October 10th Signaled the End of Three Prior Bear Markets - 1974, 1990 and 2002

Vanity ^ | 10-10-2008 | Frantzie

[Frantzie]

Wall Street seesawed Friday, with the Dow Jones industrials dropping nearly 700 points in the early going and fluctuating wildly in the last hour while investors looked for bargains after eight straight days of massive losses.

[Frantzie]

I mentioned last night that I thought we might be up today but we closed down 1% on the Dow. It appears October 10th or within a few days that bear markets ended on October 10 in 1974, 1990 and 2002. 1974 was brutal and 2002 was the turn from the tech bubble.

A little possible good news. Hopefully John McCain will unveil a 10 point plan lead by energy independence. We have FOUR times the Saudis oil reserves in shale oil, coal diesel and ND oil. This does not include ANWR and offshore oil.

This is a free market way and possibly the only way to "recapitalize" the U.S. economy. Energy creates wealth. If you have any doubts, look at the $750 BILLION a year you are sending to the Saudis, UAE, and our other oil producing friends. Sure the Russians are getting hurt but they spent their wealth faster than could build it and exported most of it offshore.

Develop our energy sources in the lower 48 will create jobs, tax revenues and most importantly wealth. This has happened MANY times before in U.S. history.

Fortunes made on oil: PA, TX, CA, Gulf, Alaska and now North Dakota.

Fortunes in minerals: CA and AK Gold rushes.

if McCain keeps bashing the ACORN criminal and offers a serious 10 Point Plan. Frightened Americans will rally around McCain. Any plan beats no plan (Obama's generalities and lies).

If McCain-Palin attack Obama and have a 10 Point Plan - we will see a market rally.

[FreedomProtector]

Conservatives better not forget we have the upper hand in the economic debate:

1) Economics which leads to prosperity requires a moral foundation....in order to prosper
a) you shouldn’t steal other people’s property
b) you shouldn’t covet other people’s property
c) requires honest transactions (if you sell insurance better be honest about ability to support it)

Obama and liberals ask for ‘regulation’, but they completely miss the moral significance of the free market and honest transactions—and they run their entire campaigns trying to get one to covet and steal anothers property.

2) Liberals in congress trying to steal and redistribute other peoples money creates market distortions
a) Government suing banks (Obama) to get them to make loans creates market distortions.

3) It is very important that the changes and reforms made result in economic freedom—not erode freedom.

4) Wealth is not stagnant. Wealth is created via every honest transactions...producer and consumer surplus.

5) Conservatives our the only ones for developing our own natural resources.

[cw35]

Yesterday was also the anniversary of the high.

[politicket]

If McCain-Palin attack Obama and have a 10 Point Plan - we will see a market rally.

Not until the credit market unfreezes.

[Frantzie]

No I know.

[Freedom_Is_Not_Free]

Correct. It really IS different this time. Much as I hate Greenspan, I agree that we are in a one-in-a-hundred-year event. People are using typical bull and bear market indicators to read this market, when I don’t believe typical technical indicators or fundmanentals apply. This is a panic situation.

Look at today’s market action. Today the markets acted just like a genuine market bottom with capitulation, volatility and all. The Pollyannas on CNBC will call this “THE bottom” and cite all manner of historic indicators from recent decades.

Now what happens if Morgan Stanley goes bankrupt, or General Motors. We go down. No bottom there.

This time it IS different. Like you said, we need to see liquidity return to semi-normal levels before anyone can safely call a bottom on this brutal market decline. But historic indicators are not reliable. No market rally until lenders are genuinely lending again.

Now here is a sliver of good news. I heard it reported this morning on CNBC that Wells Fargo claimed the availability of commercial paper was better than it had been in week. If the problems with commercial paper show themselves to be resolved, then that is good news for the markets and the economy. We’ll have to wait and see.

[Alberta's Child]

A very astute friend of mine who has made some great investment decisions over the years has told me that he doesn't expect any kind of sustained rally anytime soon, but he thinks we're pretty close to the bottom at this point. This is largely driven by a shrinking money supply, and all signs are pointing to a change of course on that front.

This same guy bailed out of residential real estate in 2006, and began bailing out of commodities back in August of this year.

[Velveeta]

Why a 10 point plan? What are the points you’d like to see?

I’m not challenging you, I’m just trying to learn.

[politicket]

Wells Fargo claimed the availability of commercial paper was better than it had been in week.

We'll have to wait and see.

Right now the TED Spread is at 464 basis points (scary) and the LIBOR/OIS Spread is at 365 basis points (insane).

Nothing of note is happening until those two indicators drop hundreds of points - which could happen if 3-month LIBOR collapsed back down.

[B4Ranch]

>This is largely driven by a shrinking money supply, .<

Care to rewrite?

[Frantzie]

10 Point Plan? People are scared. Obama has no plan. People want specifics and want to see action. A plan to fix the problems with the economy and punish people who wrecked the financial system is what people want to see.

The enrtgy independence will re-capitalize America. i.e. generate jobs, wealth and tax revenues.

1. Energy independence because we have FOUR times the Saudis oil reserves in the lower 48 in shale oil, coal diesel and ND oil.
2. People involved in the financial disaster are going to go to jail or be prosecuted (Fannie and Freddie ex execs to start).
3. People and organizations involved in stealing elections will be prosecuted.
4. Tax cut.
5. Market oriented approach to this mess and regulations to insure the mortgage bomb never happens again like at least 10% down and no teaser rates. Term limits on the Senate (constitutional convention for that).

6-10. Copy stuff from the contract with America or something along those lines.

Newt and the GOP scored big with the Contract for America but it cannot be a gimmick.

[Captain Peter Blood]

The market is a mess and my feeling is that it will continue to go down and will for most of the month of October. We could see a 6000 Dow when it’s all over.

[Alberta's Child]

Everything I've seen over the last few weeks indicates exactly what I posted there.

We're actually in a DEFLATIONARY period right now -- at least for the short term. That's why interest rates are way down (short-term U.S. Treasuries are being auctioned off at something like a 0.4% annual rate of return), the price of oil is down more than 40% in the last three months, and real estate prices are declining as well.

[B4Ranch]

The problem isn’t a shortage of money, it is a liquidity problem. I am loaded down with the cash I removed from two banks in town BUT I will not spend it because I am unsure of just where the bottom of the credit market is.

The bottom of the credit market is what sets the bottom of the stock market and as long as the stock market is falling I am going to do everything possible to preserve my nest egg.

Listening to CNBC with their rantings and ravings about the various market sectors doing well or poorly today is of no actual value until the LIBOR rates, the overnight credit rates, drop into a level that banks can feel comfortable operating in. It is these LIBOR credit rates that affect businesses worldwide. They need the ability to borrow short term money and right now that is missing.

[Freedom_Is_Not_Free]

Thanks for the tip. I can use as much information from successful sources as possible.

[Alberta's Child]

Well, he'd be the first to admit that he can be wrong on any given trade. But he does a lot of his work based on his knowledge of history, his knowledge of economic cycles, and especially his view of odd indicators.

That last item is a pretty important one. Case in point . . . Back when everyone was talking about whether Amazon.com, Borders.com or Barnes&Noble.com would be the top online book retailer, his attitude was: "I think they have a great concept and they all have the ability to come out as the market leader, but maybe only one of those three will be a solid investment for the long haul. I really don't care which one is the best bet, since I don't know enough to make an astute investment. Instead, I'll look at other companies that will do well regardless of which of these online retailers ends up doing well in the end."

So he went out and loaded up on Federal Express and UPS stock.

[Freedom_Is_Not_Free]

That move would not be obvious to me but it is now in hindsight. He’s a clever investor. I don’t have that kind of savvy. I can talk myself into our out of anything and have great difficulty accurately reading the tea leaves. That is why I normally stick with something fool-proof like an Index fund. All I have to do is guess when I think we go for the next bull market and move from safety to an aggressive index fund.

I don’t have any of the skill and savvy your friend has.

[Freedom_Is_Not_Free]

We will have to wait and see. I heard it on CNBC which could well be just one of those optimistic throwaway lines they constantly spew in a futile attempt to bolster confidence. I just thought it noteworthy. If any commercial paper is moving anywhere, it is newsworthy at this point.

[cherry]

well, I almost started crying when I saw what has happend to my 403b.....a lot of it in cash reserves but my Roths and some 403 money in mutual funds.....

but its not a loss until you cash them in, I guess...hope I live to be 100.

[Alberta's Child]

That is why I normally stick with something fool-proof like an Index fund. All I have to do is guess when I think we go for the next bull market and move from safety to an aggressive index fund. I don’t have any of the skill and savvy your friend has.

That's perfectly fine. I don't have any of that skill and savvy, either. LOL.

The important thing is that you recognize your limitations, which is more than many investors can say. I follow the same index fund approach as you, because I don't have the time to do all the research necessary to succeed on individual trades . . . and I'm most interested in long-term, hands-off investments anyway.

This friend of mine isn't just any "ordinary" investor. He has an MBA in real estate finance, began his career working for a real estate developer, started his own real estate development company that attracted some big institutional partners, and now runs a private equity fund for a small, select group of clients. He devotes most of his time to research on various prospective investments.

In other words, he has more "skill and savvy" than 99% of the investors in the world . . . and he still has to account for the possibility that his investment decisions will turn out to be bad ones.

[Freedom_Is_Not_Free]

Good points.

Yes, I try to be honest about my limitations. You are not kidding that this gives me a big boost over most people. I have so many friends who think they are savvy investors who never seemed able to beat my Index Funds during the bull market. They would gloat about one stock or another but be quiet when I asked how the others were doing, saying “OK” or something similar.

I have friends that lost money or who are back to square one after all of their “savvy” investing. By that I meant, pre-2008. All of them lost money in this 40% drop on the DJIA and S&P500. Nobody listened to me when I begged them to get out of the market.

I would love to have a friend who was a talented investor. He should be able to keep you from the big mistakes, if nothing else.

[Alberta's Child]

I would love to have a friend who was a talented investor. He should be able to keep you from the big mistakes, if nothing else.

Right. I don't ask for advice on specific investments because it would put him in the uncomfortable position of serving as my financial advisor when he really isn't.

We trade ideas and talk a lot about major economic trends. I learn a lot from him, and he gets a good grasp of the things in my field of work that might help him. Usually he only "advises" me when he gives me some good reasons why I should not invest in one of his funds. LOL.

[Mr. Jeeves]

October 10th Signaled the End of Three Prior Bear Markets - 1974, 1990 and 2002

The cyclical bear market that began with the dot-com crash did not end in 2002. We are still in the middle of it, and the next real bull cycle - the Kondratieff Spring - will begin around 2017. We are, however, due for an upward correction, and the Dow may bounce back close to 10,000 over the next few days or weeks. This does not mean happy days are here again. Trade the bounce, if you can, but bear in mind we haven't yet seen the lows. I expect at least a retest of the post-9/11 low and possibly a panic drop below Dow 6,000. "Buy-and-hold" will not be a workable investment philosophy again for some years to come.