How low can the market go??

[redgtxdi]

Don't consider myself a market timer, but just happened to get lucky because I dropped my contributions (I usually plunk tax and non-tax money into the market weekly) around the time the market got high last year and have since reinstated my higher contributions as of a few weeks ago enjoying being able to buy on the cheap again. I hate watching my totals go lower, but definitely like buying stuff cheap.

Any chance we're goin' to 10k???

Sky is falling?

We're all dead?



(Me likey to draw the P&N trolls)

 

[DaveSimmons]

If you're investing for retirement this is a great time to buy.

Yes, the market could dip a bit more but you're getting 2006 share prices now and in the long term the index funds you buy now will do very well.

 

[brxndxn]

I'd definitely rather have my money in shares rather than worthless dollars..

 

[AccruedExpenditure]

Originally posted by: brxndxn
I'd definitely rather have my money in shares rather than worthless dollars..

Unless a company has significant international operations/earnings owning shares denominated in dollars is just as bad as owning dollars themselves

 

[Engineer]

Originally posted by: DaveSimmons
If you're investing for retirement this is a great time to buy.

Yes, the market could dip a bit more but you're getting 2006 share prices now and in the long term the index funds you buy now will do very well.

Not only are you getting 2006 prices, but 2000/2001 prices as well as both the Nasdaq and S&P are negative since 2000/2001.

Housing took all of the money of the early/mid 2000's and now oil is pulling in billions of dollars, especially hedge funds. Maybe after oil loses steam, the money might flow back in to general equities. At some point, the P/E ratios should be good enough to justify an inflow back into the market.

[P&N troll remark] Who was the last President that spent two terms in office and ended up with a negative market in the Dow, Nasdaq (if it existed then) and the S&P (or overall market in general)? [/P&N Troll Remark]

 

[Dr. Detroit]

Video - Richard Suttmeir predicts Dow 10,747

Stocks are tumbling again, a decline many press reports are blaming on FedEx's warning. While that certainly didn't help, the reality is the financial sector remains key for the broad market and is resuming its decline.

Largely because of the financials' ongoing woes, veteran market watcher Richard Suttmeier believes more bear market action lies ahead. Suttmeier forecasts the Dow will hit 10,747 by the end of 2008, a roughly 11.5% drop from Tuesday's opening level.

While most of the media's attention remains on the big banks and brokers -- Morgan Stanley reported a steep year-over-year earnings drop -- Suttmeier is increasingly concerned about weakness in smaller regional and community banks, citing evidence of rising levels of bad loans.

Case in point: A day after Goldman Sachs downgraded the sector, Fifth Third Bancorp said Wednesday it's slashing its dividend and seeking to raise $2 billion via a combination of preferred stock and selling certain business lines.

While weakness in the financial sector is obvious now, I should note Suttmeier has been negative on the financials since long before it was fashionable.

 

[FeathersMcGraw]

Automatic investment transfers, a no-load index fund, and 30 years to retirement means I don't have to care what the Dow does for at least another two decades.

 

[IHateMyJob2004]

One word:

CAPITULATION

AFter seeing stocks like BAC, USB, WFC, BBT and STI get nailed. All Berkshire holdings except BBT you must realize that the markets are not being rational.

Now is a great time to buy value.

 

[IHateMyJob2004]

Originally posted by: FeathersMcGraw
Automatic investment transfers, a no-load index fund, and 30 years to retirement means I don't have to care what the Dow does for at least another two decades.

Expect 15-20 years of bounded range movement of the major indices. That is what we'll probably get. This is typically what a bear market is. People think that in a bear market that stock prices go down. This is not true. The only real exception was the great depression.

 

[vi edit]

Originally posted by: IHateMyJob2004

Originally posted by: FeathersMcGraw
Automatic investment transfers, a no-load index fund, and 30 years to retirement means I don't have to care what the Dow does for at least another two decades.

Expect 15-20 years of bounded range movement of the major indices. That is what we'll probably get. This is typically what a bear market is. People think that in a bear market that stock prices go down. This is not true. The only real exception was the great depression.

Can you explain that one in a little more plain english?

Indexes go down, stocks don't. The only way that makes sense to me is if some higher priced stocks are replaced with cheaper ones brining the combined value of the index down.

 

[Special K]

Originally posted by: Engineer

as both the Nasdaq and S&P are negative since 2000/2001.

Does that include dividends?

 

[IHateMyJob2004]

Originally posted by: vi edit

Originally posted by: IHateMyJob2004

Originally posted by: FeathersMcGraw
Automatic investment transfers, a no-load index fund, and 30 years to retirement means I don't have to care what the Dow does for at least another two decades.

Expect 15-20 years of bounded range movement of the major indices. That is what we'll probably get. This is typically what a bear market is. People think that in a bear market that stock prices go down. This is not true. The only real exception was the great depression.

Can you explain that one in a little more plain english?

Indexes go down, stocks don't. The only way that makes sense to me is if some higher priced stocks are replaced with cheaper ones brining the combined value of the index down.

This will explain it better than I ever could:
Range Bound Market

I should not have mentioned stocks. I should have termed everything with the term indices.

The slideshow will also tell you something else. We are going to have a higher level of inflation for years. There is nothing that the gov't can do to change this.

 

[aigomorla]

as all the people with money icon and 1 candy cane icon been saying, now is a great time to buy.

The funny thing about the stock market is you want to do whats oposite of what everyone else is doing.

What people do now is only whats known as a follow though. These are the late suckers who buy or sell at a hugh loss because they want to "ride the train" with everyone else.

You want to do the oposite. You sell when everyone buys so you can sell at a higher price. And you buy when everyone sells, so you can buy at a lower price.

Originally posted by: IHateMyJob2004

This will explain it better than I ever could:
Range Bound Market

i really hate to do this to you. Cuz it does seem like a good presentation material, however.

I hope you just showed us compliance approved material.

Otherwise i need to ask you take it off because it is a violation of NASD protocol.

EDIT: i double checked. Its a publically held document. So there is nothing wrong in compliance end. Sorry for the scare!

 

[IHateMyJob2004]

Originally posted by: aigomorla
as all the people with money icon's been saying, now is a great time to buy.

The funny thing about the stock market is you want to do whats oposite of what everyone else is doing.

What people do now is only whats known as a follow though. These are the late suckers who buy or sell at a high loss because they want to "ride the train" with everyone else.

You want to do the opposite. You sell when everyone buys so you can sell at a higher price. And you buy when everyone sells, so you can buy at a lower price.

For reasons of my own, I am fairly convinced that the short selling of financials right now is being done by amateurs. For starters, go look at some stock message boards for banks, like over at Yahoo! finance.

Looks like Jim Cramer is winning!

A good read. It is funny to value investors:
http://www.gurufocus.com/news.php?id=30723

I will say that now is a good time to be bargain hunting. remember, price is what you pay, value is what you get. Find stocks that are priced much lower than their value. If you liek to discount future cash flows, go look at JNJ!

 

[mshan]

?Rather than worry about the direction of the next 1,000 points, my advice is to stay focused on this reality: If the Index compounds at just 7% on average over the next 30 years, the Dow would rise to between 90,000 and 100,000.?

Discipline of The Successful Investor

 

[IHateMyJob2004]

Originally posted by: mshan
?Rather than worry about the direction of the next 1,000 points, my advice is to stay focused on this reality: If the Index compounds at just 7% on average over the next 30 years, the Dow would rise to between 90,000 and 100,000.?

Discipline of The Successful Investor

If growth slows, we will have PE compression. For example, the average PE of the S&P 500 will drop.

As for the 7% growth, you might want to read the article(actually a slide show) I linked several posts above. The markets are not going anywhere for atleast 10 years. The stocks might grow in terms of intrinsic value, but the share prices will probably go no where.

 

[IHateMyJob2004]

An article on banks:

http://seekingalpha.com/articl...portunity?source=yahoo

 

[imported_Lothar]

Originally posted by: IHateMyJob2004
One word:

CAPITULATION

AFter seeing stocks like BAC, USB, WFC, BBT and STI get nailed. All Berkshire holdings except BBT you must realize that the markets are not being rational.

Now is a great time to buy value.

I still think it's a little early to start buying banks.

 

[Engineer]

Originally posted by: Special K

Originally posted by: Engineer

as both the Nasdaq and S&P are negative since 2000/2001.

Does that include dividends?

No, but my money in an online savings account would have done better "including" dividends during that time (on average).

 

[dullard]

How low will it go? There are many answers to that question. Most will be wrong.

A) How low can it go? It can drop all the way to 0.0 It can go that low. It won't happen though. And if it did, we'd have much bigger problems than money to worry about.

B) What level SHOULD it be at given the true fundamentals? We have three contributions to the value of an index. (1) Inflation. Inflation causes the price of items, including stock indicies, to grow exponentialy. Over time money is worth less and less, thus to compenate the price of an index will go up and up. (2) Dividend contributions of money from the companies. As dividends are distributed, a portion are reinvested, each year. Due to inflation effects, the divideds and contributions exponentially grow. (3) The number of people in the stock market. The total number of people in the world grows exponentially and the % of people who invest often grows.

As you can see, there SHOULD be a clear exponential growth in stocks, since the true fundamentals grow exponentially. True, people come and go from the market and they will add/subtract how much they have in the market. Thus, on top of the exponential growth there will be some scattered noise. If the scatter is organized, you usually have irrational exuberance (chasing a boom) or irrational pessimism (selling at the bottom when the company is still a sound company). So, what does this look like? On a log graph, it should look like a sine-like wave along a linearly increasing line. I made that graph of the DJIA for you. Yep, it looks like what it should with irrational booms in 1920s and late 1990s and crashes in 1930s and inflation problems in the 1970s. According to the linear portion, where should we be? 7600.

C) As you can see, the DJIA rarely drops much. Instead, to revert to the mean, it pauses. As described above, the DJIA (and other indicies) tend to go on "hold" for 15-20 years. Thus, we've been in the 9000-14000 hold for half of that time. According to this estimate, it will go as low as 9000, but it'll jump right back to the 14000 mark before coming back to the middle again.

D) You have estimates that stocks and indicies always go up. 10% a year I hear is what you can expect from these exubberant people. So, under this measure, today's value is as low as it should go. 11800.

Which do we believe? 0? 7600? 9000? 11800? That is the great mystery. If you could make these predictions accurately, you'd be the wealthiest person in the world. You can't. I can't. No one can.

My personal belief? We will revert to the line, not by falling a lot, but by holding steady. In the year 2016, we will have reached that linear graph even if the DJIA stays at 11800. Since the DJIA historically goes on 15-20 year holds, 2016 is right near that 15-20 year end. I think the holding period is the most realistic estimate. For the next 8 years the DJIA will be in the 9000 - 14000 range. Thus, my long-winded answer to your question is 9000.

 

[Engineer]

Originally posted by: dullard
How low will it go? There are many answers to that question. Most will be wrong.

A) How low can it go? It can drop all the way to 0.0 It can go that low. It won't happen though. And if it did, we'd have much bigger problems than money to worry about.

B) What level SHOULD it be at given the true fundamentals? We have three contributions to the value of an index. (1) Inflation. Inflation causes the price of items, including stock indicies, to grow exponentialy. Over time money is worth less and less, thus to compenate the price of an index will go up and up. (2) Dividend contributions of money from the companies. As dividends are distributed, a portion are reinvested, each year. Due to inflation effects, the divideds and contributions exponentially grow. (3) The number of people in the stock market. The total number of people in the world grows exponentially and the % of people who invest often grows.

As you can see, there SHOULD be a clear exponential growth in stocks, since the true fundamentals grow exponentially. True, people come and go from the market and they will add/subtract how much they have in the market. Thus, on top of the exponential growth there will be some scattered noise. If the scatter is organized, you usually have irrational exuberance (chasing a boom) or irrational pessimism (selling at the bottom when the company is still a sound company). So, what does this look like? On a log graph, it should look like a sine-like wave along a linearly increasing line. I made that graph of the DJIA for you. Yep, it looks like what it should with irrational booms in 1920s and late 1990s and crashes in 1930s and inflation problems in the 1970s. According to the linear portion, where should we be? 7600.

C) As you can see, the DJIA rarely drops much. Instead, to revert to the mean, it pauses. As described above, the DJIA (and other indicies) tend to go on "hold" for 15-20 years. Thus, we've been in the 9000-14000 hold for half of that time. According to this estimate, it will go as low as 9000, but it'll jump right back to the 14000 mark before coming back to the middle again.

D) You have estimates that stocks and indicies always go up. 10% a year I hear is what you can expect from these exubberant people. So, under this measure, today's value is as low as it should go. 11800.

Which do we believe? 0? 7600? 9000? 11800? That is the great mystery. If you could make these predictions accurately, you'd be the wealthiest person in the world. You can't. I can't. No one can.

My personal belief? We will revert to the line, not by falling a lot, but by holding steady. In the year 2016, we will have reached that linear graph even if the DJIA stays at 11800. Since the DJIA historically goes on 15-20 year holds, 2016 is right near that 15-20 year end. I think the holding period is the most realistic estimate. For the next 8 years the DJIA will be in the 9000 - 14000 range. Thus, my long-winded answer to your question is 9000.

A :beer: for you for possibly the best explained answer here. Bravo (whether it's true or false doesn't matter, it's the thought and information into the answer that is really impressive)!!

(In general, if the above is the case, buy the hell out of equities for the next eight years, sit back and PROFIT!!! )

 

[dullard]

Originally posted by: Engineer
A :beer: for you for possibly the best explained answer here. Bravo (whether it's true or false doesn't matter, it's the thought and information into the answer that is really impressive)!!

(In general, if the above is the case, buy the hell out of equities for the next eight years, sit back and PROFIT!!! )

I am glad someone liked the post.

Yes, down times and hold times are the best possible thing for young people. Buy as much as you can now (spread it out monthly for dollar-cost-averaging boosts), sit back, and when it does increase again you'll be sitting pretty. Falling stocks and hold periods only hurt day traders and those who are retired.

 

[Special K]

Originally posted by: dullard
spread it out monthly for dollar-cost-averaging boosts

I read that statistically, you are better off lump-sum investing whenever possible, as opposed to DCA-ing. The rationale given was that statistically, the market has had more up days than down days (IIRC 2/3 up days vs. 1/3 down days), so you stand a better chance to gain by investing it all at once.

Obviously if you are investing a portion of each paycheck then you don't really have a choice, but for those who have a lump sum to invest, wouldn't it be logical to invest it all at once as opposed to DCA?

 

[vi edit]

Originally posted by: Special K

Originally posted by: dullard
spread it out monthly for dollar-cost-averaging boosts

I read that statistically, you are better off lump-sum investing whenever possible, as opposed to DCA-ing. The rationale given was that statistically, the market has had more up days than down days (IIRC 2/3 up days vs. 1/3 down days), so you stand a better chance to gain by investing it all at once.

Obviously if you are investing a portion of each paycheck then you don't really have a choice, but for those who have a lump sum to invest, wouldn't it be logical to invest it all at once as opposed to DCA?

Every study I've seen - and even when studying for the series 7 & 66 gave the advantage to DCA. It wasn't an overwhelming advantage by any means. But for most people it came out ahead. This assumes that you are dumping in at set times each year for your IRA contribution. Not very elaborate market timing.

 

[alphatarget1]

Quick question for you stock gurus: What happens if you short a stock and then the company goes BK?