Dow 9500 ... Where we go from here...

[First]

Originally posted by: Budarow
The economy and stock market is going to continue to drop and NOT come back for a LONG, LONG, LONG time. To the best of my knowledge, there is NO time in recent history which equals todays scenario. Even the crash of 1929-1933 can't compare. We didn't have $10T in debt, most of our jobs (first it was manufacturing and now it's the better paying, white collar technology jobs) going to 3rd world countries, the largest entitlement program in human history (Social Security) growing at exponential rates (12,000 peeps turn 60 years old EVERY day which means in 2 years 12k will be able to collect SS), and a LONG-TERM expensive war with no end in sight.

And the crash of 1929 didn't "rebound" until 1954 (i.e., $1 in the DOW was worth ~$0.18 in 1933 and was worth $1 in 1954, plus an average dividend of 5.5% which was better than the 3% you get now).

So count your loses now and move on or watch your 401k continue to shrink to ~1/2 of where it is now.

Just my opinion, but shorting the market appears to be the only way to make any money in the stock market.

I don't know where you got your numbers, but stocks have never averaged a negative real return over any 17 year period (or longer) since 1802. And in terms of real wealth lost, absolutely nothing compares to the Great Depression, which was decade-long and included rampant unemployment, deflation, and crippled future investment expectations among Americans.

 

[Thump553]

The stock market actually performed reasonably normal on Friday, the first day in a long time. By normal I mean none of the whipsaw plunges and rises for no apparent reason. It was down a bit but some pretty crappy (and expected) economic news came out in the morning. This was a witching day, too, when the options expire.

Libor rates are dropping fast too, indicating the credit markets are becoming upstuck.

Hopefully we can put together a string of these sane days, which will inspire investors to come back into the market. For the last couple of weeks its been a wild crapshoot where luck is the most significant factor.

 

[Budarow]

Originally posted by: Evan

Originally posted by: Budarow
The economy and stock market is going to continue to drop and NOT come back for a LONG, LONG, LONG time. To the best of my knowledge, there is NO time in recent history which equals todays scenario. Even the crash of 1929-1933 can't compare. We didn't have $10T in debt, most of our jobs (first it was manufacturing and now it's the better paying, white collar technology jobs) going to 3rd world countries, the largest entitlement program in human history (Social Security) growing at exponential rates (12,000 peeps turn 60 years old EVERY day which means in 2 years 12k will be able to collect SS), and a LONG-TERM expensive war with no end in sight.

And the crash of 1929 didn't "rebound" until 1954 (i.e., $1 in the DOW was worth ~$0.18 in 1933 and was worth $1 in 1954, plus an average dividend of 5.5% which was better than the 3% you get now).

So count your loses now and move on or watch your 401k continue to shrink to ~1/2 of where it is now.

Just my opinion, but shorting the market appears to be the only way to make any money in the stock market.

I don't know where you got your numbers, but stocks have never averaged a negative real return over any 17 year period (or longer) since 1802. And in terms of real wealth lost, absolutely nothing compares to the Great Depression, which was decade-long and included rampant unemployment, deflation, and crippled future investment expectations among Americans.

Look at a chart of the DOW from 1929 through 1955. You'll see that it's back to "break even" in 1954 (24 years after the initial crash started). Your stat includes dividend payments from stocks which averaged 5.5% for over a ~70 year time period (~1930-2000). If you add stock appreciation and dividends, you'll come up better numbers for breaking even with the markets.

We're not through with this "correction" yet. We are in a period of deflation now which IMO will continue for a long time.

 

[Budarow]

Originally posted by: Thump553
The stock market actually performed reasonably normal on Friday, the first day in a long time. By normal I mean none of the whipsaw plunges and rises for no apparent reason. It was down a bit but some pretty crappy (and expected) economic news came out in the morning. This was a witching day, too, when the options expire.

Libor rates are dropping fast too, indicating the credit markets are becoming upstuck.

Hopefully we can put together a string of these sane days, which will inspire investors to come back into the market. For the last couple of weeks its been a wild crapshoot where luck is the most significant factor.

I heard a rumored report on Thursday that another world-wide interest rate drop was in the works. Anyone else hear this? I'd like to know cause I'm planning to start shorting the market again right after it happens. I may start next week even if an interest rate drop is not annouced soon.

 

[Thump553]

Here's one opinion that it will not be as bad as the doomsayers are forecasting:

Sorry, Chicken Little-Barron's article

Then again, this article was written before Bush scheduled his world summit on the markets-and we all know what Bush's pep talks have done to the markets.

Budarow-there is an expectation that the Fed will drop interest rates another one-quarter at their next regular meeting-which I think is the 29th. Is that what you are thinking of? I haven't heard anything about another coordinated drop and since the credit lockup is thawing, that doesn't seem likely to me.

 

[dmcowen674]

Originally posted by: Thump553
Here's one opinion that it will not be as bad as the doomsayers are forecasting:

Sorry, Chicken Little-Barron's article

The main positive is the huge boost to consumer spending that will come from the decline in energy costs. Although the run-up in oil, which punished consumers in the spring and summer, made front-page news, far less attention has been paid to the benefits of petroleum's recent slide.
===================================================
Then again, this article was written before Bush scheduled his world summit on the markets-and we all know what Bush's pep talks have done to the markets.

Budarow-there is an expectation that the Fed will drop interest rates another one-quarter at their next regular meeting-which I think is the 29th. Is that what you are thinking of? I haven't heard anything about another coordinated drop and since the credit lockup is thawing, that doesn't seem likely to me.

What makes you and him think they will keep oil low?

 

[ponyo]

Originally posted by: Thump553
Here's one opinion that it will not be as bad as the doomsayers are forecasting:

Sorry, Chicken Little-Barron's article

Then again, this article was written before Bush scheduled his world summit on the markets-and we all know what Bush's pep talks have done to the markets.

Budarow-there is an expectation that the Fed will drop interest rates another one-quarter at their next regular meeting-which I think is the 29th. Is that what you are thinking of? I haven't heard anything about another coordinated drop and since the credit lockup is thawing, that doesn't seem likely to me.

Barron's cover is usually contrarian indicator. Fading what's on Barron cover makes you money more often than not.

 

[Thump553]

Originally posted by: dmcowen674

What makes you and him think they will keep oil low?

Dave, do you mean that you don't think oil is 50% of the price it was four months ago that the the demand dropped 50%? BTW, when is the price of gasoline and heating oil dropping 50%?

 

[imported_Lothar]

Originally posted by: Thump553
Here's one opinion that it will not be as bad as the doomsayers are forecasting:

Sorry, Chicken Little-Barron's article

Then again, this article was written before Bush scheduled his world summit on the markets-and we all know what Bush's pep talks have done to the markets.

Budarow-there is an expectation that the Fed will drop interest rates another one-quarter at their next regular meeting-which I think is the 29th. Is that what you are thinking of? I haven't heard anything about another coordinated drop and since the credit lockup is thawing, that doesn't seem likely to me.

Barrons is the "Fox news" of the investing world.
I pay little attention to their articles.

 

[dmcowen674]

Originally posted by: Thump553

Originally posted by: dmcowen674

What makes you and him think they will keep oil low?

Dave, do you mean that you don't think oil is 50% of the price it was four months ago that the the demand dropped 50%? BTW, when is the price of gasoline and heating oil dropping 50%?

No demand has not dropped significantly enough.

The whole S&D thing has thoroughly been trashed and debunked this year.

If you still believe it either there is no hope for your brain or you are in the oil industry and personally profit.

 

[Budarow]

Originally posted by: Thump553
Here's one opinion that it will not be as bad as the doomsayers are forecasting:

Sorry, Chicken Little-Barron's article

Then again, this article was written before Bush scheduled his world summit on the markets-and we all know what Bush's pep talks have done to the markets.

Budarow-there is an expectation that the Fed will drop interest rates another one-quarter at their next regular meeting-which I think is the 29th. Is that what you are thinking of? I haven't heard anything about another coordinated drop and since the credit lockup is thawing, that doesn't seem likely to me.

No. I heard about the "spectulation" regarding another world-wide interest rate cut on CBS news (WWJ AM 950 in Detroit) on Thursday morning ~8:25 a.m.

At the very least, you guys need to be alarmed with respect to the stock market going forward and your retirement accounts. I'm in my 40's and have been paying close attention to the economy (mostly U.S.) and the stock market for the last 12 years.

The U.S. has been the driving force of the world's economy for many decades now and the great bull market from 1982 to 2000 can't readily be repeated. From 1982 to ~1990, the stock market was mostly driven by deficit spending of ~$3T. And from 1990 to 2000, it was driven by worker productivity gains with the wide-sread use of the PC up until the tech bubble burst. From 2000 until now, it was driven by home price increases and deficit spending by home owners (and the U.S. government) running up their home equity lines of credit. Now the "cons" are all up. Home owners can't borrow, the U.S. government shouldn't either (although they are more so than ever at our peril), and now the financial world is going to totally crap out. Things can only go a lot lower before they start back upwards again.

Maybe new energy technologies like solar or wind will be the answer to the next stock market rally. But that'll be 10 years or more out.

 

[blackangst1]

If the stock market was so bad why did Buffet move 100% of his personal investments to stocks from 80% bonds?

 

[bctbct]

Originally posted by: blackangst1
If the stock market was so bad why did Buffet move 100% of his personal investments to stocks from 80% bonds?

Knowing the gov't they have backed his investments in a PR move to ease public fear. I kid.... hopefully :Q

 

[Budarow]

Originally posted by: blackangst1
If the stock market was so bad why did Buffet move 100% of his personal investments to stocks from 80% bonds?

The market isn't so bad, if you look at all the BS statistics such as forward PEs. But I think it will be over the next 5-10 years. The market supposedly looks ahead 6-9 months so a huge drop in the market would not be priced in since not enough peeps are guessing the economy will be really bad by then. A lot of experts are guessing a recession will be short lived.

The tech bubble was a con, the housing market bubble was a con and I can't see another really big con on the horizon which would save the stock market from a big fall.

Let's face it. Every "bubble" is a con (i.e., wild speculation which can not be sustained with an ensuing collapse). And what drives the stock market up more than a good con?? And what brings the stock market down to it's knees more than a bubble bursting??

I saw the tech bubble coming several years before it burst. I saw the housing market bubble coming several years before it burst. I admit getting the timing wrong for both cause I got out of the stock market back in 1998 and didn't get back until recently with my short activity. And I admit that I got out way too early only because it's very hard to believe so many peeps can buy into a con for so long after it's really evident it's a bubble. I guess it's the greed factor (i.e., hard to believe so many peeps are so greedy that they stay in way past the point of rational thinking).

I'm just very glad ETF are available for peeps like me with all our $$$ in IRA and 401K plans. I can now short the market without needing to have extra cash in non-retirement accounts (which I have very little of).

And I'm glad to have followed the tech and housing bubbles so I can have confidence in the fall of this stock market. I'm sorry for all those who have bought into this con and didn't get out in time, but I've got to "make hay while the sun shines" for me. This may be my last chance to make a lot of money in an attempt to be able to retire in 10 or 15 years so I'm going for it now.

Good luck to you peeps.

 

[Dissipate]

Originally posted by: blackangst1
If the stock market was so bad why did Buffet move 100% of his personal investments to stocks from 80% bonds?

Buffet is getting preferred stock and sweetheart deals the individual investor could only dream of getting.

The economy is going to take a HUGE dump, more than most realize. The next shoe to drop will be the consumer debt market. Once the consumer debt market tightens up BIG TIME, consumption will take a dump, and so will the GDP along with that.

Then, on top of that the politicians will be up against a wall, they will have to either cut programs, print money or raise taxes to pay for the bailout. But the problem is, raising taxes will just make the situation much worse. It will choke off much needed capital to revive the markets. That just leaves two options: run the printing press or cut programs. Cutting programs is very unpopular and so the printing press will be the most attractive option to the politicians. Therefore, inflation is in the pipeline. Add high unemployment to that and you get stagflation.

 

[nullzero]

Originally posted by: Dissipate

Originally posted by: blackangst1
If the stock market was so bad why did Buffet move 100% of his personal investments to stocks from 80% bonds?

Buffet is getting preferred stock and sweetheart deals the individual investor could only dream of getting.

The economy is going to take a HUGE dump, more than most realize. The next shoe to drop will be the consumer debt market. Once the consumer debt market tightens up BIG TIME, consumption will take a dump, and so will the GDP along with that.

Then, on top of that the politicians will be up against a wall, they will have to either cut programs, print money or raise taxes to pay for the bailout. But the problem is, raising taxes will just make the situation much worse. It will choke off much needed capital to revive the markets. That just leaves two options: run the printing press or cut programs. Cutting programs is very unpopular and so the printing press will be the most attractive option to the politicians. Therefore, inflation is in the pipeline. Add high unemployment to that and you get stagflation.

Yeap your dead on here... When over 70% of the economy is consumer driven this is going to make this credit crisis look pale in comparison. No bailouts will be able to fix this problem... its a problem of massive consumer debt, rising cost of living, and stagnant wages that has been going on for 30 years. The consumer spending will drop off the cliff very soon and take the economy down with it.

 

[Dissipate]

October 18, 2008
Bad credit card debt is expected to reach $100B
By Edward Gately
Tribune

A massive tidal wave of bad credit card debt is surging toward Wall Street, prompting more investor panic and pushing more consumers to the brink of financial devastation.

That?s according to Innovest Strategic Value Advisors, an international investment research and advisory firm. Its latest report, ?Credit Cards at a Tipping Point,? forecasts that credit card charge-offs by financial institutions will reach near $100 billion by the end of 2009.

Charge-offs are when credit card accounts have been deemed irrecoverable or there has been no payment for 120 days, according to Innovest.

The economy already is shaky under the crushing weight of the mortgage crisis, and this will only add to that instability, said Gregory Larkin, senior analyst with Innovest.

?This is really going to start registering in the first quarter of 2009, when we?re looking at about $18.5 billion to $20 billion of charge-offs, and by probably the (end of) 2009 we?re probably looking at between $96 billion and $102 billion, and then after that we think it will start to taper off,? he said. ?In our view, it?s at least a 12-month cycle. We?ve never seen credit cards default at this level before, so this is going to break the record.?...

Text

After all these defaults go down watch earnings reports across the board get slashed. The U.S. economy has been propped up by an orgy of debt for far too long. A 0 or negative savings rate is NOT sustainable. The insanity is coming to a close soon.

 

[First]

^ rofl.

 

[BoberFett]

:roll:

Let us know when you get out of school, boy.

 

[StageLeft]

I find it very natural and logical to conclude that there will be a great increase in credit card defaults. They've been growing huge, especially in the last year credit use has increased even (except for recently, where consumer lending has cut back, more from being forced back than people being responsible, I suspect).

As credit card use has increased and we find the historical escape for some of HELOCs being harder, plus a recession/increases in unemployment, particularly in the sectors of the economy most likely to be in a bad way with CC debt (middle and lower classes), I cannot really imagine a convincing argument against the idea that it's going to be increasingly substantial as a factor here--the defaults, I mean. I don't know how much it will hurt banks, but I think we're going to soon have a come-to-Jesus with credit cards to some degree. They are not going away, but I am not sure it's a good time to have a lot of credit card debt now, especially given that companies can at any time jack your rates simply because they want to.

 

[Thump553]

There is such a huge profit margin with credit cards, with their high interest rates, merchants fees, substantial penalties for late payments, over limits, etc. and their extraordinary lax credit standards for years, I will not shed a tear for any crisis there. The only thing they have done for years to curtail risk is to lobby successfully to make bankruptcy more expensive and difficult.

I have represented lots of people going through bankruptcy and one thing that is consistent is that they continue to get unsolicited credit card applications in the mail right up to the day they file bankruptcy.

Our government had better not be considering spending a dime to bail out the credit card shylocks.

 

[dmcowen674]

Originally posted by: Thump553
There is such a huge profit margin with credit cards, with their high interest rates, merchants fees, substantial penalties for late payments, over limits, etc. and their extraordinary lax credit standards for years, I will not shed a tear for any crisis there. The only thing they have done for years to curtail risk is to lobby successfully to make bankruptcy more expensive and difficult.

I have represented lots of people going through bankruptcy and one thing that is consistent is that they continue to get unsolicited credit card applications in the mail right up to the day they file bankruptcy.

Our government had better not be considering spending a dime to bail out the credit card shylocks.

Amen

It used to be called Usery until the thugs bought out the government.

 

[StageLeft]

Originally posted by: Thump553
There is such a huge profit margin with credit cards, with their high interest rates, merchants fees, substantial penalties for late payments, over limits, etc. and their extraordinary lax credit standards for years, I will not shed a tear for any crisis there. The only thing they have done for years to curtail risk is to lobby successfully to make bankruptcy more expensive and difficult.

I have represented lots of people going through bankruptcy and one thing that is consistent is that they continue to get unsolicited credit card applications in the mail right up to the day they file bankruptcy.

Our government had better not be considering spending a dime to bail out the credit card shylocks.

Oh Thump, such optimism, but here's how it can go:

"We have to assist these lenders so that they can still make desperately-needed credit available to some of those who are temporarily down on their luck. In this economy, some need credit just to make ends meet, to put gas in their car, to put food on the table. How can we remove this from them?"

 

[BoberFett]

I agree, no pity for the credit card companies. However, the inability of Americans to spend now that their available credit is drying up is going to have a massive impact around the world. All the bullshit Evan spews about how everything is rosy now that banks are liquid again has no basis in reality. Liquidity doesn't start and stop with banks. Consumers, remember them? They drive the economy. They are completely illiquid. Everything has been spent. The credit cards are maxed. The HELOC days are over. I'm not sure what companies Evan intends to loan money to when he gets out of the classroom. Companies don't borrow money if they don't have customers to sell to.

 

[First]

Originally posted by: BoberFett
:roll:

Let us know when you get out of school, boy.

Been out for a while and make more than you, podunk.