Is it safe to invest in stocks ?

FANNIE MAE Share Price Chart | FNM - Yahoo! Finance

Two years ago this stock (FNM) was at $62.46 per share price
One year ago, May 8, it was at $23.68 per share
Yesterday, May 7th it was at $00.88 per share

It was touted by most analysts, incuding Bob Brinker, a very reliable and conservative investment commentator on his show "MoneyTalk, as an excellent and secure investment, with it's implied Federal guarantee.

Does this suggest anything about the future of highly rated but potentially "politically volatile" stocks?

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Now is the time. My brother bought some stock at $10 a share and it went up to $24 a share and then he sold. Made $14k, minus the broker fee of course.

On Wall Street: Beware of the sucker’s rally
By Spencer Jakab
Published: May 8 2009 17:42 | Last updated: May 8 2009 17:42
The market is a cruel mistress indeed. Compounding the pain of big swoons, it kicks investors when they are down by luring them into sucker’s rallies – typically sharp but fleeting bounces in the middle of a bear market.

The current recovery has propelled the S&P 500 a third above its March low in just 60 days, convincing many sceptics that a new bull market has begun. Noted bear Doug Kass of Seabreeze Partners said the recent nadir may be a “generational low” and strategist Tobias Levkovich of Citigroup claimed many large investors who had feared another bear market rally may soon capitulate, pushing markets higher.

The Bull Market Express may really be pulling out of the station, but Wall Street’s trains have a nasty tendency to derail just as passengers jostle for seats. Most recently, the S&P 500 soared 24 per cent over seven weeks ending in early January, only to plunge to a new low. It was a fairly typical sucker’s rally and bear markets often need more than one to create sufficient disillusionment for a definitive bottom.

The 2000–2002 bear market had three, with average gains of 21 per cent in the Dow Jones Industrials over 45 days.

The granddaddy of all bear markets, 1929 –1932, had six false alarms with an average gain of 47 per cent. And Japan’s ongoing bear saw the Nikkei rise by at least a third four times in its first four years with 10 more false dawns since then...

What if we held an auction and no one came?
POSTED AT 9:26 AM ON MAY 8, 2009 BY ED MORRISSEY
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Great Britain knows how that feels, and now so does Barack Obama. Treasury had to offer higher-than-expected prices to investors to get them to buy government debt, signaling a distrust of American economic policy and financial strength. That will have significant consequences for Obama’s deficit spending policies (via Instapundit):

Weak demand at a Treasury bond auction touched off worries in the stock market Thursday about the government’s ability to raise funds to fight the recession.

The government had to pay greater interest than expected in a sale of 30-year Treasurys. That is worrisome to traders because it could signal that it will become harder for Washington to finance its ambitious economic recovery plans. The higher interest rates also could push up costs for borrowing in areas like mortgages.

Investors also pocketed some gains after strong rally in stocks this week and ahead of the government’s April employment report on Friday. Investors were jittery ahead of the formal release of results from the government’s “stress tests” of bank balance sheets, which came out later Thursday.

Major stocks market indicators slid more than 1 percent, including the Dow Jones industrial average which lost 102 points after gaining nearly the same amount Wednesday.

Once again, this shows exactly how speculative the White House and the CBO have been in calculating deficits for the next decade based on Obama’s spending plans. Let’s take another look at the deficit projections from OMB and CBO:

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Both sets of numbers depended on a certain level of economic growth, which so far hasn’t begun despite Obama’s predictions of rebound in Q1 from the application of the stimulus. It also depended on a constant supply of debt purchase at steady bond rates. These projections had to consider interest payments on all of the debt Obama planned to buy while running these deficits, and any hike in interest rates means that those interest payments will have to go up. That also means that we will have to spend more money than Obama projected, creating even higher deficits and the need for even more bond sales — and more interest payments on those.

It’s basically a Ponzi scheme, and it’s accelerating.

One of two things will have to occur to resolve the situation. Either the federal government will have to massively cut its spending in order to service all that debt at the higher interest rates now demanded, or it will have to pass massive new taxes in order to generate enough revenue to accomplish it. Which do you think Obama is likely to try?

Deficit spending usually is beneficial for stocks, at least in the short term.

When American go back to work, THEN I would feel confident to invest generally.

Bear in mind that I still think that the price of real estate is so far out of line with average incomes that things are going to remain out of kilter regardless of what the stock market does from day to day.

That doesn't mean that some stocks cannot be winners, but it does mean that Amnerica cannot win until it does something about the shrinking American middle class.

Based on what?

We've ususally had deficit spending, but is there a strong correlation? Did stocks do better in the 00s with big deficit spending vs. 90s with low deficit spending? How about the 50s and 60s compared to the 80s?

I haven't done a study, but I doubt you'd find much correlation.