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

[Dissipate]

Originally posted by: Evan
Any short-term lunacy should be avoided, basically stick with blue chip equity mixed with a more
conservative ratio of bonds and commodities.

What blue chips?

 

[ponyo]

Originally posted by: Budarow

Originally posted by: Skoorb

Shorting the stock market is the only way to "earn" for retirement (i.e., trading ETFs in an IRA). If you plan to leave your 401k money in stocks, and the market continues to go down, your shorting activity may at least off-set your loses (goes both ways though). Keep in mind you can still loose money in a down market while shorting stocks. Even these ETFs are strange and seem to track their benchmarks VERY loosly.

You could move it into bonds.

I got an email from my dad last night. They had avoided asking their retirement management how much of a hit they'd taken but finally had to call him after Thursday's rout. Turns out their fund has lost only 14% (as of the end of Oct, it would be a bit worse now). They're set to retire in several years, so much of it would have been bonds anyway, but whoever is managing their fund should get a medal.

MY PREDICTIONS
As more and more peeps seek "protection" from a sinking stock market, U.S. government treasuries should do well UNTIL the stock market gets near the bottom (~DOW 4-5k, the DOW will eventually hit a bottom at ~3k).

Once the stock market no longer gets much attention (i.e., volatility sharply DECREASES and it doesn't move up and down much day to day), the attention will turn to the U.S. debt which will likely be ~$12-14T in 2 years. This will be BAD attention since the larger the debt goes, the more peeps will discuss a U.S. default. That's right a U.S. DEFAULT. This should cause interest rates on U.S. treasuries to skyrocket (to include all other interest rates) and bond prices to TANK.

Gold will hit $2,500 to $3,000 per ounce within 2 years and the value of the U.S. dollar will plummet. The U.S. dollar sinking assumes the other major governments in the world (EU, Japan, China, etc.) aren't in the exact same boat as the U.S. They may be, but maybe not since they don't have near the debt of the U.S. (at the moment). This could rapidly change though given the depression we're in/headed for in the near future.

Gold will still skyrocket due to fear alone. I'm hoping gold sinks to ~$550/ounce over the next few months due to deflation of commodities, but it may just continue to rise as it has over the last week. Gold will be VERY hard to time in the near future and picking a bottom.

Preserving capital and even making some money shorting the stock markets is possible; however, preventing your "money" from sever loses due to inflation (U.S. dollar sinking) is another MAJOR challenge.

We are ALL going to need a lot of LUCK to maintain even a semblance of our current lifestyle over the next 5-10 years. Truely, we ALL need to get used to the idea of having LESS money, possibly more FREE time and less "toys" (hopefully, we'll have shelter, food, water, utilities and reasonable health care).

This is sort of the line of thinking in my doomsday deflation to hyperinflation scenario. I'm planning to convert around 20% of my assets into gold, agricultural commodities, and foreign currency as a hedge. I'm just waiting for the dollar to continue to gain strength during this deflation and waiting for the right time to do the swap. Hopefully it never gets that bad. But if gets anything near it, I'll have some protection.

 

[Budarow]

Originally posted by: Evan

Originally posted by: Budarow

Originally posted by: Skoorb

Shorting the stock market is the only way to "earn" for retirement (i.e., trading ETFs in an IRA). If you plan to leave your 401k money in stocks, and the market continues to go down, your shorting activity may at least off-set your loses (goes both ways though). Keep in mind you can still loose money in a down market while shorting stocks. Even these ETFs are strange and seem to track their benchmarks VERY loosly.

You could move it into bonds.

I got an email from my dad last night. They had avoided asking their retirement management how much of a hit they'd taken but finally had to call him after Thursday's rout. Turns out their fund has lost only 14% (as of the end of Oct, it would be a bit worse now). They're set to retire in several years, so much of it would have been bonds anyway, but whoever is managing their fund should get a medal.

MY PREDICTIONS
As more and more peeps seek "protection" from a sinking stock market, U.S. government treasuries should do well UNTIL the stock market gets near the bottom (~DOW 4-5k, the DOW will eventually hit a bottom at ~3k).

Once the stock market no longer gets much attention (i.e., volatility sharply DECREASES and it doesn't move up and down much day to day), the attention will turn to the U.S. debt which will likely be ~$12-14T in 2 years. This will be BAD attention since the larger the debt goes, the more peeps will discuss a U.S. default. That's right a U.S. DEFAULT. This should cause interest rates on U.S. treasuries to skyrocket (to include all other interest rates) and bond prices to TANK.

Gold will hit $2,500 to $3,000 per ounce within 2 years and the value of the U.S. dollar will plummet. The U.S. dollar sinking assumes the other major governments in the world (EU, Japan, China, etc.) aren't in the exact same boat as the U.S. They may be, but maybe not since they don't have near the debt of the U.S. (at the moment). This could rapidly change though given the depression we're in/headed for in the near future.

Gold will still skyrocket due to fear alone. I'm hoping gold sinks to ~$550/ounce over the next few months due to deflation of commodities, but it may just continue to rise as it has over the last week. Gold will be VERY hard to time in the near future and picking a bottom.

Preserving capital and even making some money shorting the stock markets is possible; however, preventing your "money" from sever loses due to inflation (U.S. dollar sinking) is another MAJOR challenge.

We are ALL going to need a lot of LUCK to maintain even a semblance of our current lifestyle over the next 5-10 years. Truely, we ALL need to get used to the idea of having LESS money, possibly more FREE time and less "toys" (hopefully, we'll have shelter, food, water, utilities and reasonable health care).

Sorry, but you have to be a bit loony to honestly believe the Dow is going to hit 3K or that the U.S. is anywhere near default. For one the overall U.S. market is already below 13 P/E, so for it to sink to about 3K you're talking below 6 P/E. No sensible reason for stocks to hit that low short of a massive terrorist attack. You're also flatly wrong that countries like (as one example) Japan won't be in the same boat as the U.S, particularly since Japan is already in recession and has a massive debt just like the U.S.; in fact, Japan is in far more debt than the U.S., about twice their annual GDP. We're at about 80% of our annual GDP.

Gold won't touch $2500-$3000 anytime in the near future either, that's just jumping the shark. At this point shorting is wildly dangerous, flatly stupid really, to recommend to the average investor. And as far as ETFs go, because it trades like a stock whose price fluctuates daily, it does not have its NAV (net asset value) calculated every day like a mutual fund does. Its disadvantages are numerous; you have to pay commission when buying and selling (most open end mutual funds and index funds are no-load funds, you buy and sell at NAV). Narrow niches undermine the broad safety of index funds, so these niche funds are more suited for short-term speculation than long term investment, and therefore many are designed for speculators who wish to bet on short term movements. Any short-term lunacy should be avoided, basically stick with blue chip equity mixed with a more conservative ratio of bonds and commodities.

I TRUELY hope you're right and I'm wrong. But if I'm wrong, I'll miss a bull market and preserve all my capital. If you're wrong, all the average Joe investors out there (to include yourself) will loss almost all their savings for the next 10-20 years.

Keep in mind...shorting this market using ETFs is NO cake walk. Even if the market goes down, these "short" ETFs are NOT "true" to their benchmarks. EEV is a good example. The index EEV is supposed to track (MSCI Emerging Asian Markets outside Japan) went down last night, so you'd think EEV would go up today. Not so. It's WAY down just because the U.S. market is way up.

The ETFs I pay attention to seem to track the U.S. market only. I suppose you could assume EEV is down because peeps think the Asian market will go way up tonight, but it's tough to figure out.

 

[TallBill]

I wish I wasn't a student and had surplus cash right now

 

[StageLeft]

Well, you don't need to be a loon to think it could hit 3k, frankly. It's been down from 14000 to 7600--6400 points. To pretend that it couldn't drop another 4600 in the face of the greatest, by most accounts, economic crisis since the depression would be denying a plausible process. If I had to put my money on it--and most of us are doing just that--I'd say it won't, and so that's why I still have most of my investments in stocks. Still, who really knows how catastrophic it will be, nobody does.

 

[First]

Except the Dow at 14K was clearly, without any doubt whatsoever, overpriced. The P/E's were simply getting absurdly high. We've seen adjustments like that before, we've never seen a percentage dip of 14k to 3k since the Great Depression and the current climate is nothing like the Great Depression despite hype from the media. The worst since the Depression, but this doesn't sniff Depression-era suffering, where employment hit 25%, GDP decreased by 10%+ annually, etc.

To get down to 3K would mean people think equity is next to worthless. Sorry, but that just isn't going to happen unless some sort of disastrous game-changer like a terrorist attack occurs. Plenty of economists thought 7500 was likely too (though certainly it won't stay there, and it's currently at 8300). Dow 7500 is overreaction and you'll see that reality by next year when P/E's come more in line with reality (i.e. higher). Probably late in the year, but numbers say equity is a bargain at this point.

 

[SP33Demon]

Originally posted by: Skoorb
Well, you don't need to be a loon to think it could hit 3k, frankly. It's been down from 14000 to 7600--6400 points. To pretend that it couldn't drop another 4600 in the face of the greatest, by most accounts, economic crisis since the depression would be denying a plausible process. If I had to put my money on it--and most of us are doing just that--I'd say it won't, and so that's why I still have most of my investments in stocks. Still, who really knows how catastrophic it will be, nobody does.

Yep, markets are built on confidence, not rationality. Emo and slitting wrists today? So be it. Just depends on the mood.

 

[StageLeft]

Except the Dow at 14K was clearly, without any doubt whatsoever, overpriced.

Obviously enough thought it _wasn't_ overpriced to actually bid it up that high. As sp33demon says, it's based on confidence.

Unless I am sadly mistaken, the 25% of the great depression kicked in during it; the unemployment of 25% was a result of, not cause of, the depression (though both are intertwined and feed each other, nothing is necessarily the cause of something else and they are symbiotic). We're already breaking ground quickly on unemployment, which will help slow recovery.

 

[TallBill]

Well, I'll enjoy logging in to look at my portfolio tonight at least. I don't expect the Dow to break 14k again for 2 years maybe.. but keeping it near 9-10k will keep people more sane.

 

[Budarow]

Originally posted by: Evan
Except the Dow at 14K was clearly, without any doubt whatsoever, overpriced. The P/E's were simply getting absurdly high. We've seen adjustments like that before, we've never seen a percentage dip of 14k to 3k since the Great Depression and the current climate is nothing like the Great Depression despite hype from the media. The worst since the Depression, but this doesn't sniff Depression-era suffering, where employment hit 25%, GDP decreased by 10%+ annually, etc.

To get down to 3K would mean people think equity is next to worthless. Sorry, but that just isn't going to happen unless some sort of disastrous game-changer like a terrorist attack occurs. Plenty of economists thought 7500 was likely too (though certainly it won't stay there, and it's currently at 8300). Dow 7500 is overreaction and you'll see that reality by next year when P/E's come more in line with reality (i.e. higher). Probably late in the year, but numbers say equity is a bargain at this point.

Can't prove or disprove it, but I believe I heard on CNBC last week that ~1/2 the peeps who are "unemployed" are NO LONGER collecting benefits. And I believe today, the unemployment rate counts only those who are currently collecting benefits. If the above is correct, that puts the unemployment rate at ~13% (and in Michigan, where I'm from, at ~18.7%) in 1930's depression numbers (i.e., there was no unemployment insurance in the 1930' so if you didn't have a job, you were unemployed).

 

[First]

Originally posted by: Skoorb

Except the Dow at 14K was clearly, without any doubt whatsoever, overpriced.

Obviously enough thought it _wasn't_ overpriced to actually bid it up that high. As sp33demon says, it's based on confidence.

Unless I am sadly mistaken, the 25% of the great depression kicked in during it; the unemployment of 25% was a result of, not cause of, the depression (though both are intertwined and feed each other, nothing is necessarily the cause of something else and they are symbiotic). We're already breaking ground quickly on unemployment, which will help slow recovery.

I'm saying that the irrational exuberance with people bidding up asset prices to 14K+ on the Dow is the same (on the other end of the spectrum) as the irrational pessimism we currently see driving the Dow down to 8K. It'll continue like any other recession, except this one will be more severe, but same principles apply.

 

[First]

Originally posted by: Budarow

Originally posted by: Evan
Except the Dow at 14K was clearly, without any doubt whatsoever, overpriced. The P/E's were simply getting absurdly high. We've seen adjustments like that before, we've never seen a percentage dip of 14k to 3k since the Great Depression and the current climate is nothing like the Great Depression despite hype from the media. The worst since the Depression, but this doesn't sniff Depression-era suffering, where employment hit 25%, GDP decreased by 10%+ annually, etc.

To get down to 3K would mean people think equity is next to worthless. Sorry, but that just isn't going to happen unless some sort of disastrous game-changer like a terrorist attack occurs. Plenty of economists thought 7500 was likely too (though certainly it won't stay there, and it's currently at 8300). Dow 7500 is overreaction and you'll see that reality by next year when P/E's come more in line with reality (i.e. higher). Probably late in the year, but numbers say equity is a bargain at this point.

Can't prove or disprove it, but I believe I heard on CNBC last week that ~1/2 the peeps who are "unemployed" are NO LONGER collecting benefits. And I believe today, the unemployment rate counts only those who are currently collecting benefits. If the above is correct, that puts the unemployment rate at ~13% (and in Michigan, where I'm from, at ~18.7%) in 1930's depression numbers (i.e., there was no unemployment insurance in the 1930' so if you didn't have a job, you were unemployed).

Using the same standards of employment (frictional/structural/cyclical), current unemployment is just over 6% nationwide while it was 25% at the height of the Depression in 33 and still in double digits in 1940. Currently unemployment is nowhere near 13% and it would take an absolute avalanche of bad luck to get there, which would still be half what it was in the 30's and you'd still need to see 8-10 years of that to even talk about an apt comparison to the 30's.

We're in troubled times, not Depression-era times, barring some game changer.

 

[BoberFett]

Originally posted by: Evan

Originally posted by: Budarow

Originally posted by: Evan
Except the Dow at 14K was clearly, without any doubt whatsoever, overpriced. The P/E's were simply getting absurdly high. We've seen adjustments like that before, we've never seen a percentage dip of 14k to 3k since the Great Depression and the current climate is nothing like the Great Depression despite hype from the media. The worst since the Depression, but this doesn't sniff Depression-era suffering, where employment hit 25%, GDP decreased by 10%+ annually, etc.

To get down to 3K would mean people think equity is next to worthless. Sorry, but that just isn't going to happen unless some sort of disastrous game-changer like a terrorist attack occurs. Plenty of economists thought 7500 was likely too (though certainly it won't stay there, and it's currently at 8300). Dow 7500 is overreaction and you'll see that reality by next year when P/E's come more in line with reality (i.e. higher). Probably late in the year, but numbers say equity is a bargain at this point.

Can't prove or disprove it, but I believe I heard on CNBC last week that ~1/2 the peeps who are "unemployed" are NO LONGER collecting benefits. And I believe today, the unemployment rate counts only those who are currently collecting benefits. If the above is correct, that puts the unemployment rate at ~13% (and in Michigan, where I'm from, at ~18.7%) in 1930's depression numbers (i.e., there was no unemployment insurance in the 1930' so if you didn't have a job, you were unemployed).

Using the same standards of employment (frictional/structural/cyclical), current unemployment is just over 6% nationwide while it was 25% at the height of the Depression in 33 and still in double digits in 1940. Currently unemployment is nowhere near 13% and it would take an absolute avalanche of bad luck to get there, which would still be half what it was in the 30's and you'd still need to see 8-10 years of that to even talk about an apt comparison to the 30's.

We're in troubled times, not Depression-era times, barring some game changer.

So which is it? We needed the bailout because a depression was looming, but now we're just troubled? You've stated elsewhere that the effects of the bailout haven't been felt yet. So were we troubled or catastrophic?

You're no better than the crazy guy shouting on the corner about the end of the world. You can't even keep your story straight.

 

[First]

Originally posted by: BoberFett

Originally posted by: Evan

Originally posted by: Budarow

Originally posted by: Evan
Except the Dow at 14K was clearly, without any doubt whatsoever, overpriced. The P/E's were simply getting absurdly high. We've seen adjustments like that before, we've never seen a percentage dip of 14k to 3k since the Great Depression and the current climate is nothing like the Great Depression despite hype from the media. The worst since the Depression, but this doesn't sniff Depression-era suffering, where employment hit 25%, GDP decreased by 10%+ annually, etc.

To get down to 3K would mean people think equity is next to worthless. Sorry, but that just isn't going to happen unless some sort of disastrous game-changer like a terrorist attack occurs. Plenty of economists thought 7500 was likely too (though certainly it won't stay there, and it's currently at 8300). Dow 7500 is overreaction and you'll see that reality by next year when P/E's come more in line with reality (i.e. higher). Probably late in the year, but numbers say equity is a bargain at this point.

Can't prove or disprove it, but I believe I heard on CNBC last week that ~1/2 the peeps who are "unemployed" are NO LONGER collecting benefits. And I believe today, the unemployment rate counts only those who are currently collecting benefits. If the above is correct, that puts the unemployment rate at ~13% (and in Michigan, where I'm from, at ~18.7%) in 1930's depression numbers (i.e., there was no unemployment insurance in the 1930' so if you didn't have a job, you were unemployed).

Using the same standards of employment (frictional/structural/cyclical), current unemployment is just over 6% nationwide while it was 25% at the height of the Depression in 33 and still in double digits in 1940. Currently unemployment is nowhere near 13% and it would take an absolute avalanche of bad luck to get there, which would still be half what it was in the 30's and you'd still need to see 8-10 years of that to even talk about an apt comparison to the 30's.

We're in troubled times, not Depression-era times, barring some game changer.

So which is it? We needed the bailout because a depression was looming, but now we're just troubled? You've stated elsewhere that the effects of the bailout haven't been felt yet. So were we troubled or catastrophic?

You're no better than the crazy guy shouting on the corner about the end of the world. You can't even keep your story straight.

Don't reach too far out there kiddo, you'll tear your rotator cuff.

Btw, please link where I said this would be a depression on the order of the 1930's, or when the effects of the bailout would be felt had to do with my post. I await your wimp out.

 

[KlokWyze]

Originally posted by: nixium
Dow 36000

LOL!

 

[fleshconsumed]

Originally posted by: KlokWyze

Originally posted by: nixium
Dow 36000

LOL!

ROFL, I liked the following quote: "In 2004, Hassett served as an economic adviser to President Bush's reelection campaign, and in 2008 he served as an economic advisor to John McCain's Presidential campaign." How fitting.

 

[dmcowen674]

Originally posted by: fleshconsumed

Originally posted by: KlokWyze

Originally posted by: nixium
Dow 36000

LOL!

ROFL, I liked the following quote: "In 2004, Hassett served as an economic adviser to President Bush's reelection campaign, and in 2008 he served as an economic advisor to John McCain's Presidential campaign." How fitting.

I'm certainly a lot closer with my 3600 prediction when it was at 14,000.

 

[daveymark]

Originally posted by: Thump553
As a parent and a baby boomer myself, I feel compelled to point out that quite a few of us squandered our money on paying for kid's college educations (at 100K per kid, minimum) instead of saving for our future retirement. When we went to school thirty years ago $1000 a semester for everything (including room and board) was very common-but our facilities were a lot less swank-more like an army barracks than the semi-luxury condos that are so common now.

retirement should ALWAYS be taken care of before college expenses for children...sorry you had to learn the hard way

 

[StageLeft]

Originally posted by: daveymark

Originally posted by: Thump553
As a parent and a baby boomer myself, I feel compelled to point out that quite a few of us squandered our money on paying for kid's college educations (at 100K per kid, minimum) instead of saving for our future retirement. When we went to school thirty years ago $1000 a semester for everything (including room and board) was very common-but our facilities were a lot less swank-more like an army barracks than the semi-luxury condos that are so common now.

retirement should ALWAYS be taken care of before college expenses for children...sorry you had to learn the hard way

Maybe, but it's a balancing act. What is "taking care of" retirement? I'm already putting money into my kids' education that could be put into retirement, so clearly by saving for them I'm compromising/weakening it from a position it could otherwise be in, just as my parents did for me and just as, presumably, my kids will do for them. It's really a pay-it-forward scheme.

 

[Thump553]

Originally posted by: daveymark

Originally posted by: Thump553
As a parent and a baby boomer myself, I feel compelled to point out that quite a few of us squandered our money on paying for kid's college educations (at 100K per kid, minimum) instead of saving for our future retirement. When we went to school thirty years ago $1000 a semester for everything (including room and board) was very common-but our facilities were a lot less swank-more like an army barracks than the semi-luxury condos that are so common now.

retirement should ALWAYS be taken care of before college expenses for children...sorry you had to learn the hard way

You must not be a parent. Anyone with any parental instinct always puts the welfare and future prospects of their children over theirs. Besides I could drop dead at 62, or in the worst case I could do the Eskimo retirement-walk out on an ice floe-if there are any around in a decade or so.

 

[blackangst1]

It doesnt take much to save for kids college. $50/mo starting at birth with a moderate intersest rate can grow to over $25000 at age 18. It doesnt take much.

 

[StageLeft]

Originally posted by: blackangst1
It doesnt take much to save for kids college. $50/mo starting at birth with a moderate intersest rate can grow to over $25000 at age 18. It doesnt take much.

That'll cover their first year, depending on where they go

 

[fleshconsumed]

Originally posted by: blackangst1
It doesnt take much to save for kids college. $50/mo starting at birth with a moderate intersest rate can grow to over $25000 at age 18. It doesnt take much.

When I left state university 18 months ago tuition was $4,400, if you include book and misc expenses you're easily at $5K per semester excluding housing. Those $25K would only last for 2.5 years for a single kid. If you have more than one kid or if he wants to live on-campus/rent then he is definitely in trouble.

I'm not arguing it's impossible to make the most out of 25K, the kid can go to community college for the first two years and then transfer to 4 year university (if the program/university allows for it) as well as live at home to save money on renting/utilities. However, just to set the record straight, 25K do not go very far. Frankly I don't think parents should foot entire bill for the kids education, the kid must contribute as well, however if some parents want to do it, realistically they would have to put away $200 per month, which is a lot more than just $50.

 

[blackangst1]

Originally posted by: Skoorb

Originally posted by: blackangst1
It doesnt take much to save for kids college. $50/mo starting at birth with a moderate intersest rate can grow to over $25000 at age 18. It doesnt take much.

That'll cover their first year, depending on where they go

You and I both know with a few exceptions no one's kids are going to Ivy league. |Please. Reality check!

Fine. $75/mo will yield approx 79,000. Still cheap.

 

[StageLeft]

Originally posted by: blackangst1

Originally posted by: Skoorb

Originally posted by: blackangst1
It doesnt take much to save for kids college. $50/mo starting at birth with a moderate intersest rate can grow to over $25000 at age 18. It doesnt take much.

That'll cover their first year, depending on where they go

You and I both know with a few exceptions no one's kids are going to Ivy league. |Please. Reality check!

Mine is. How DARE you!