They're extremely stable if bedded and inlet correctly, and tend to have magnificent long range performance.
Posted on 10/10/2008 6:52:10 AM PDT by disraeligears
Caveat: None of the following is to be relied upon by anyone for anything. Anyother words, I have no idea what is going to happen in the financial markets, and if anyone tries to tell you differently, they are a bloody fool!!!
That said, before going to law school, I was a stockbroker (I know, I know, next it is selling used cars). I remember looking at my Quotron in 87 and seeing the Dow drop 25% in one day!
Never paid much mind to the charts (was always zeroed in on fundamentals).... BUT, recently, when I looked at the Dow over the past 12 years or so, support looked to be at around the 7600 level (July 2002).
Then I looked at the Dow since around 1935. Using my old ruler and drawing a line throught the market accretion since then (1935), it looks like the DOW would naturally be around 6000 if not for the past activity of 20 years or so.
Any ideas?
Based on what? That is still high for historical P/E ratios, even if earnings are not affected by this mess.
The more these idiots try to save their pals on Wall Street, the worse it gets.
I started mine at 1950 and took it to 1980. From there, the S&P should be around 820.
I've been nibbling on some gold issues....fwiw
I am not sure that there is any Capital to buy into a rally.
Hmm, I think commodities are getting hit hard. I know gold is up a little, so maybe you know something I don't : )
They're extremely stable if bedded and inlet correctly, and tend to have magnificent long range performance.
I could be wrong...and I'm prepared for that.
Not gonna give them much room to go against me.
Snowing there?
Oh, I think I’d predict lower now, just back then I was predicting it the knowledge and understanding that the mess we were heading for was bigger than any of the “experts” were even considering.
My gut told me the bottom was at least 1/3 contraction of the market, and at the time the market was 12,000. If I was to think about it now, I’d say fear has pretty well taken hold, as has panic, a lot of boomers just watched a lot of paper equity evaporate, and as they are coming up on retirement are going to be cashing out big time.
THe shrinking of the DOW was going to happen even without the current mess, as the pig in the python that is the boomer generation moves into retirement and begins to pull out of the market. This was going to happen, albeit much slower in the coming years, decreasing demand for stocks in general IMHO.
With this panic right now, and the external manipulations adding to it by folks who want Fauxbama elected, it probably will bottom lower than that 8k I predicted back then.
I do think it will start to stablize, soon, though it may continue to slowly trend lower for a good while. At this point its just abject panic and fear. YOu have people dumping completely stable things. I mean for all its troubles do you really thing GM deserves to be market capitalized at a value under what it was in the 1950s? Not adjusted for inflation? Companies that are benefiting from this mess are even getting pounded on the street right now. That won’t and can’t last forever.
I believe things will return to more realistic/historic PE ratios and that stocks will begin to pay dividends as well. The idea of a stock with no divident payment when you think about it is ludicrous. If you are part owner, you should be getting a payment out of the profits, not simply betting the paper.
Right now, I think somewhere around 7kish might be where I’d be willing to say... not saying 6 isn’t possible, but I don’t know if there’s enough fear, and not enough greed to allow it to contract that far before rebounding.
While I view with alarm the fact that the government appears to be altogether too willing to have too many fingers in the pie, T-Bills are short term, and give you as close to guaranteed safety as is possible in market investing.
Just my 2 cents, for whatever that's worth...
CA....
For a historical perspective, one has to do a lot of research as some have done. I don't have a up to date figure, but it is sufficient to say that the index now is very oversold.
http://www2.standardandpoors.com/spf/pdf/index/SP_500_Factsheet.pdf
There is at least a couple trillion on the sidelines right now.
We got a little snow at the top of the peeks a week or so ago. It looks like we will get snow tomorrow at my level, it won't last though : (
For 20 years the boomers have been building the DOW. The next 10 years they will need the money to live on. For the boomers what goes in must come out. This may lead to a very choppy 10 years.
Add to this all the emerging economies, and economic growth worldwide, and the fact that we are no longer just a manufacturing base, and have invented new models with much higher productivity and profits.
That's why you must factor in a huge potential as compared with the fifties which were largely fueled by low margin manufacturing for domestic use as opposed to a global economy of scale.
The data is interesting as a comparison, but jeez Louise! The entire model has changed dramatically with margins going into the 30-50% category in tech, for just one example.
Pe's in these companies have been traditionally much, much higher then they are now.
You also need to look at just what companies are in the indexes and what indexes should be used.
One can make a very compelling argument that this market is so oversold, it no longer is connected to reality. A ten PE is comparable to the great depression!
Not a chance, the money supply is imploding. We are seeing major deflation right now.
I think the panic selling is spurred by people trying to raise capital to fill obligations. We are seeing the unwinding of all the leverage.
Why did you stop at 1980? IMHO, there was a large shift that began in the 1980s when IRAs and 401(k)s came in to being and became common. I agree that the portion of the market beyond 1995/96 looks like it is affected by a lot of funny money to me. But the period from 1984 to 1996 or so striks me as a genuine steepening of the curve in the equities markets that was based on the solid fundamentals of much more investment money flowing from middle class workers into their retirement savings.
Why would you neglect this critical part of the curve? Think about it? Before 1980, pensions were common, so workers didn’t put a lot into retirement savings. After IRAs and 401(k)s became the norm for those who have no fixed pension to rely on, many people began socking away good money in those retirement investment vehicles. Why would you ignore that critical part of the curve?
Do you think the market will only bottom once? I think their will be double or multiple bottoms? Why buy the first attempt at a bottom.
That said, I would rather buy in too early than too late as it is just impossible to tell when things will turn and begin to soar. After seeing multiple false rallies, I’ll become complacent and miss the real thing. I would rather get in now and be sure to catch all of the eventual upturn than to try to time the recovery and miss a good bit of it.
That said, if you see a great company that is just screaming “buy” right now, why wait? Frankly, I’m not seeing any yet... Not just yet...
I think the S&P is guaranteed to fall to 770 before forming a bottom and there is no telling what companies or sectors will lead that fall, besides the financials which are nearly guaranteed to be the largest sector to fall.
I’ll be looking to start buying when the S&P hits 770. It could go lower, but waiting beyond that is just a diminishing return IMHO. Maybe I’ll miss skimming the cream off the top, but I’ve saved myself from a 40% haircut so far by being in all cash since December 2006. Waiting until 770 will make my savings over 45% from those who bought and held to the bottom. By then, I’ll move everything back to an S%P 500 Index fund and then gradually start targetting solid companies with great future prospects that are way oversold.
I am getting antsy. The buying opportunities are going to be great.
Yes, but where is the money going? It's sitting in treasuries, which is the legal obligation in most cases for the hedge funds and the 401K's. Much of it, the largest part is simply waiting. Some of it is being sent back to the principle investors who may be Joe sixpack, or just a guy that crapped out and taken his money off the table but that is the lesser of the total. The money supply, or M-1 is expanding, but that was was the intent. The deflation is overcoming the inflation and the Fed will pull it back out as the situation settles. The banks are now holding their cash and that is the result of unknowns that are becoming more clear and visible daily, and this will eventually end and free up the remaining capital as the system unwinds the CDO's. This is beginning just today, and the first of many auctions will end around 2.00 this afternoon. It is this first auction that is fighting the uptrend right now, and I expect a sideways volatility trade for the next few weeks. Good for the day trade though. They love this stuff....
All signals seem to me to be pointing at the lows and the final unwinding. As this moves ahead, the values will emerge.
You have to be full of testosterone and patience. The downward spiral will end, and is ending, but the system now has to reset and that will take some time.
One thing to keep in mind though. There is no way that we go back to where we were prior to this. Things have fundamentally changed, or will change in the financial and real estate sectors. The lending for this these sectors will have a big wet blanket thrown over it, and this will put us back where we were in the seventies and eighties, but it will also put the spotlight on business, where it has always belonged. Business will start slow because of the global recession, but business will continue in spite of it and the strong will survive as usual, and they will be stronger for it.
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