The Official Dow 7000 thread

[editec]

that might happen this week.

This week? It might happen today. Futures are down 141. We won't even see 6900 at the open!

We'll know in a few minutes, DavidS.

I suspect that the market cannot really thrive as long as the banking situation is still up in the air.

And I suspect the fiscal health of the banks are uncertain until the price of real estate finds a bottom.

Now if I were predicting a bottom on RE, it would be when the price of the median home price rounghly equaled one year's median salary for the American family.

So I expect that the RE prices still have a long way to go down before they get back in line with the reality of incomes.

Locally, for exmple, if the average family income is 60,000, then the median price of you homes should be roughly that.

In this part of Maine, that would mean that the median price of our homes needs to drop about 50% from what it about a year ago.

If it does that, of course, almost everyone who purchased a home recently, (say with in the last five or ten years) using a conventional mortgage, even if they put down 20% of the purchase price is basically underwater.

There's a happy thought for this snowy Monday morning, isn't it?

 

[DavidS]

Well... it's official. Dow 6900.

 

[editec]

Well... it's official. Dow 6900.

I cannot see how the stock market NOW, can recover until the PEOPLE's ECONOMIES start to recover.

The disconnect that we seemed to have, where the stock market was trhiving while Main Street was not, was a bubble..in stocks and bonds and real estate, too.

The cashing sound you're all hearing on the market is reality correcting the misguided notion that a national economy can screw the working man and still thrive.

It's taken nearly 40 years, but the big corrrection is happening right now.

OUCH!

 

[Care4all]

Why would homes be worth less than before this Boom actually began?

What was 2000's value on these homes?

the other thing, Editec.... i think the banks in the very old days used the figure of the mortgage payment being no more than 25% of ones gross income...total debt payments of no more than 33% of ones monthly income....

They changed that to no more than 27% and 37% total monthly debt payments about 10 years ago when we bought our house in massachusetts...

AND the Lord only knows what the standards have been changed to after this...

I tend to think that ones house payment being no more than 25% of ones gross monthy income is about right...

Taking your 60k yearly household income, devided by 12 months, comes to a monthly gross income of $5000....

25% of 5k a month is a mortgage or rent payment payment of $1250 a month....

That is a home worth about $210,000....if mortgage interest rates are between 5%-6%.

Maine has a median household income of around $45k only, that would mean these households can afford a home at around $156,000....

Of course there are many households here in maine that make much less than the $45k combined income, at least up in my neck of the woods, so they should have homes for much less values. My area has 11% of the people living below poverty levels...and this is $15k total household income for a 2 person household.

Care

 

[Missourian]

Care,

In 1998 the price of a house was divorced from inflation.

So people were making the same amount but houses were more expensive, so it took a larger percentage of income to buy the same house.

 

[FactFinder]

Looks like you are going to have to start a 6000 thread. Hurry or you may not get it in before the 5000

 

[DavidS]

I'm worried what happens if the S&P dives below 700. There's such a thing as an over-correction.

 

[wimpy77]

yep i saw an economist today say they market wont stabilize until we see house prices stabilize.

 

[auditor0007]

yep i saw an economist today say they market wont stabilize until we see house prices stabilize.

There are so many houses on the market right now that they couldn't give them all away.

 

[DavidS]

The S&P is only 4 points above 700. It's taking a really bad hit today.

 

[DavidS]

Looks like you are going to have to start a 6000 thread. Hurry or you may not get it in before the 5000

I don't think we'll reach 6000. At least I certainly hope not. I think the bottom is around 6500. I've been saying this months and I'm finally going to be right about something to do with the stock market. I got rid of Apple when I shouldn't have, held onto Starbucks too long, took money out of gold when it was $700 to put into Morgan Stanley when it was $13/share... there is absolutely no way to make money in this market right now.

 

[wimpy77]

a guy on cnbc said in his opinion this is a pros market right now and the fix income traders need to stay out for a while.

 

[mash107]

yep i saw an economist today say they market wont stabilize until we see house prices stabilize.

but with 19million unoccupied homes, prices are only going to stabilize downward.

good for new buyers, for sure; sucks for those that think their home is any more than a place to live.

 

[wimpy77]

the former head of the fdic said he thinks the s&p could drop another 20 to 30%

 

[Valerie]

Looks like you are going to have to start a 6000 thread. Hurry or you may not get it in before the 5000

I don't think we'll reach 6000. At least I certainly hope not. I think the bottom is around 6500. I've been saying this months and I'm finally going to be right about something to do with the stock market. I got rid of Apple when I shouldn't have, held onto Starbucks too long, took money out of gold when it was $700 to put into Morgan Stanley when it was $13/share... there is absolutely no way to make money in this market right now.

You were right about CAT.

I bought some DIA today in my IRA.

DIA: Summary for DIAMONDS TRUST SER 1 - Yahoo! Finance

 

[Valerie]

DIA - Diamonds Trust

FUND SUMMARY
The investment seeks to provide investment results that, before expenses, generally correspond to the price and yield performance of the Dow Jones Industrial Average (DJIA). The Trust holds the Portfolio and cash, and is not actively "managed" by traditional methods. To maintain the correspondence between the composition and weightings of stocks held by the Trust and component stocks of the DJIA, the Trustee adjusts the portfolio from time to time to conform to periodic changes in the identity and/or relative weightings of index securities, typically within three business days before or after the day on which such changes are scheduled to take effect.

 

[DavidS]

the former head of the fdic said he thinks the s&p could drop another 20 to 30%

link?

i call bullshit. we're oversold. we either hit the bottom today or we've got another 4% to go. This is it. We're going to linger here for a while, but this is it.

 

[DavidS]

I saw a look today in art cashin that I've never seen before in my life and probably that he's never had in his life. The good news is, we're going up tomorrow. Way up. The trends of this bear market show us two things:

Whenever we close below x250 with the x being 13, 12, 11, 10, 9, 8 and now sadly 7, we always hit the next thousand below AND whenever we close below the next thousand below for the first time, we go up the next day and close above it. So tomorrow, if the pattern holds, we should close above 7000. One caveat is that we've never hit so far below this before. The first time we reached 7998 intraday, we bounced like 500 points and settled 200-300 points above it and then went all the way up to 8900 or so. We've never, ever, in the entire history of the DJIA hit this low this fast. We usually close at x900 or x950.

I think people are exhausted from selling, personally and I think tomorrow is going to be one of the best days on the markets we've seen all year.

 

[wimpy77]

well i saw the boldest prediction ever on larry kudlow's show doug kass said the yearly in the s&p 500 bottom will be hit in the next three days. also david the had another guy that basically agreed with you he said it was oversold it wasn't funny.

 

[Toro]

It very much feels like a bottom is near in terms of time. However, at this rate, we will be at 600 on the SP by Friday.

I say, if its going to get there, bring it on. The sooner we get to the bottom, the better.