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Stock prices headed toward zero

As each month passes, more and more companies get into the kind of trouble that pushes them toward Chapter 11 or insolvency. Some of the companies that hit that point several months ago include Sirius XM (NASDAQ: SIRI) and Charter Communications (NASDAQ: CHTR).

In the next several months two or three large companies could be added to the list.

Advanced Micros Devices (NYSE: AMD) posted a narrow loss last quarter compared with the same quarter a year ago, but a third of its revenue disappeared. If PC and server sales get worse, its sales could shrink faster than the company can cut costs. The firm's gross margins are dropping fast and AMD has long term debt of over $4.7 billion.

Citigroup (NYSE: C) still faces the prospects that it could be nationalized if it posts more huge losses in the first quarter. Last week, its market cap dropped to $17 billion. A massive capital investment from the Treasury could wipe that equity out.

General Motors (NYSE: GM) may seem like an obvious choice, but its shares could go to zero faster than investors think. If the UAW or creditors walk away from restructuring talks, GM's attempt to cut its costs to get more government assistance based on a plan to be submitted on March 31 would be ruined.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Are Republican presidents better for the stock market?

The Grand Old Party (GOP) is known for supporting big business. So it pays to elect Republicans to the White House, right? If you analyze the stock market performance under Republican and Democratic presidents, the answer is a resounding NO. Democratic presidents generate average stock market returns in excess of the risk-free rate of 10.69% -- roughly six times the 1.69% earned under Republican administrations.

Investopedia describes the research of Pedro Santa-Clara and Rossen Valkanov who analyzed the value-weighted returns on stocks between 1927 and 1998 under Democratic and Republican presidents. And they found that the excess returns of stocks over the risk-free rate of return -- as measured by the Center for Research into Securities Prices (CRSP) indexes versus three-month Treasury bill rates -- were far higher for Democratic presidents (10.69%) than for Republican ones (1.69%).

Of course, these are just long-term statistics. Under the last Democratic president, stocks rose an annual average of 17.4%. The current Republican White House occupant has presided over an average annual decline of 1.1% -- the S&P 500 was 1,342 when he took over and stands at 1,233 today -- the only president of either party of the last 11 to oversee a decline in stocks.

Continue reading Are Republican presidents better for the stock market?

If you like rising incomes, higher stock prices and economic growth, vote Democratic

The New York Times reports that a new book -- Unequal Democracy by Larry M. Bartels, a Princeton economics professor -- contains statistics that demonstrate an important historical pattern -- the U.S. economy does better under Democratic presidents than under Republican ones. That is, the last eight years -- in which the median income shrank while consumer prices rose -- is just an extreme example of the economic impact of Republican presidencies.

And based on statistics from Forbes, the stock market also does better under Democratic presidents. Forbes "found that the S&P 500 has averaged a total return of 14.1% per year under Democratic presidents since April 1945, and 11.8% under Republicans. The best total returns--17.4% per year--were under Bill Clinton, whose presidency ranked first in economic results."

How much better does the economy do under Democrats? The Times reports that between 1948 and 2007, Gross National Product (GNP) growth per capita was 1.14 percentage points higher under Democrats (2.78%) compared to 1.64% for Republicans. The Times reports "that 1.14-point difference, if maintained for eight years, would yield 9.33 percent more income per person, which is a lot more than almost anyone can expect from a tax cut."

Continue reading If you like rising incomes, higher stock prices and economic growth, vote Democratic

Symbol Lookup
IndexesChangePrice
DJIA+20.0310,246.97
NASDAQ-2.982,151.08
S&P 500-0.071,093.01

Last updated: November 10, 2009: 06:35 PM

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