Monday, 9/30/, Market WrapUp (Instead of bailing out of stocks...investors have held on)

Financial Sense Online ^ | 9/30/2002 | James J. Puplava

[Dog Gone]

No, the stock market doesn't determine anything. It's a reflection of the expectations and achievements of American businesses.

Why do you think that I'm for a long term stock market decline?

I don't know if you're FOR it, but you did say

I am surprised that ANYONE would believe that stocks are going to go up in the long term...

That certainly is a pretty strong implication that you think stocks WON'T go up, don't you think?

[Southack]

"West Coast ports shut down If this continues for any length of time, this will have a good deal of impact."

Yes it will have a large impact, but on imports...

[jdege]

"Have you looked at a chart of the market from 1929 to 1949, or 1966 to 1992? The market does not always go up. Sideways is not a good thing, Down is not a good thing, either..."

Yep.

And in some detail, both large and small cap stocks, and including dividend returns, instead of just looking at prices.

The total return of a diversified portfolio isn't well represented by the DJIA.

[WOSG]

Wouldn't it make a lot more sense to wait for the bear to be over before investing for your retirement?

And you will now this .. how?

You cant pick bottoms.And any given stock, in bull or bear market, has a chance of going up or down after you buy it. Better to buy what is undervalued and wait for it to become fuly valued.

[Southack]

"America has experienced secular bear markets before and it appears that we are in one now. The other secular bear markets lasted many years, and I can't see why this one would prove to be any different than the others."

You can't see why this bear market is different than past bear markets?

Man, I can.

Past bear markets weren't due to major accounting scandals and overhyped internet stocks. Sure, past bear markets did share the "bubble" factor (e.g. tech stocks and "growth" stocks), but there were many external factors such as Dust Bowl farming disasters, new tax increases (e.g. Smoot tariff), banning formerly legal industries (e.g. alcohol), excessive government spending on social programs (e.g. War on Poverty), and fighting wars (e.g. Vietnam, Iraq).

But in the other bear markets, we didn't have low inflation/low interest rates/low unemployment and high worker productivity (all of which are very positive economic fundamentals that make seperate stock market recoveries more feasable).

So if I'm right and this bear market is different, then consider that it may be MORE than just a bear market. In fact, it might be the readjustment of our stock markets away from "growth" stocks (i.e. companies that don't pay dividends but merely promise to "grow") to something more fundamental, such as dividend stocks that actually pay stockholders ca$h for buying and holding.

In addition, we are probably witnessing the beginning of a fairly major shift in corporate America away from mega-companies towards smaller, more efficient, leaner firms.

We do live in interesting times, but how many people can really spot a trend as it is happening (rather than in hindsight)...

[rohry]

Easy answer, I'm not for a long term market decline, but I expect it. This doesn't mean that I am expecting us to become like Russia or Korea.

There is a bubble deflating out there. It needs to be pricked. Just because I believe that the stock market is toast doesn't mean that I'm for the decline. It's just that I believe that the market is ready for a decline...

[arete]

Better to buy what is undervalued and wait for it to become fuly valued.

Well, you keep buying those undervalued stocks. Me, I'm going to sit on the sidelines and watch the action.

Richard W.

[Dog Gone]

Fine, we're not that far apart. I think the bubble needs deflating, and I don't think we're done yet.

I do see a rally after a successful war, whether it's justified by economic fundamentals or not.

However, in the long run, after the market has returned to rationality, probably after that post-war rally I'm predicting, I think US stocks will appreciate. They will grow in proportion to the US economy, which I fully expect to continue to grow over the long term.

[rohry]

"Fine, we're not that far apart. I think the bubble needs deflating, and I don't think we're done yet."

Good, then we can be friends...

[steveegg]

It'll take nearly a quintupling of the Nasdaq for it to make it back to its high. Unless there's another bubble, that's not going to happen in my lifetime (and I've got a LOT more than 20 years to live).

[UnBlinkingEye]

Yes it will have a large impact, but on imports...

No doubt, since we have a huge deficit trade imbalance.

[steveegg]

Well, you keep buying those undervalued stocks. Me, I'm going to sit on the sidelines and watch the action.

Given that there's not a lot of undervalued stocks out there, the sidelines sounds like a safe place.

[rohry]

Hey Southack. Do you want to be on the ping list? I hate your little Bull logo and I disagree with you on most issues, but your comments are welcome here. We love "diversity."

Just let me know...

[Nuke'm Glowing]

If that couple lost 75% of the value of their portfolio and didn't understand the term "stop-loss" then they must be every brokers wet dream. I bail on some stocks on as little as a 10-15% move and usually even quicker. That's insanity. They might as well pull it out and invest in tulips or gold.

[Nuke'm Glowing]

I still think there is a possiblity of accelerated action in Iraq in October. Also, you have the election to deal with. I would wait. A GOP win-win in the Senate and House would create a quick rally with the prospects of a permanent tax cut and hopefully a capital gains tax cut being introduced.

[Nuke'm Glowing]

I tend to follow the smart money. Warren Buffet predicted a sideways 10 year grinder for the market. That means you either have to be one hell of a day trader or just lucky to hit a hot IPO. Look at chart history. Also read up on the Congressional investigations into the Wall Street scandals from 1930-1938. You'll find the parallels interesting and the resulting laws just as interesting.

[Nuke'm Glowing]

I'm with you on the sidelines for now. Two sayings come to mind:

1. Never try to catch a falling knife.

2. The investor who is in cash at the start of the bear market still has cash at the end of a bear market.

[Dog Gone]

That means you either have to be one hell of a day trader or just lucky to hit a hot IPO.

Not necessarily. There used to be a time when stocks spun off dividends that were as reliable as bond interest, with an appreciation of a few percent a year.

[Nuke'm Glowing]

LOL, yes but that was when the CFO reported honest earnings! I think I'll just sit this one out. I do not like playing any market during war time other than collectible Gold and Silver coins. It's a low return rate, but at least it's not something that I have to worry about some two bit broker churning into the ether or some CFO and CEO moving to a bank in the Caymans.

[HighWheeler]

Remember in early 2000 when everyone was OVERjoyed about the stock prices? That was the time to sell. We are quickly getting to OVERwhelmed by the bear market, meaing we are entering a time to buy. I have about 25-35% cash right now, and have traded heavily lately. I am up, but only a couple percent in the last 6 months, and that has been hammered in the last week.

If history repeats, then about 4-6 weeks into the war with Iraq the market will turn around as confidence