December 1, 2009 - As I write this, Dow Jones Industrial Average closed up 126 points. A good day on top of a good year. Investors, as always, are looking ahead of today's headlines and determining that things will most likely improve in the next 6 months to a year, thereby feeling confident enough to buy stocks. But things aren't all rosy, and the lights aren't all green. Here are some items to consider before you feel the need to fully invest in this market.

Second, look at interest rates. They're very low. Why is this a concern? Because it reflects the slow economy. When producers are producing and service companies are fully booked, they need more capital to grow. So they often borrow it. Right now, there isn't much demand for debt because new projects don't "pencil out". They make no economic sense. Especially when factories are closing, and workers are being laid off. There's no need to expand if there isn't demand for your goods or services. If interest rates start to rise, it's an indicator that economic activity is picking up, and more jobs are being filled.

Third, the stock market itself. It's had a great run, even more robust than gold. The Dow Jones Industrial Average's 52-week low was 6440. Now it's trading at 10,472 (Dec. 1), just a little below its 52-week high of 10,524. That's a gain of 62.61% in one year. Any investor would take that and say thanks. The concern is: are investors being too optimistic? Have they bid up stocks well beyond reasonable expecations? For example, housing companies are still losing money, but their stocks have rebounded very well. The same is true for many banks. Investors are saying by buying these stocks and other industries that still show losses that they recognize the problems of today but believe, in a rather short time, recovery will bring profits, big ones. If those profits don't show within 3 to 6 months, these stocks could fall hard.

Fourth, while Christmas shopping started with a positive sound of ringing cash registers (at least online they did), the question is whether continued spending is part of the new year. Since consumers are about 67% of the U.S.'s economy, they need to be spending if new jobs are in the near future. If consumers emulate Japan's, we're in trouble. That economy has stalled for 10 years. New government programs are being initiated to help restart it. They're a nation of savers which is a good thing usually. But too much saving, like too much spending, can be trouble. If U.S. consumers go into an even stronger savings mode, don't expect new jobs any time soon because companies won't need workers as the demand just won't be there.

There are plenty of other things to worry about. There are also plenty of bright spots, suggesting that the worst is over, that better days are, in fact ahead. Those will be highlighted next week. As always, the question is whether the glass is half-full or half-empty. And, as always, there are two sides to the answer. If, as investors, we can see some of the above resolved in a positive way, the stock market should continue to do well.

Ted Allrich