Another 1929 like Stock Market Crash?

Discussion in 'Stock Market' started by Neubarth, Jan 24, 2009.

  1. Neubarth
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    Neubarth At the Ballpark July 30th

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    Price to Earnings Ratios are way too high right now for a Depressionary Economy with massive unemployment. The potential is there for a massive stock market crash.

    I ain't promisin' you nuttin'

    Only sayin' the potential is there to lose half of your investment dollars over the next four years. That ain't good. People need to be made aware of the risks of staying in the stock market when we are going deeper and deeper into Depression.
     
  2. dilloduck
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    dilloduck Diamond Member

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    caveat emptor, baby. I don't care if people insist on buying a pig in a poke, I can't stop em nor should I be able to.
     
  3. editec
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    editec Mr. Forgot-it-All

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    They killed the geese that liad the golden eggs.

    This is what happens when supply siderism is taken to absurd levels like it has been in the last thirty years or so.

    Eventually the working class makes so little money (in relation to the ruling classes) that they cannot buy enough to keep the system going.

    The price of oil didn't help, either.

    But the big problem, the biggest source of what has screwed this nationa's economy is fairly simple to understand...people cannot find work that pays enough to keep them going.

    And since they cannot work, they cannot buy, and if they cannot buy the value of stocks declines, and the bonds that are sold predicated on people paying their bills ALSO collapses.

    The wealthy have nobody to blem but themselves.

    Selfish idiots, the lot of them.
     
  4. RodISHI
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    RodISHI Gold Member

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    It has gotten to the point private enterprise is not allowed to exist. The corporate entities fully screwed themselves.

    When they stole the America Dream they destroyed the essence of this country. That is they destroyed the spirit of freedom and liberty that honors creativity and innovation.

    Do not forget to add in the mix the greed of the prosperiety pimps that have taken over pulpits and the total mental veiw of the average citizen in the last 20 years. When you teach and promote greed to the extent that has gone on here in this country for the last fifty years this is what the end results are and the bottom has not been reached yet.

    This society is sick no doubt with honoring the dishonorable. It is rather disgusting when you get to looking closely at the whole pot mixed together. Ethics went out the window along with justice as people started selling themselves to the highest bidder.
     
  5. Toro
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    Toro Diamond Member

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    PE ratios are not too high. Earnings are depressed. Profit margins have collapsed because banks are taking massive write-offs.

    [​IMG]

    Price to normalized earnings are actually quite low.

    [​IMG]

    Price to the average trailing 10-year earnings is now below the 140-year average

    [​IMG]

    Price to sales is low.

    [​IMG]

    Price to book value is low.

    [​IMG]

    In 2002, stocks bottomed at 22x depressed earnings. In 1991, they bottomed at 19x depressed earnings. Since 1900, the average multiple of depressed earnings the market has bottomed at is about 15x.

    Stocks are cheap.

    More here

    Toro's Running of the Bulls Market Blog: Is the Stock Market Expensive?
    Toro's Running of the Bulls Market Blog: Stocks are Inexpensive - Robert Shiller
     
  6. Neubarth
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    Neubarth At the Ballpark July 30th

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    Do statistics lie? Hell yes!

    Price to sales and Price to earnings needs to be compared to current numbers, not normalized numbers.

    Dude, when the sales/earnings plummet, stock prices come down, too. You may very well see a 30 to 40 percent fall in the DOW in the next month. Don't ride it down and then look back at what might have been if you had sold all your stocks in January of 2008.
     
  7. editec
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    editec Mr. Forgot-it-All

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    Just as they did so often BEFORE FDR changed the game to prevent the big fish from eating up everything in the economic pond.

    Becuase that is the NATURE of capitalism unchecked, isn't it? Lasisse fair capitalism is a snake that eats itself but not before it eats the young, the seed corn and all the livestock.

    The invisible hand of the market has all the long term sense of cockroaches.



    W
    Yup. Cronnyist capitalism replaces meritocratic capitalism. And how do they do that? They own the government when enough people buy into their lies and enough people think that the working class are a bunch of losers who we don't need to have a civil and prosperous society, too.

    As we have read here often from some of the folks who THINK they understand economics.

    Yup. The GREED IS GOOD morons who read a damned fine story called ATLAS SHRUGGED but who aren't quite intelligent enough to realize the inherent flaws in its presuppositions.

    Well...we'll ether recover becasue some strong man will wrest control back from the scoundrels or AMERICA will become another former superpower.

    I don't have much hope that we'll fix it though.

    Not enough people yet understand what the true source of the problem is, really.

    Too many people think that it's merely too much debt, but they haven't yet figured out WHY people, people who work hard their whole lives, are forced into debt.

    It is damned easy to manipulate materialists and most of us have been taught to think that having money equates to being smart or productive or somehow a superior person.

    My father's generation uderstood that wasn't true, of course, but they're opver the hill and my generation bought into the conceit that feeds into this self destructive behavior.
     
  8. Toro
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    Toro Diamond Member

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    Price to sales is the price per share relative to the sales per share. That is not a lie. That is fact. It is also fact that the stock market generally does not bottom at extreme lows on earnings. You are arguing that the market is going to bottom at a depressed multiple of depressed earnings. That usually does not happen.

    Now, they do sometimes, and maybe they do this time, I don't know. Maybe you are correct. Maybe stocks will drop 30%-40% next month. But it is improbable.

    You use normalized earnings because earnings are cyclical. You did not buy the market at 1500 when earnings were $100 because earnings were inflated. 15x earnings looks like a fair multiple, since that is the average multiple over time. However, margins were too high at the earnings peak. Instead, the normalized earnings were around $65, and the market was trading at 23x normalized earnings, which is very expensive.

    Likewise, if you have a time frame longer than your nose, you do not sell the market when margins are at cyclical lows, as they are now approaching because cyclically low profit margins do not approximate the true long-term earnings power of the American economy.

    I'm of the opinion that the market is in a basing formation, and that the next move is probably up. Then maybe we retest the lows.

    Maybe I'm wrong though. Maybe the SP500 market goes to 600. But selling now is like buying stocks in 1999.
     
    Last edited: Jan 24, 2009

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