltry supply.

The stock market has not stopped going down.

Douglas A. McIntyre is an editor at 247wallst.com.

If you believe an analysis I posted of a Fortune article last November, the answer is probably yes. This is based on a theory that stock prices needed to adjust downward for something called the equity risk premium.

How did Fortune arrive at the idea that the market needs an 18% drop? (I should note that Time Warner (NYSE: TWX) owns both BloggingStocks and Fortune.) Fortune calculates the current equity risk premium by adding stocks' earnings yield -- which it gets by flipping the market's P/E on its head (calculating E/P) -- to the inflation rate and then subtracts the t-bill yield. Then it compares the current value with the long run equity risk premium to conclude that stocks have a long way to fall before their prices align with that long-run value.

Here are the numbers. The market currently trades at a PE of 16, but based on adjustments to remove short term spikes by Yale market guru Robert Schiller, Fortune uses a PE of 22 -- which is the inverse of the market's earnings yield of 4.5%. Investors expect equity returns of 7% -- calculated by adding expected inflation of 2.5% to that 4.5%. To get the equity risk premium of 3% Fortune subtracted the 10-year treasury rate of 4% from that 7% expected return. Got that?

The Dow enjoyed a large and technically significant upside day Wednesday, but as noted on BloggingStocks, and probably by other analysts, keep in mind that "A bottom is a process and not an event" and that "One or two up days does not a trend make."

Other points to remain aware of while watching Thursday's session:

The Dow, which closed at 13,289.45, closed above the critical 200-day moving average at 13,244.12 -- the toughest moving average to break. (The 200-day moving average is the red line on the price bar portion of this chart.)

The battle

Currently, a battle is going on between the institutional investment bulls and bears and it involves, oh, about $3-$4 trillion or so, give or take a few hundred billion dollars.

Right now, even after Wednesday's 330-point rise, the contest is advantage: bears. There are still many unknowns regarding the subprime mortgage/asset sector, oil prices remain elevated, and there are signs of a U.S. economic slowdown.

Now that the Dow has fallen 10% from its October 2007 peak of 14,164 to 12,743 -- i.e. now that it officially qualifies as a correction, it's a good time to summarize the investment landscape, fundamental and technically.

Although numerous fundamentals (high energy prices, subprime mortgage defaults and subprime-asset losses, housing sector slump, slowing U.S. consumer spending) suggest U.S. economic growth will slow up ahead, and hence that more selling is ahead for the Dow, that, in fact, may not be the case.

If limited to roughly 10%, the Dow's decline constitutes solely a correction. Keep in mind also that the Dow is a lead indicator that always points to economic conditions 6-9 months ahead. Hence, investors, if they believe that measures being taken are addressing important concerns, could conclude that economic conditions will improve and hence send the Dow rising very soon.

People who are opposed to the legalization of drugs should consider the following: cocaine is having a better year than the stock market.

This fun fact courtesy of WallStreetFighter paints a very grim picture of the War on Drugs. Addicts are paying more for less-pure Bolivian marching powder. From January through June, the average price per gram of domestic cocaine purchases rose 24% from $95.89 to $118.70, while purity fell. Retail (involving 10 grams or more) prices rose 15% while "mid-level" wholesale prices surged 33% and wholesale (1 kilogram or more) prices jumped 11%.

Cocaine is a helluva drug -- just ask any celebrity. Heck, read any story on TMZ.com about Britney Spears and you'll understand. Supplies are down and demand is steady. That's the type of stable cash-flow business that usually attracts private equity, no?

Now consider that the Dow Jones industrial average rose 10.8% this year. The S&P 500 Index is up 7.98% while the tech-heavy Nasdaq Composite Index has surged more than 14% Cocaine has had a better year than many blue-chip stocks including General Electric Co. (NYSE: GE) (up 10%), News Corp. (NYSE: NWS) (up 5.5%) and Procter & Gamble Co. (NYSE: PG) (up 9.7%). Google Inc.'s (NASDAQ: GOOG) 35% does beat cocaine but not by much.



Unlike most products, cocaine really does sell itself as does pornography. Lots of people -- mostly really bad people -- are getting rich off drugs. Why shouldn't the federal government? Researcher Jon Gettman estimates that the government loses $31.1 billion in taxes because of the prohibition against marijuana, according to the Marijuana Policy Project. You can bet that the figures would be similar for cocaine.

Imagine how much money Uncle Sam could reap if he taxed cocaine or marijuana? What does the War on Drugs cost? Hundreds of millions? That money could be used to fund a real war on drugs -- treating addicts whose lives have been destroyed.

JPMorgan Chase & Co. (NYSE: JPM), Coca-Cola Co. (NYSE: KO), United Technologies Corp. (NYSE: UTX) and Altria Group Inc. (NYSE: MO) all reported better-than-expected earnings this morning underscoring the continued strength of the economy.

Net income at JPMorgan rose 2% to $3.37 billion, or 7 cents per share, compared with $3.30 billion, or 5 cents, a year earlier. Revenue rose 4% to $16.11 billion. The results included a $1.3 billion writedown and credit loss provisions of $18 billion. Analysts had expected profit of 90 cents on revenue of $16.6 billion. The results stunned Wall Street and highlighted Chief Executive Jamie Dimon's prowess as a cost-cutter.

The picture at Coke was also bright thanks to strong sales outside the U.S. Profit at the Atlanta-based company soared 13% to $1.65 billion, or 71 cents a share, from $1.46 billion, or 62 cents, a year earlier. Revenue rose 19% to $7.69 billion. Wall Street had expected profit of 68 cents.

Meanwhile, United Technologies continued to produce strong results. Net income at the parent of Pratt & Whitney aircraft engines and Otis elevators, surged 20% to $1.2 billion, or $1.21 per share, as revenue jumped 14% to $12.16 billion. The results surpassed the $1.16 average estimate of analysts polled by Thomson Financial.

Altria Group reported net income of $2.63 billion, or $1.24 per share, down from $2.88 billion, or $1.36 per share, because of the spinoff of Kraft Foods Inc. (NYSE: KFT), helped by higher prices and a weaker dollar, according to Reuters.

Visit AOL Money & Finance for more earnings coverage.

Don't expect the rally that pushed the Dow Jones industrial average past 14,000 today to last.

The world isn't going to end for investors tomorrow, but it may not have the perfect storm of bullish signals that investors are reacting to today that sent the index to record levels. I've listed a few of them below.

After warning of a 60% earnings decline in the third quarter, Citigroup Inc. (NYSE: C) Chief Executive Chuck Prince said he expects the fourth quarter to be more "normal." Former Fed Chairman Alan Greenspan said the credit slump may be ending. Shares of Lennar Corp. (NYSE: LEN) and other homebuilders rose after a Citigroup analyst said the worst may be behind the companies.

Today's rally lifted a broad array of stocks including Google Inc. (NASDAQ: GOOG), General Electric Co. (NYSE: GE) and ExxonMobil Corp. (NYSE: XOM). Even beleaguered Countrywide Financial Corp. (NYSE: CFC) got a lift as investors seem to have no doubt that at least one more rate cut was coming from the Federal Reserve after the Institute for Supply Management reported that manufacturing grew at its slowest pace in six months.

Stock futures started the day on a positive note, turning sharply higher in reaction to a wider-than-expected decline in August's producer price index (PPI) number. Despite thin volume during the morning hours, the major indices hovered in the black, awaiting the 2:15 interest-rate decision from Ben Bernanke and the Federal Open Market Committee.

Pleasantly surprising even the doves among us, the rate-setting board made an aggressive rate cut of 50 basis points to 4.75%. And ... they were off. Nearly all market sectors closed in positive territory, led by strong gains from the housing and financial-services groups (areas that have been most adversely affected by the recent credit crunch and subprime woes).

By the time the closing bell sounded, the Dow Jones Industrial Average (DJIA) had gained 336 points - the blue-chip index's biggest single-day jump in almost half a decade. With 29 of its 30 components closing above break-even - Boeing (NYSE: BA) was the lone exception - the Dow settled at 13,739.4, closing above the 13,700 level for the first time since July 25.

Elsewhere, the S&P 500 Index (SPX) tacked on 43 points, or 2.9%, to 1,519.78. Today marked the index's first close above the psychologically significant 1,500 threshold since July 25. And tech stocks weren't left out of the fun ... the Nasdaq Composite (COMP) rallied 70 points, or 2.7%, to 2,651.7, taking out the 2,650 mark for the first time since July 23. All three of the major market averages ended the session at their intraday highs.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

Last night I was so disappointed in some of my fellow stock investors (and big time whiners) that I closed the BloggingStocks day with The Dow throws a 280 point hissy fit!. Now we find the hissy fit is already over and the Dow Jones industrial average is up this morning as I write, about 140 points.

Don't you just love it. This is one crazy market. I expect the Dow to close strong today as investors take advantage of plenty of buying opportunities. Unfortunately what I expect and what happens are two different things. All bets are off, if a black cat prances across the trading floor, or Ben Bernanke sneezes.

I still hope the Federal Reserve leaves rates alone for years and I wish they would actually announce that intention and let people plan their investments based on sound principals, expanding markets, company earnings and not speculation about rates, or bail outs for wealthy (and greedy) hedge fund investors. It's all about stability and predictability.

One of our beloved editors and I were discussing how Bernanke must feel like a parent in a room full of whiney children at times. I think he had a shaky start to his tenure on the job but he has proven to be an adult about the situation and he has my support. Someone has to behave like a grown up. You won't see it from James Cramer ranting and raving. So plan on no cut and move on about your business.

To find more potential opportunities and verify my track record read Chasing Value or Serious Money.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.