CrimsonWhite
*****istrator Emeritus
I am holding you to this.
As a matter of fact, I'm putting a sticky on this thread until then, just so we won't forget about it.
Predictions - next 6 trading days
- Thread starter DavidS
- Start date
I am holding you to this.
As a matter of fact, I'm putting a sticky on this thread until then, just so we won't forget about it.
DavidS
Anti-Tea Party Member
- Thread starter
- #26
Here's my reasoning for 6200:
We're going to get terrible new unemployment data at the beginning of the month
We're going to get a growth report for November which is going to be terrible
We're going to get auto sales reports which is going to be very ugly
We're going to get press releases about how gloomy retail sales are so far
We could see a report about GM or Ford heading into liquidation
Every single report we're going to get that is any kind of barometer as to how well the economy is doing is going to be worse than we ever expected this recession to be.
Here's also my reasoning for Monday:
Every time the DOW drops 10%, it makes at least half of it back up the next day. This has happened throughout history. It's called the "dead cat bounce." Then the market resumes selling again.
DavidS
Anti-Tea Party Member
- Thread starter
- #28
We've had several dead cat bounces.
09-29-2008 - Dow down 777.68 or 6.98%
09-30-2008 - Dow up 485.21 or 4.68%
10-09-2008 - Dow down 678.91 - or 7.33%
10-13-2008 - Dow up 936.42 - or 11.08%
10-22-2008 - Dow down 514.45 - or 5.69%
10-28-2008 - Dow up 889.35 - or 10.88%
11-12-2008 - Dow down 411.30 - or 4.73%
11-13-2008 - Dow up 552.59 - or 6.67%
11-20-2008 - Dow down 444.99 or 5.56%
11-21-2008 - Dow up 494.13 - or 6.54%
CrimsonWhite
*****istrator Emeritus
Do I have to be right on all of them?
Those are the terms you laid down.
This is usually the beginning of the strongest time of the year.
(...not that I don't think you are right. 
)
You may be right. However, stocks have fallen 20%-25% each of the past two months. Its difficult to get much worse than this.
There is liquidity out there. Investors are sitting on their hands out of fear. If there are any signs of turning, this thing will rip higher violently. Even during the Depression, there were 50% bear market rallies.
You may be right. However, stocks have fallen 20%-25% each of the past two months. Its difficult to get much worse than this.
There is liquidity out there. Investors are sitting on their hands out of fear. If there are any signs of turning, this thing will rip higher violently. Even during the Depression, there were 50% bear market rallies.
I agree. Over the past 2 weeks I've started rebuilding my portfolio, taking small positions, then averaging down. I got some great prices Friday, before Obama's pick was announced.
Neubarth
At the Ballpark July 30th
I am posting to this topic for the first time. I note that for most of my life, the average P/E of stocks was far far lower than it has been in the past ten years.
Now, I do not know the exact numbers, so I will throw some approximate stuff out there. The specificity is not the issue, the general trend is.
I believe that the average Price to Earnings ratio from 1930 to 1990 was in the seven to eight range. Somewhere (exactly where is not important) in the 1990's the P/E ratio started to rise. By the end of the Ninties, stock prices had risen and pushed the P/E ratio into the teens. By 2001 P/E's had jumped to astronomical highs in tech stocks and outrageous levels elsewhere. I worked in the phone industry as a data communications manager for what is now AT&T. The P/E ratio for that stock (then SBC) was 30 as opposed to the normal 8 or 9.
With the reality of the escalation of stock P/Es behind us, it is now likely that the average P/E on stocks could return to the traditional average of seven to eight?
If so, the market could fall another forty to fifty percent. I do not know about buying back in when that is the risk.
What say you? Government Bonds are far safer when one realizes what the risk of buying into a falling/correcting stock market is. Is the correction that is occuring a fall to tradition in stock valuation absent this recent ten or so year exhuberance ?????????
Now, I do not know the exact numbers, so I will throw some approximate stuff out there. The specificity is not the issue, the general trend is.
I believe that the average Price to Earnings ratio from 1930 to 1990 was in the seven to eight range. Somewhere (exactly where is not important) in the 1990's the P/E ratio started to rise. By the end of the Ninties, stock prices had risen and pushed the P/E ratio into the teens. By 2001 P/E's had jumped to astronomical highs in tech stocks and outrageous levels elsewhere. I worked in the phone industry as a data communications manager for what is now AT&T. The P/E ratio for that stock (then SBC) was 30 as opposed to the normal 8 or 9.
With the reality of the escalation of stock P/Es behind us, it is now likely that the average P/E on stocks could return to the traditional average of seven to eight?
If so, the market could fall another forty to fifty percent. I do not know about buying back in when that is the risk.
What say you? Government Bonds are far safer when one realizes what the risk of buying into a falling/correcting stock market is. Is the correction that is occuring a fall to tradition in stock valuation absent this recent ten or so year exhuberance ?????????
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I'm inclined to agree with your supposition.
The PE ratios have been a form of inflation, but one which our economist have been reluctant to acknowlege as such.
Bascially investments, all kinds of investments, have been a bubble.
This decline in the stock market was inevitable because the stock market has been far healthier than the economy upon which it depends.
The affluent class, which has been enjoying enormous tax breaks (let's remember that the true invetor class once had a 90% top tax rate...now it's 35%) had to put their money SOMEWHERE.
Nturally since they are affluent they invested much of it.
But while they were enjoying affluence, the working class has been suffering a fairly consistent loss of purchasing power.
So while the affluent classes were investing, their investments were basically creating a cituation where more and more money was chasing less and less profit.
PE rations had to eventually go down.
I'm simplifying this argument terribly, I know, but that is, in the marco sense, what I think is happening.
Basically the investment bubble is bursting.
When workers are more affluent, when they are ALSO making enough money to pay their bills, save for their retirements, put their kids through school, as so forth, THEN the stock market's rises will actually be supported by the economy upon which those rising prices are actually based.
The inflation of the prices in the stock market were no less artificial than the rising prices of real estate.
They were all fueled by cheap money thanks to the policies of the FED.
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Neubarth
At the Ballpark July 30th
I am also prone to think that a lot of the money pulled out of the market will not return because millions of Baby Boomers have come to the conclusion that they need to be more conservative with their money now that they are of retirement age.
I retired from Pacific Bell--SBC--AT&T in early 2001. Most of my funds are in US bonds and notes, so the recent fall in the market did not hurt me. I have been warning my friends for two years now to get out! GET OUT! GET OUT!
None of them did, and most of them lost half of their life savings. Now, they are asking ME what to do, and I tell them that I do not know, but that there is the possibility of further fall to those old P/E ratios.
As long as that possibility exists, they could still see another fifty percent fall in the value of their life savings. Their attitude was that the market is the only place that you can make money. My attitude was that the market was also a place where they could lose their money.
Perspective!
I retired from Pacific Bell--SBC--AT&T in early 2001. Most of my funds are in US bonds and notes, so the recent fall in the market did not hurt me. I have been warning my friends for two years now to get out! GET OUT! GET OUT!
None of them did, and most of them lost half of their life savings. Now, they are asking ME what to do, and I tell them that I do not know, but that there is the possibility of further fall to those old P/E ratios.
As long as that possibility exists, they could still see another fifty percent fall in the value of their life savings. Their attitude was that the market is the only place that you can make money. My attitude was that the market was also a place where they could lose their money.
Perspective!
That's right that money will not be returning anytime soon.
But the reason that it won't is because that money no longer exists.
It existed only in our minds and balance sheets as inflated values on real estate and stocks.
Market corrections are not just a transference of wealth, they are the destruction of imaginary wealth.
We are having an ecoomic meltdown that is coming to us as an illiquidty crises precisely because so much imaginary weath is now recognized as such.
Just take me for example. Assuming my net worth was MOSTLY found in the inflated value of my home, then I FEEL poorer even if my cash flow has not changed at all.
Hence I will cut back on spending because that cushion of cash I thought I had in the value of my home no longer exists.
Now I am sure you know how Cassandra must have felt while she witness the Greeks burning troy to the ground.
Remind them not to cry over spilled milk.
Having the vision to forsee problems, but lacking the credibility to be able to save those who won't listen to you about your vision, isn't exactly as satisfying as many people think it must be, is it?
Back in the late 70's I did everything I could to convince my father to dump Sears stock and invest in gold.
Had the old man done that he'd have quadrupled his dough in about six months.
Instead, I watched his net worth cut in half in about the same period.
Whenever we see each other we assiduously avoid discussing investing.
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Missourian
Diamond Member
You all have a much better understanding of the stock market than I do.
I have an image burned into the deepest recesses of my residual reptile brain that is very similar to this one:
The image that scars my psyche has an old style wood cook stove in it but the same caption...
"Post-war German woman burns money, saying the money burns longer than the firewood it would purchase."
It is very difficult to invest in something real after you realize you don't even hold something real to invest.
I have an image burned into the deepest recesses of my residual reptile brain that is very similar to this one:
The image that scars my psyche has an old style wood cook stove in it but the same caption...
"Post-war German woman burns money, saying the money burns longer than the firewood it would purchase."
It is very difficult to invest in something real after you realize you don't even hold something real to invest.
DavidS
Anti-Tea Party Member
- Thread starter
- #40
I'm worried about this call with the historic government bailout of Citigroup. All Asian stocks are up following this massive move. This, along with Obama's economic team press conference may move the market massively positive today. The only bad news that we're going to have is October existing home sales. Now, unless this is historically bad news, we could be looking at Dow 8500 tomorrow.
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