S&P500 to 600

[Neubarth]

I was in a meeting with some Asian Men in the Bay Area today. They seemed to be in ageement that they expected the S&P500 to fall well below 600 in the next few months. They had all shorted the market. Smart men.

We are talking about another strong stock market fall.

Out of curiousity when I got to my apartment, I Googled S&P500 to 600, and had four hits. This is not a pretty picture following the Fed Gov saying that this Recession (Depression?) will last at least to Mid 2010.

That was not 2009 (THIS YEAR), but Mid 2010 (NEXT YEAR!)

Time to get out of the market or short it. This is getting uglier by the day.

 

[Neubarth]

• Fed Officials Saw `Substantial' Risk to Economy Last Month as Rate Slashed

• U.S. Factory Orders Fall Twice as Much as Forecast as Companies Cut Costs

• Pending Home Resales in U.S. Decline 4%, Worse Than Economists' Forecasts

“A lot of businesses have been caught flat-footed by how deep and accelerated this recession has been,” Bill Taubman, chief operating officer of shopping-mall owner Taubman Centers Inc., said in a Dec. 26 interview on Bloomberg Television.

Orders to U.S. factories fell 4.6 percent in November after a revised 6 percent decrease the prior month that was larger than initially estimated, the Commerce Department said. The back-to-back decline was the biggest since records began in 1992.

 

[Dr Grump]

Dontcha just love rampant capitalism!

 

[Toro]

Maybe, but I doubt it.

The profit margin of the SP500 over the past 20+ years has averaged 6%. However, because the proportion of higher-margin intellectual capital companies - such as software companies - make up a much larger proportion of the economy, I think the normalized profit margin is 7%. Sales per share on the SP 500 is $1000. Thus, normalized earnings are about $70.

At 600, the market would thus be trading at 8.5x earnings. Multiples have gotten that low before, but it is rare that they do. In fact, it is about as rare as the market trading at 25x-30x earnings, which is very high.

Betting on stocks falling to 8x earnings or rising to 30x earnings is betting on an improbable bet. It might happen, but it usually does not.

I own more stock than I ever have, but I expect to start selling another 5%-10% higher. However, the market may be putting in a serious bottom, though I am skeptical that it is.

 

[xsited1]

That is possible. Markets typically do about 3-4x worse with a Democratically-controlled Congress. They should rebound by 2011. Let's hope things remain at least steady until then.

 

[Toro]

Well, not quite.

Since 1948, the Standard & Poor's 500 total return (capital gains plus dividends) has averaged 15.6% when a Democrat was in the White House and only 11.1% when a Republican was in the White House.

You get a similar result if you look at growth in real gross domestic product. Under Democratic presidents, the average since 1948 has been 4.2%. Under Republican presidents it has been only 2.8%. ...

The president just signs them. Based on congressional control, the study results look very different. Under Republican Congresses, stocks have averaged a 19% return, while under Democratic Congresses only 11.9%. Real GDP growth, lagged two years, has averaged 3.7% under Republican Congresses, and only 3.2% under Democratic ones.

Then there are the various party mixes between the president and Congress. If John McCain wins and we have a Republican president and a Democratic Congress, history leads us to expect an average 10.3% total return from stocks and 3.3% real GDP growth. If Barack Obama wins, and we have a Democratic Congress too, then according to history stocks will average 13.8%, and real GDP growth 3.3%.

But that's no argument for voting for Mr. Obama. Vote for Mr. McCain -- but vote for Republican senators and representatives too. When Republicans have controlled the whole government, it blows away anything Democrats can do. Stocks have averaged 17.5% and real GDP growth 3.3%.

Divided Government Is Best for the Market - WSJ.com

I have all the daily data for the S&P 500 starting in 1928. I'm going to check this out.

 

[xsited1]

Well, not quite.



Divided Government Is Best for the Market - WSJ.com

I have all the daily data for the S&P 500 starting in 1928. I'm going to check this out.

It would be useless to go back more than about 25 years since the Republicans and Democrats have changed so much over time. For example, George W. Bush is very similar to LBJ from the 60s. Look at the last 25 years and tell me what you get.

 

[Zoomie1980]

I was in a meeting with some Asian Men in the Bay Area today. They seemed to be in ageement that they expected the S&P500 to fall well below 600 in the next few months. They had all shorted the market. Smart men.

We are talking about another strong stock market fall.

Out of curiousity when I got to my apartment, I Googled S&P500 to 600, and had four hits. This is not a pretty picture following the Fed Gov saying that this Recession (Depression?) will last at least to Mid 2010.

That was not 2009 (THIS YEAR), but Mid 2010 (NEXT YEAR!)

Time to get out of the market or short it. This is getting uglier by the day.

Well, that would be nice if it did and if it lasted that long. Sounds like a great, long term, share accumulation period. Shorting this market is the dumbest move anyone could possibly make, unless you are a day trader (aka moron)

 

[xsited1]

It would be useless to go back more than about 25 years since the Republicans and Democrats have changed so much over time. For example, George W. Bush is very similar to LBJ from the 60s. Look at the last 25 years and tell me what you get.

Here's the information if anyone is interested:

Taking Stock of the Parties

 

[editec]

I'm inclined to think that until prospects on Main Street improve, Wall Street isn't going to improve.

700,000 people lose their jobs, last month?

That's a whole lot of consumers who aren't going to be doing much to improve profits for corporations.

All those so-called losers some of you have expressed such contempt for? Apparently they must have had something to do with all the money your master class that many of you suck up to was making.

Why this surprises any of you I cannot say.

Hubris, I guess.

 

[Toro]

It would be useless to go back more than about 25 years since the Republicans and Democrats have changed so much over time. For example, George W. Bush is very similar to LBJ from the 60s. Look at the last 25 years and tell me what you get.

Well, I did put this together.

However, it is a little misleading in that at the end of Clinton's term, valuations on stocks were sky high while they were very low at the end of Bush's term.

The point of that, though, is the economy and stock market are often independent of politics.

I did see a graph at one time that showed the stock market since 1928 did best under a Democrat President and a Republican Congress. I tried to find it but could not.

 

[Baruch Menachem]

The thing to do with stocks is wait till everyone is in agreement on the movement in a general direction, and then bet the other way.

Were it not for the fact that Obama is moving into the whitehouse real soon, I would use the OP here as a good sign to start buying. 14 months ago, people were saying the bull market was perpetual.

And lets not forget what caused the biggest meltdown was the passage of TARP. I think congress got the message on that one. Folks, even republican folks, don't like corporate welfare.

Lets not forget what you are buying and selling here is the earnings potential of the stocks. The worst smashes have been stocks where earning have dropped out. The Banks got hit making government mandated mortgages to folks who never could pay, the auto makers got hit with being commited to making SUVs when gas all the sudden went up to $4.50 a gallon. That is unsustainable. They also have insane labor costs... but that is not every industry.


Gas is now at rational levels, the banks that made the bad loans are all now merged away or otherwise gone. The auto dealers are busy retooling, and I think most folks are budgeting gas at $3 per gallon.

Providing Obama doesn't bring us TARPII, the economy should do very well, thank you very much. Most of the correction has already happened. If Obama does give us TARP II, then all bets are off, and you are better off in precious metals and a cabin in the woods.

 

[foggedinn]

Back when the DOW was 14,000+, I made the comment that I expected it to be at 4,000 by the time Bush left office. Idiot was one of the nicer terms hurled at me.

We still have almost a week to go.

 

[Paulie]

I did see a graph at one time that showed the stock market since 1928 did best under a Democrat President and a Republican Congress. I tried to find it but could not.

Because it's the only time the R's are being fiscally responsible. Too bad it's really only because they want to stick it to the liberal dems, and not because they actually advocate that policy.

 

[Paulie]

Back when the DOW was 14,000+, I made the comment that I expected it to be at 4,000 by the time Bush left office. Idiot was one of the nicer terms hurled at me.

We still have almost a week to go.

I doubt it. If it happened though, I'd be taking one hell of a profit on my DXD (double short DOW ETF).

Wouldn't be surprised with 7,000 though.

 

[Neubarth]

7000 should be easy to make once people realize Obama does not have any short term stimulus plan.

 

[editec]

Good luck trying to figure out the trend in this market, guys.

I seriously mean that, too.

I wish you well.

Just remember that the stock market is NOT the US economy.

it is an indicator of how well the monied class is doing but inevitably even the market has to bear some relationship to how well the people it sells into are doing.

the market will recover when it becomes obvious that the PEOPLE are starting to recover.

Not before.