Posted on 03/30/2009 2:35:11 PM PDT by arthurus
So here we are - the end of March 2009. We've been in a recession since December 2007. The stock market began rallying a couple of weeks ago, despite economic news that still looks as bleak as ever. So is this time to start buying undervalued blue chip stocks, following the play book that has worked so well over the past 25 years of buying good, quality stocks on dips?
(Excerpt) Read more at seekingalpha.com ...
I’m still waiting for the 1Q numbers to know if if it officially is a recession by textbook definition (two consecutive quarters of negative growth). I don’t buy all this randomly assigning labels to things that are measurable events.
Pick 83 random names of major firms in a broad range of industries. Pick a new set of firms every six months. Make sure it’s random.
Take these names and pin them to a dart board, one in each field.
Decide how much you can afford every month and divide this amount to equal the number of throws in your game.
Start throwing darts and buy shares in that firm.
In two years you’ll have net made money.
What you might think is a "good quality stock" today may be a GOVERNMENT OWNED debacle tomorrow....
Was not 3Q08 slightly negative? Like -.5%?
I can’t remember what it was revised to, I thought it was still up by a fraction of a percent.. I’ll have to go look in a bit..
To start with, stop focusing on the Great Depression. There are much closer parallels in the Panic of 1837 and the Panic of 1893, at least in some things, to the situation we find ourselves in today. (Both of these events have tolerable Wikis, so check them out.)
But the bottom line is to objectively look at where our economy stands today, and what can reasonably be done to fix it.
To start with, there are enormous leverage markets out there with little or no regulation, and literally hundreds of trillions of dollars in debt—more money than exists in the world. These cannot continue or survive in any way, so must collapse.
Unfortunately, with their *theoretical* money, they purchased changes in our laws allowing them to parasite the money and resources from “real” corporations that produce goods and services. So these laws, like the Bankruptcy Reform Act of 2005, must be changed. Wavers to US gambling laws were also given to these leverage corporations, that must also be revoked. They act as a cancer to our economy.
The next step is more painful. The US national debt of $15T cannot be paid, so it must be defaulted. This will temporarily end most international trade, but it is mostly shut down already. This will also mean that the US must rebuild all the industries that we outsourced over decades, because “Made in USA” will no longer be an option. It will be *the* option.
After that, the most painful step will be to renounce the unreasonable promises made by the government since WWII. This means Social Security, Medicare and Medicaid, which have a combined promise in the future of well over $50T.
“The cake is a lie”.
To end these programs it must be done quickly, so that alternative systems can be set up to provide bare sustenance for those who would be utterly destitute without them. This will have to be done by the individual States, however. There will be a tremendous hue and cry from those currently receiving benefits, but it must be made clear to them that there is no choice in the matter.
The federal resolution will come with a balanced budget amendment, and possibly a line item veto amendment.
It would be wise in the interim for the individual States to set up a complementary currency to the US dollar, called ‘scrip’. This will keep government and the market functioning at the local and State level, while the dollar is experiencing wild fluctuations.
Importantly, neither the typical Democrat scheme, of massive inflation, nor the Republican scheme of economic growth, will work in this depression. Only when the massive debts are gone can our economic engine be restarted.
I would like to add that right now, we are in a period like 1930, which had three major jumps that looked like a stock market recovery, and another four minor ones. Don’t believe it. We still have a long way to go on the downward side.
Bubbles yet to burst include alt-a, ARM and business real estate, many of the nations pension programs, some of the blue State municipal bonds, and the granddaddy of all bubbles, the US Treasury bill.
It will be a wild ride.
In the 1800s the government did not create huge amounts of money or take over industries or flood them with resources in order to prevent reallocation to efficient uses. That sort of thing did happen in the 30s and is happening now.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.