***Official*** 2011 Stock Market Thread

[lothar]

Not exactly true. There are certain types of risks that are impossible to predict. Diversification protects you against those. You give up a small amount of return in exchange for a large reduction in risk. I guarantee you Warren Buffet wouldn't advocate putting all your money in one stock as a strategy.

IMO the best strategy for a small value investor is to have 20 to 30 positions. It's just hard to follow that many companies and industries when you are doing it on your own and have a full time job. I know a guy who basically has a hedge fund with 4 or 5 other guys. They have only their own money in it. It just helps to divide up the research hours.

Like what? Give examples.

The fact that one needs 30 positions to diversify is why I said it's nothing but a protection against ignorance.
Having 30 positions doesn't achieve anything except making your broker's pocket fat through commissions.
Unless you're a banker, you don't have time to study 30 companies. I have enough time trying to study the 16 companies we're in.

Why invest in your 30th best idea when you can invest in your 10th?

I have a friend who works at the JPM bond desk. He only has 6 stocks and he's outperformed both me and the market with less risk without having to load up on 30 or a million stocks as you suggest.
He owns MO, COP, SAM, IDT, JNJ and WFC.

The funny thing about you quoting Warren Buffett as an example is that he has 98+% of his assets in one stock.
Your ironing is delicious. Can I have some more please?

Anyone who invested 100% in BRK.A, LUK, MKL, FFH or other such companies that have great capital allocators that make very concentrated(read: "not diversified") bets have outperformed the market and indexes by far.

 

[lothar]

You didn't read the entire post where I went 10 years back, that's not cherry picking at all. Look at your numbers, gold is up "483% vs 5.6%" by those metrics. I didn't miss any boat on gold, I've had it since the subprime crisis and made 25X more than I would have made with WFC. I'm not using emotion, but fact which says to play off of others' emotions to derive big gains. Fact: In recessionary times, gold will hit its highs because of low CC.

I stand by my statement that you'd be a fool not to invest in gold and silver. Yes, even now. Analysts are predicting 2K for gold and 75 for silver. In this economy, are you willing to bet against that? While this may not be "long term investing", it still falls under smart investing. We aren't coming out of this spiral anytime soon, pad your gains with precious metals. I'm not saying you shouldn't own WFC, but using IHateMyJob's theoretical scenario (all money in WFC vs metals in a recession), it's obvious which will come out on top. Leverage in both is the best advice I can give, what % to allocate is up to you and your risk tolerance.

Yep, it took a major hit and corrected. While still not a bad stock, I'm not going to "put all my money into it". You'd be a fool to not put a position in gold/silver right now. This economy isn't going to be coming out of this recession anytime soon.

Why go back only 10 years and not 40 years?

I am shocked by all your statements.
I wish I could respond but that would just take too much of my precious time.

 

[the DRIZZLE]

Like what? Give examples.

The fact that one needs 30 positions to diversify is why I said it's nothing but a protection against ignorance.
Having 30 positions doesn't achieve anything except making your broker's pocket fat through commissions.
Unless you're a banker, you don't have time to study 30 companies. I have enough time trying to study the 16 companies we're in.

Why invest in your 30th best idea when you can invest in your 10th?

I have a friend who works at the JPM bond desk. He only has 6 stocks and he's outperformed both me and the market with less risk without having to load up on 30 or a million stocks as you suggest.
He owns MO, COP, SAM, IDT, JNJ and WFC.

The funny thing about you quoting Warren Buffett as an example is that he has 98+% of his assets in one stock.
Your ironing is delicious. Can I have some more please?

Anyone who invested 100% in BRK.A, LUK, MKL, FFH or other such companies that have great capital allocators that make very concentrated(read: "not diversified") bets have outperformed the market and indexes by far.

BRK is technically one stock but it's basically a fund by itself as I'm sure you know. I also never said you must have 30 positions.

How are you defining less risk in the case of your friend?

The fact that most people don't have time to do sufficient research doesn't make me wrong. Investment clubs are in interesting way to split up the work among friends.

 

[Pliablemoose]

Why do you think that?



PS: Regarding AAPL, I always find it amazing how the people playing this dips are participating in a zero sum game yet everyone here seems to be winning the game... interesting ...

As I said, I've been very lucky this year. An apology would be nice though, particularly since you seem to think I was lying.

 

[IHateMyJob2004]

Moose,

Think you were lying? Not necessarily. I just don't trust anything that people say about investments on the internet. I think you are lucky to have bet correctly is all. The silence I am referring to is the other 90 people here that tried to do what you did and did not get lucky. Given enough people, someone is bound to get lucky. Kinda like the people that timed the housing crash perfectly. When 10,000 pepole try and time it rihgt, sure 10 or 20 get it perfect.

If an apology makes you feel better, I am sorry.

Good luck in your future endeavors.

IHMJ

 

[IHateMyJob2004]

It's pretty simple, sell when you're comfortable with your profit. If emotions dictate a selloff, then get out. Basically follow consumer confidence when it comes to things like precious metals. Things like the current recession are a homerun... not going to post how much I've made but it's a lot more than the 5-15% index funds. Once I hit a certain limit (usually 300% depending on what I'm trading), I pull out and reinvest half of that back into trading. My gains are permanent since the other half goes back into my mutual funds (yes, a few of them are holding WFC).

That's a decent portfolio for long term investing. Just better hope Wells Fargo doesn't pull an Enron on you and isn't cooking its books. But at least you didn't put all your eggs in one basket like your earlier scenario. Although you'd probably be fine if it's only a 25% portfolio hit, I thought you had like over half allocated to WFC.

Anyone that held Enron past the moment the cut their dividend was a fool. If you exited at that time, you would have been within 20% of Enron's all time high.

As for WFC. They are not cooking their books. 0% chance of that. I know to much about the company to even consider what you are saying to be possible. WFC is one of the best run banks in the country and they are interested in working for shareholders unlike BAC which is horribly run. There was a recent Q&A with BAC where I was shaking my head at anyone that thinks that the interview made them look good. It took one sentence for me to see why BAC is garbage.

 

[Pliablemoose]

Moose,

Think you were lying? Not necessarily. I just don't trust anything that people say about investments on the internet. I think you are lucky to have bet correctly is all. The silence I am referring to is the other 90 people here that tried to do what you did and did not get lucky.

If an apology makes you feel better, I am sorry.

Good luck in your future endeavors.

IHMJ

Really, so you just kinda thought I was stretching the truth?

Seems I was, I made a bit more than $50K off Apple, and I lost less (only $1500, versus what I posted $1700)

I enjoy the sharing in this thread, and have kept up with it for some time, I really don't appreciate being called out.

The funniest thing is you're so biased against Apple that you even hate the stock. In 10 years are you going to still hate Apple because Steve Job's ghost is a douce?

I actually ignore fundamentals, due diligence etc, I just trade on the rumors etc... I do know Apple inside & out though, I read everything I can that's published about them, and I guessed correctly that the iPad would be a success, I never anticipated how big a success it would be.

 

[IHateMyJob2004]

Apple? It's in a quickly evolving industry. There is no way to know what it's future is. I don't think a value investor should invest in Apple for this simple reason. You're not approaching it as a value ivnestor though. Hate is a strong word. Apple has no durable competitive advantage. And revenues could easily drop signifigantly in 10 years. Maybe I am wrong. I just don't care to take the risk.

I understand sheetrock, there is nothing to guess about. All I have to do is look at the housing market and know that within 5 years (probably less than 2) there will be a recovery in construction and with that, USG will provide some handsome returns.

I have a strong opinion about BAC too. I could care less if it wee a $1 stock. I still would not buy it. Cliff notes: BAC has horrible management. This is also why I like WFC so much. Superior mangement there.

I appreciate your honesty in regards to how you play Apple (I actually ignore fundamentals, due diligence etc, I just trade on the rumors etc). I was not calling you in particular out though. I was calling everyone out that plays Apple because most of them are not winning their game after commissions and taxes. It's exciting trading all the time but study after study show that it is a loosers game. Of course, there will always be a winner. In geernal, anyone that trades frequently will have an inferior record in 10 years.

 

[Tequila]

Small investors shoudl have 20 to 30 stocks simply because no one should tell them other wise. 20 to 30 is pretty much the standard broker type talk. 5 is sufficient in reality if you are doing your research correctly. I have about 8 or 9 right now.

20-30 is way too many for me, you may as well just start with a well diversified mutual fund or etf first. My five largest holdings that I've bought, held and reinvested the divvies and bought on dips for the past 20 years -- JNJ CVX KO WFC MMM have treated me very well but was also lucky because I started in the early 90s. I only got into AAPL when it hit $250 so I missed that boat by a lot. I only have 10 stocks total right now and I've weathered this recent storm quite well without panicking and selling my long-term holdings.

I choose all my domestic stocks since they are easy to follow and leave it up to mutual funds to choose my foreign stocks. For my long-term holdings I stick to the "buy what I use" mantra since I fill up at Chevron, bank at Wells Fargo, buy lots of products from Johnson & Johnson, drink LOTS of Coke lol and use 3M products daily at the office. I also like the fact that JNJ is in itself well diversified in pharma, medical devices and consumer products. Chevron is making smart moves into NatGas that will pay off in the future.

Then on occasion I buy and sell small caps like HANS and LULU but only stick to ones that are making money, have a good pile of cash and little to no long term debt. That Hansen Natural vanilla cola is damn good stuff I must say. And the GF loves the athletic gear from Lululemon I stay away from penny stocks and hyped up companies that have huge debt and are losing money hand over fist and I stay far far away from speculative biotech stocks that are losing money and their hopes ride on one possible drug approval.

 

[Pliablemoose]

snip

LOL, you're expecting a recovery?

Hahahahahahahahahahahahahahahahahahahahahahahahahahahahahahah


Gasp, 2 deep breaths

Hahahahahahahahahahahahahahahahahahah

 

[IHateMyJob2004]

LOL, you're expecting a recovery?

Actually, alot of people are expecting a recovery. When new home construction is to the tune of 323,000-485,000 homes per year for 3 years now when historical norms from pre-2002 are about 900,000 .... there has to be a bottom eventually. The first question you’ve seemed to answer via your own research is when. For everyone else, let me throw some numbers at the wall. If you use 900,000 as a baseline average, from 2003-2006 there were an extra 1.5 million homes built that were not needed. Now, from 2007-2011 there was a deficiency to the pre 2002 norm of about 1.5 million homes. So, 1.5 million minus 1.5 million gives you zero? Simple math here. But it is better to be approximately right than precisely wrong.

There was also a baby boom (small one) in the late 80s. Those kids are now 20-25. They are now entering the age of home ownership so there will be a bump in demand. A bit of a catalyst.

Still laughing? I only laugh when people clearly don't know the facts and make statements that only show off their ignorance on a topic. Admittedly, I am ignorant when it comes to trading successfully .... but I do know that the traders hall of fame consists of an empty room. To me, “understanding” trading is an exercise in futility. The only thing I know about trading is that it is part of human nature and because of this all the brokerages that advertise during Mad Money have a moat.

Thanks for making me look into the numbers again though. It simply validates what Buffett has been saying for a few months now. The housing market is going to turn. It is going to turn soon and with it unemployment is going to rebound. And all of this is going to happen much faster than people expect.

The other thing most lemmings don't seem to grasp because of their reliance on the media is the simple fact that Obama and Congress and anyone else out there can not fix unemployment. It is tied directly to housing. Unemployment right now is only an issue in housing related industries. Unemployment levels in every other industry is at historical norms.

Hahahahahahahahahahahahahahahahahahahahahahahahahahahahahahah

Gasp, 2 deep breaths

Hahahahahahahahahahahahahahahahahahah

:whiste::thumbsdown:

 

[Pliablemoose]

IHMJ, you seem to want to have the last word, and it's all yours.

There will be no "recovery", the US economy has fundamentally changed.

Fail to recognize that at your own peril, we lack the discipline to fix what's wrong, so we're all going to be drug down, our standard of living will get worse, commodities will cost more, globalization of manufacturing will continue, energy costs will continue to march from the bottom left corner of the chart to the top right. The ONLY upside to what's happening is that we're the largest crappy economy and that the dollar is still the world's reserve currency. A few more political missteps and that's (reserve currency status) gone.

Investing in any stocks with a 2-5 year window is a fools game.

Also, the description of "black swan" applies to Apple, you need to look that up, it's an interesting concept. I'm not saying Apple is the absolute bestest stock ever, and that it'll go up forevers, but the company itself is an anomaly.

As I said, you get the last word, I'll no longer go back and forth over this BS.

And you were seriously owned, have a great day.

 

[IHateMyJob2004]

IHMJ, you seem to want to have the last word, and it's all yours.
There will be no "recovery", the US economy has fundamentally changed.

Fail to recognize that at your own peril, we lack the discipline to fix what's wrong, so we're all going to be drug down, our standard of living will get worse, commodities will cost more, globalization of manufacturing will continue, energy costs will continue to march from the bottom left corner of the chart to the top right. The ONLY upside to what's happening is that we're the largest crappy economy and that the dollar is still the world's reserve currency. A few more political missteps and that's (reserve currency status) gone.

Investing in any stocks with a 2-5 year window is a fools game.

Also, the description of "black swan" applies to Apple, you need to look that up, it's an interesting concept. I'm not saying Apple is the absolute bestest stock ever, and that it'll go up forevers, but the company itself is an anomaly.

As I said, you get the last word, I'll no longer go back and forth over this BS.

And you were seriously owned, have a great day.

That thing I italicized (inner quoted)? I'd explain it's faults but you clearly know everything about the economies of every nation in the world. Things like how healthy the economies are espeically relaitve to the US. Have taken that data and come up with your conclusion. We'll just trust you. Sure that you jsut didn't hear that stuff on TV?

By the way, what does that have to do with drywall sales in the US, Canada and Mexico? You know, the thing my previous post was about? I am "owned" because you just spewed out some random media generated sentences? Could you actually tell me how my analysis is wrong? Didn't even bother to ask where I got my numbers from? How does your statement invalidate mine from a analytical standpoint? Do you even know what countries USG sells drywall in?

I'm just going to go shopping in my new truck(2011). The one that gets 15% better fuel economy than the one I had previously(2003) while being providing a more powerful engine. Maybe go to Wal-Mart and buy some tissues to dry my tears from my worried about our declinging "standard of living". Maybe, I'll even find a dictionary over at Border's and see what "declining standard of living" means. WAIT! They are going out of busness because a technological advancement (the internet) has made book prices lower thus lowering my costs ...... wait ... lower prices on a book today than 10 years PRIOR? That is unpossible .... I wish there were a term for that I could use for such an event. Hrmm, I hope things like Kindles don't reduce costs on books anymore thusly providing a lower standard of living.

Thanks for owning me. I guess my process of using things like "data" and "facts" are pointless. I suppose the potential of a housing deficiency in the US will not drive up wallboard sales and provide USG FCFs more in line with historical norms. Totally illogical statement on my part. I'm sorry for ever thinking otherwise.

Thanks for owning me! I hope I dont end up in a bread line.

 

[RbSX]

That thing I italicized (inner quoted)? I'd explain it's faults but you clearly know everything about the economies of every nation in the world. Things like how healthy the economies are espeically relaitve to the US. Have taken that data and come up with your conclusion. We'll just trust you. Sure that you jsut didn't hear that stuff on TV?

By the way, what does that have to do with drywall sales in the US, Canada and Mexico? You know, the thing my previous post was about? I am "owned" because you just spewed out some random media generated sentences? Could you actually tell me how my analysis is wrong? Didn't even bother to ask where I got my numbers from? How does your statement invalidate mine from a analytical standpoint? Do you even know what countries USG sells drywall in?

I'm just going to go shopping in my new truck(2011). The one that gets 15% better fuel economy than the one I had previously(2003) while being providing a more powerful engine. Maybe go to Wal-Mart and buy some tissues to dry my tears from my worried about our declinging "standard of living". Maybe, I'll even find a dictionary over at Border's and see what "declining standard of living" means. WAIT! They are going out of busness because a technological advancement (the internet) has made book prices lower thus lowering my costs ...... wait ... lower prices on a book today than 10 years PRIOR? That is unpossible .... I wish there were a term for that I could use for such an event. Hrmm, I hope things like Kindles don't reduce costs on books anymore thusly providing a lower standard of living.

Thanks for owning me. I guess my process of using things like "data" and "facts" are pointless. I suppose the potential of a housing deficiency in the US will not drive up wallboard sales and provide USG FCFs more in line with historical norms. Totally illogical statement on my part. I'm sorry for ever thinking otherwise.

Thanks for owning me! I hope I dont end up in a bread line.

You remind me of a friend of mine, who would say the economy was fine, even if the sky is falling.

The economy isn't fine, I suggest you start doing some serious reading on sites like zerohedge and seeking alpha.

Remember, the facts are generally written by people who also will benefit from a better economy, the biggest reminder that this is all bullshit is that when everyone was screaming lower unemployment, no one mentioned anything about labour force participation was at its lowest rate in 30 years.

http://www.huffingtonpost.com/2011/...participation-jobs-crisis-worse_n_925309.html

 

[IHateMyJob2004]

You remind me of a friend of mine, who would say the economy was fine, even if the sky is falling.

The economy isn't fine, I suggest you start doing some serious reading on sites like zerohedge and seeking alpha.

Remember, the facts are generally written by people who also will benefit from a better economy, the biggest reminder that this is all bullshit is that when everyone was screaming lower unemployment, no one mentioned anything about labour force participation was at its lowest rate in 30 years.

http://www.huffingtonpost.com/2011/...participation-jobs-crisis-worse_n_925309.html

I might have said the economy is fine but I don't remember it. Not sure why I would have. Unemployment levels are pretty bad right now. I will say this. The economy will get better. The question then become when. That's alright though, so far Moose has only reminded me of people that take what the media spoon feeds them and accepts it as past current and future. Sorry if I take (A) and look into (B) then ask some questions (C) and maybe do some other fact checking (D,E,F,G) and draw up a rational conclusion (H).

My housing numbers are from a very reputable source and they were not pulled out of some article. I actually took raw data.

Good work on linking an article. That is 100x more than Moose managed to supply. Of course, that article is a wonderful indicator of the past. Now if only people would start wrapping their heads around where things are currently bad. And what needs to occur in order for the statistics to change direction. If only there were things like unemployment level breakdowns by sector. And if only that horrible sector were to improve, what other beatdown sectors would improve with the tide? Took me less than a minute of Googling to find the breakdown. So, if the need (notice I did not say want) for housing were to occur, who would benefit? What sectors? Now, what sectors have the worst unemployment levels? Hrmm, that's odd how all this points in the direction I have stated. Strange what happens when one thinks about something critically. Asks some questions. Does some research instead of reading what can be spoon fed to them. Finds some answers. And draws a conclusion based on "facts". Most people have a good splatter pattern of knowledge but none of it is coherently connected to each other. UnpliableMosse's last post was basically a post of spread shot of random information that anyone with a TV has heard.

Want to talk about the effects of a falling US dollar in terms of unemployment? What sector's would benefit? What would it do to unemployment and therefore consumer confidence? Any good articles you can show me on all this?

Buffett has said that most people would benefit if they just sat in an empty room and thought about things for themselves for a while. Many here should try it some time.

 

[SP33Demon]

Anyone that held Enron past the moment the cut their dividend was a fool. If you exited at that time, you would have been within 20% of Enron's all time high.

As for WFC. They are not cooking their books. 0% chance of that. I know to much about the company to even consider what you are saying to be possible. WFC is one of the best run banks in the country and they are interested in working for shareholders unlike BAC which is horribly run. There was a recent Q&A with BAC where I was shaking my head at anyone that thinks that the interview made them look good. It took one sentence for me to see why BAC is garbage.

So you work for WFC as an executive and can confidently tell us they aren't cooking their books? You say 0% chance of that? Naivete.

Also, your outlook that the economy will recover soon is not logical. Stating that unemployment is only in the housing sector and at historical norms in "every other industry" shows that you're not following the situation logically.

Arguments that unemployment must be structural, given the failure of projected growth rates to generate new hiring, now look silly. Projected growth rates were simply overstated, and current unemployment is exactly what we'd expect given such a feeble recovery. Those overly optimistic assessments of the likely impact of interventions, from fiscal stimulus to QE, also make much more sense now. Policymakers were fighting a fire far more intense than they recognised.

http://www.economist.com/blogs/freeexchange/2011/07/americas-economy

Basically if unemployment was simplified into one sector like you claim, then we could easily resolve this recession. The housing sector is one indicator of growth, but not the surefire solution out of this downward spiral.

Also, comparing this recession to historical "norms" is not logical either. Historical recessions were never as bad as what we're seeing now, as explained in another article I read recently:

A little background: the recent recession looked somewhat different from most previous recessions in that the rate of exit from unemployment fell dramatically. In the early 1980s, by contrast, lots of workers lost jobs, but most of them returned to the labour force relatively quickly. So while the unemployment rate in the early 1980s peaked above the top unemployment rate of this latest downturn, the average duration of unemployment in the early 1980s was about half of the current level. The result is an unprecedented crisis of long-term unemployment.

http://www.economist.com/blogs/freeexchange/2011/07/labour-markets

 

[RbSX]

I might have said the economy is fine but I don't remember it. Not sure why I would have. Unemployment levels are pretty bad right now. I will say this. The economy will get better. The question then become when. That's alright though, so far Moose has only reminded me of people that take what the media spoon feeds them and accepts it as past current and future. Sorry if I take (A) and look into (B) then ask some questions (C) and maybe do some other fact checking (D,E,F,G) and draw up a rational conclusion (H).

My housing numbers are from a very reputable source and they were not pulled out of some article. I actually took raw data.

Good work on linking an article. That is 100x more than Moose managed to supply. Of course, that article is a wonderful indicator of the past. Now if only people would start wrapping their heads around where things are currently bad. And what needs to occur in order for the statistics to change direction. If only there were things like unemployment level breakdowns by sector. And if only that horrible sector were to improve, what other beatdown sectors would improve with the tide? Took me less than a minute of Googling to find the breakdown. So, if the need (notice I did not say want) for housing were to occur, who would benefit? What sectors? Now, what sectors have the worst unemployment levels? Hrmm, that's odd how all this points in the direction I have stated. Strange what happens when one thinks about something critically. Asks some questions. Does some research instead of reading what can be spoon fed to them. Finds some answers. And draws a conclusion based on "facts". Most people have a good splatter pattern of knowledge but none of it is coherently connected to each other. UnpliableMosse's last post was basically a post of spread shot of random information that anyone with a TV has heard.

Want to talk about the effects of a falling US dollar in terms of unemployment? What sector's would benefit? What would it do to unemployment and therefore consumer confidence? Any good articles you can show me on all this?

Buffett has said that most people would benefit if they just sat in an empty room and thought about things for themselves for a while. Many here should try it some time.

Again, I'll bring this up again, you claim to be looking at raw data, okay sure fine. But history would lead me to believe that the information being leaked is being cooked, because it's being provided by people that stand to benefit from overtly positive data.

All it takes is some basic brain skills, have you not noticed how many of those 'rosy' pieces of data provided over the last 6 months have been revised downwards?

What about the fact that something like 45% of the USA is underwater on their mortgages, yet you claim there isn't enough property? Who's going to be buying all this property, especially with a stagflation going on.

 

[LegendKiller]

You remind me of a friend of mine, who would say the economy was fine, even if the sky is falling.

The economy isn't fine, I suggest you start doing some serious reading on sites like zerohedge and seeking alpha.

Remember, the facts are generally written by people who also will benefit from a better economy, the biggest reminder that this is all bullshit is that when everyone was screaming lower unemployment, no one mentioned anything about labour force participation was at its lowest rate in 30 years.

http://www.huffingtonpost.com/2011/...participation-jobs-crisis-worse_n_925309.html

Using ZH or SA as your barometer for economic research is massively short-sighted and one sided. Both of those sites are chock full of permabears and anarchists who would love nothing more than see the world burn, especially ZH, hence the whole "Tyler Durden" thing.

The job participation NEEDS to come down, if only because it is hampering our society in general. It was really nothing more than a by-product of the women liberation movement.

As far as the economy fundamentally changing, I disagree. Things are way too fluid to say that this is the way it will be forever. There have been times in the past that people have bemoaned the downfall of the US because of some new country's raise. All of those prognostications came at the darkest hour, only to be shown false in the long-run. In the 80s and 90s it was the Japanese, only to see them juice their economy and eventually fall, just as the Chinese will do.

Manufacturing in some of these other countries just isn't as desirable as China, so you won't see it as huge. You do see some companies "homesourcing" now.

As far as RE, it will take time, but it will heal. As it does and construction spending increases, hundreds of thousands will be put to work.

 

[dullard]

As far as the economy fundamentally changing, I disagree. Things are way too fluid to say that this is the way it will be forever.

I think there are four issues that are serious and long enough term to consider fundamentally changing. That doesn't mean they can't change again in the far distant future, but for now, they have fundamentally changed.

1) The home equity game is over for now. In the 1990s and early 2000s about 7% of the entire US economy was people borrowing from their home equity and then spending it. That has fundamentally changed with the housing crash. Equity, if there is any left, has mostly been borrowed against. Banks are far less likely to loan with decreased valuations. Sure, some people have equity left, but as a whole, this part of the economy is gone for many years. Equity takes time for the nation to rebuild and so do home valuations. I'd say at least 20 years for another boom in home equity spending, if it comes back at all in our lifetimes.

2) The housing market boom is over. Sure, we might return to normal levels of building houses (about 1 million homes/year). But we aren't returning to the 2+ million level any time soon. That is almost 10% of the consumer economy that will be gone. Likely gone for decades.

3) The ratio of working-age people to non-working-age people peaked in 2007. We'll have fewer and fewer people working for every child + retiree. That means less and less production per capita, year after year after year (baring some new fundamental change to increase production losses). This is based purely on demographics. It takes at least a generation to change this trend (since it is "solved" by a new baby boom and that takes a generation to raise) and likely more.

4) Austerity. This may or may not last. But if it does last locally, statewide, or nationally, it'll take years for politicians to build up the debt load that they once forced us to carry.

I do think the economy is pretty good considering the four items above. Sure, it can be better. But GDP is growing, and unemployment is slowly dropping. We are headed in the right direction, but the four headwinds we are fighting will be troublemakers for 20+ years. We aren't headed for 4% unemployment any time soon. With these issues well have to be quite lucky to hit the historical average of 6% to 7% in the near term future, no matter what politicians are in office.

 

[Pliablemoose]

Dullard, IMHO, has pretty well nailed it. people keep thinking things will be better in 5 years, I think a 20 year window is much more realistic.

Everyone I know in CA is still talking about taking out ARMS, I'm just shaking my head, I've given up trying to talk to them...

<Paying off my 15 year fixed mortgage this week, 8 years ahead of schedule. (insert happy dance emoticon here)

 

[fstime]

I agree with those saying the economy is no where near making a recovery and never will make a full recovery, as most standards of living for people have decreased. This has been occurring slowly for the past few decades as employers have been either: outsourcing, cutting wages, cutting benefits, and simply cutting jobs overall while cost of living and inflation have steadily increased over time.

The housing market has not bottomed out, there are a ton of foreclosures still on the books that simply have not reached the market yet. Lenders knew if they released all these foreclosures at once, they would destroy an already weakened housing market. I'm sure government bailout money allowed many lenders to sit on these foreclosures as well instead of exposing them to the market as they normally would.

Then you have plenty of stubborn folk who got approved for $500,000 ARM loans while making $12/hour and refusing to let it go even though it will happen eventually.

Banks are going through mortgage applications with a fine comb and applicants must meet very strict requirements. As a result of this, it has become difficult for many to borrow money (in contrast to 2006 where banks were throwing money at people) and it has become a game of who has the CASH in hand ready to go.

The stock market is also a bubble right now. Interest rates have been so low for 3 years now that borrowing is now basically free, add in all the job cuts corporations have been making to make up for a weak economy and we have increased profits and share prices!

Unemployment is obviously a useless statistic made up by the government which states after so many months of being unemployed, that individual is "no longer seeking work" and the number magically goes down. Employers cutting full time positions to replace them with part time positions also allows this number to go down.

In the long run, corporations can only cut so much before there are too many consumers with no funds to spend money here and there anymore.

The Fed's decision to keep interest rates low for another 2 years is perhaps the most obvious hint that we are in a shit economic situation.

To put the icing on the cake, the U.S. government has been spending us into oblivion with both political parties only looking out for their own interests and have no intention of fixing the problem. How many people are on government aid in this country, 45&#37;? Let's see if politicians do what they must to fix the budget and start making cuts for programs that pay out to these people. I'd love to see what happens if Section 8 gets cut and the state no longer pays $1,500/month for a 2 bedroom apartment and $1,800 for a 3 bedroom.

Maybe we will see the bottom in about 4-6 years and will be partially recovered in 15 or 20.

 

[goog40]

Google is buying Motorola Mobility for $12.5B (63&#37; premium). MMI investors are thrilled, GOOG and IDCC investors not so much.

 

[SunnyD]

It's like investors simply don't want to believe the reality of the economy right now. I'll admit I was wrong about the general direction thing were to be heading in, but it feels like everybody has their head in the sand right now.

 

[Ns1]

It's like investors simply don't want to believe the reality of the economy right now. I'll admit I was wrong about the general direction thing were to be heading in, but it feels like everybody has their head in the sand right now.

I'm getting out after today.

it was a fun week

LOL

 

[TheNinja]

Google is buying Motorola Mobility for $12.5B (63% premium). MMI investors are thrilled, GOOG and IDCC investors not so much.

If they are going to pay $40 per share and MMI currently trades at $38.12.....can't I just buy $50k worth of MMI and expect to make like $2500?