Not Another Stock Market Thread

Ask Ben Bernanke...or maybe Dave Ramsey.

Sag,

How low are the markets going to go, and when will they bottom? Are we talking about 50% lower than the March 9th "false bottom"?

The second thread is ultimately correct with the relentless wave of foreclosures on higher end residential and commercial properties in general looming, and unemployment not stabilizing but instead edging ever higher. As a result by the winter there will be a renewed fall in housing prices, Case Schiller results of today notwithstanding (just like 16 months ago).

But anyone not fully invested in the stock market for the next 4 - 6 months is foolish; however, moving into managed care stocks to ride a bet against ObamaCare (which will pass because there is no legitimate economic alternative to providing insured care to the uninsured and underinsured given price inelasticity) would not be wise at this point (not so two months ago); those companies cannot pass on ceaseless provider price increases (nor can they leverage down providers in this very mature market) and there is no growth in the patient/customer base with unemployment continuing to go up.

A double-dip wouldn't surprise me, but no way does the market get anywere near the March lows. A couple more 8%-10% drops in the coming year like the one we saw over a month or so from the beginning of June seems more like it.Disclaimer: I am a seer.

slowerthanu2 wrote:

Sag,

How low are the markets going to go, and when will they bottom? Are we talking about 50% lower than the March 9th "false bottom"?

There are so many balls in the air, especially with what this government may or may not do, you'll have to seek a soothsayer. For now, Bernanke successfully campaigned for and received reappointment. His takeaway from the Great Depression and Japan was to hit HARD and EARLY. And he may be proven right, IF he can get the exit strategy correct, which I give him about a 20% chance of doing. More likely, he will either choke off the nascent "shadow" recovery or mummify banks and prolong the "toxic asset" legacy.

I don't know that we haven't put in "the bottom," because the financials went through an exorcism in Oct/Nov of last year and March. But that doesn't mean "the bottom" is in. Remember, we could consolidate in time too. I will go on record as saying that, while I never pick EXACT targets, I did believe that there was a high probability of boomers being shaken out of the market around 6500, and we never saw that "capitulation." More of an institutional capitulation really. I do think we'll see another structural disallocation in the future, either because of a distortion of credit that reinflates another asset bubble or a premature tightening of credit.

We may see some corrective action, but I'm not personally fighting the tape too much here. I took some long money off a few weeks ago, and I will again if we crest 1100 on the S&P 500. But that's just me. It's a trader's market in the meantime.

Here's another very interesting article with regard to sentiment. She has been as accurate as any in calling the market, though people often confuse "targets" and "time frames." Note the upswing in sentiment. Intuition tells me that, while we are fully priced and positive sentiment has returned, optimism is not yet "palpable" enough for a major setback. But I believe we will get there.

http://www.schwab.com/public/schwab/research_strategies/market_insight/todays_market/recent_commentary/time_of_the_season_for_caution.html?cmsid=P-3208842&lvl1=research_strategies&lvl2=market_insight&

Actually, carnivore 69, xlev2, lohalloran... are you guys willing to opine?

Sagarin wrote:

I will refrain from redundancy of my own opinion on deleveraging and deflation and only offer the following two links as food for thought. I see my shadow in the second one, but, of course, only time and tarot cards can tell for sure.

http://globaleconomicanalysis.blogspot.com/2009/08/buying-into-rally-hook-line-and-sinker.htmlhttp://www.financialsense.com/Market/daily/tuesday.htm

Sagarin, you can ALWAYS find doom and gloom people out there...ALWAYS. When times are great, the doom and gloomers like to say that there's no where to go but down. When times are bad, they like to say it will get worse. Doom and gloom has existed consistently forever, and it will continue to. Those people should just never be in the market.

Someone mentioned that we'd be foolish to not be in the market the next 4-6 months. Ok. Well, what about the last 6? A damn impressive run-up since March. I was in the whole time, and I'd damn glad I was.

While I don't ignore the bad news, I also don't ignore the good news. Yes consumer confidence is up, and yes it is still below a good level, but the point is that it is UP from where it was, and trending UP is always what drives markets forward. Durable goods orders are UP. In many areas of the country houses are selling like CRAZY, and in fact the prices of those homes is even beginning to rise (something that personally I don't care about, but I know how a rise in home prices helps the economy).

Unemployment will still lag and even get worse likely through 2010, but as it is a lagging indicator, if you wait for the unemployment rate to drop before getting back into the market, then it's too late. As the market climbs higher and higher, not only will some older workers begin to retire, but some of those looking for work will decide they now have enough to retire on and will stop looking. Both of those things greatly help the unemployment rate, and as I've long said, 5-10 years from now, jobs will be plentiful, and salaries will rise in order to keep talented employees. Our economy will be much better even before that happens.

Flagpole, I don't mind you chiming in, but at least read the material and what I've said first instead of glossing it over. I bumped this, and you replied instantaneously with your generic, templated response. Had you seen this previously, you surely would've chimed in before now. Still too much "doom and gloom," I would agree, to have a serious pullback YET.

Oh, and thanks for the tip about employment being a lagging indicator. Apparently, I had forgotten that from my 10th grade class in macroeconomics.

Sagarin wrote:

Flagpole, I don't mind you chiming in, but at least read the material and what I've said first instead of glossing it over. I bumped this, and you replied instantaneously with your generic, templated response. Had you seen this previously, you surely would've chimed in before now. Still too much "doom and gloom," I would agree, to have a serious pullback YET.

Oh, and thanks for the tip about employment being a lagging indicator. Apparently, I had forgotten that from my 10th grade class in macroeconomics.

Dude, my response wasn't JUST to you. Lots here have shown they wouldn't know a lagging indicator if it hit them in the face. Also, my response is hardly a "templated" response as it included data from TODAY (durable goods orders) and this week (consumer confidence and home prices), so because of that, it CAN'T be a "templated" response.

I read the links you provided...no glossing over. Admit that you're a doom and gloomer and you'll feel better. I honestly don't know how someone with your view can be invested in the stock market at all (as you say you consistently are). As is always the case with you, you like to throw out scenarios that say bad things are going to happen and yet you have no suggestions or opinions about what a person might do faced with such knowledge; then you cover yourself by saying "who am I to give financial advice?" Like it or not, you are giving advice (just not tangible) when you spout doom and gloom every chance you get. It's just that you're not good or complete at it.

Oy Vey.

Come on, Flagpole. You say you read Sagarin's posts and articles, but I don't think you actually internalize any of it. Every time you post in response to Sagarin, you simply call him a "doom and gloomer" and dismiss what he says. And you continually make the "then you shouldn't be in the market" comment. But again, it's like you don't even read what Sagarin says. He never says that people shouldn't be in the market at all. He doesn't say that our world as we know it is about to come crashing down. Sagarin simply likes to provide the other side of things so that people can see the whole picture. You say you pay attention to the good news and the bad, but I think you really only believe the good. Sagarin's advice is to see and understand the whole picture and make moves based upon that. He does not tell people to just stay out of the market because it's too dangerous. I think he wants people to be actual educated investors rather than suckers who just blindly throw money at the market. There are always money-making moves to be made in the market. But ignoring the true health of the market is just stupid. Sagarin is telling people to look a little closer because things may not be as rosy as they seem. That is all. And he is right.

Man...

I think i've read this type of banter before between you two, have I not???

Admirable consistency to stay in the market. We stayed fully invested but know a number of people who pulled out just around the lows. That was a rational decision, if the notion was that you just could not take the risk of losing any more money on the cusp of retirement, but it was in hindsight a very bad decision, and proof positive of how difficult and generally ill advised it is to time the broad stock market. But if we get gains of ten or twenty percent more in the next four of six months, basic instinct might suggest taking some money off the table, at least in non retirement accounts.

Flagpole wrote:

Sagarin wrote:

I will refrain from redundancy of my own opinion on deleveraging and deflation and only offer the following two links as food for thought. I see my shadow in the second one, but, of course, only time and tarot cards can tell for sure.

http://globaleconomicanalysis.blogspot.com/2009/08/buying-into-rally-hook-line-and-sinker.htmlhttp://www.financialsense.com/Market/daily/tuesday.htm

Sagarin, you can ALWAYS find doom and gloom people out there...ALWAYS. When times are great, the doom and gloomers like to say that there's no where to go but down. When times are bad, they like to say it will get worse. Doom and gloom has existed consistently forever, and it will continue to.

You would be well served separating the "permabear" from the "prescient".

Flagpole's still pissed off that I won his March Madness thread this year, though he never acknowledged it and I never touted it until now :)

Actually, there's value in what Flagpole says too over a very long period of time. But history doesn't ALWAYS repeat itself, and if that's your mantra, then you'd better be especially vigilant.

the Bluepill aint viagra wrote:

Flagpole wrote:

Sagarin, you can ALWAYS find doom and gloom people out there...ALWAYS. When times are great, the doom and gloomers like to say that there's no where to go but down. When times are bad, they like to say it will get worse. Doom and gloom has existed consistently forever, and it will continue to.

You would be well served separating the "permabear" from the "prescient".

Well, even I don't think Sagarin is a permabear. I do think though that there are lots of them out there. Actually I KNOW there are. Who are you saying is prescient? Sagarin sure isn't. I'm sure not and don't pretend to be. If you are suggesting I am with regard to whether there will always be doom and gloomers, then I think that's the same as saying that someone who thinks there will always be taxes is. It's a pretty safe assumption.

1) I've for a while now said that "cash is king" in this environment and strongly discouraged people from putting in big chunks of money in the market at once (which is generally a bad idea at any time, but especially during this volatile market we've had the last 2 years). Regular monthly or twice monthly additions of money you don't need is the way to go. For those who have been waiting to get in (which I feel is a bad way to go), I've told them since March that it was time (not pretending to be able to call a bottom though; I just see a buying opportunity when there is one, even if it goes a little lower first).

2) I call Sagarin a doom and gloomer because he is and hasn't shown any reason NOT to be called that.

3) I agree with you that Sagarin doesn't say people shouldn't be in the market. That's one of the problems I have with him (which I clearly stated earlier). He provides the doom and gloom and gives no options for how to deal with it.

4) How is it that Sagarin is the only one who can see the bad stuff? He's not. I'm aware of it all. I see the bad and the good and decide for me still 16+ years away from retirement, that I still wish to invest. This is not money I need now or will need in the near term.

5) Things aren't as rosy as they seem? Who says? How are you quantifying "rosy"? How do you know how "rosy" people think it is? People who invest in the market (especially long term investors) know that there are ups and downs; we accept it as a given. I haven't seen anyone here say the market is going to rocket north and continue that way forever. So, the fact of the matter is back in March when the DOW was at 6400, it was a long road to that market low. Since then we've climbed back up to 9500+ and have really yet to see broad positive news. This can be seen as bad, because some might say that the run-up is all based on fantasy. But on the other hand, some might say it's just the start of an even bigger run up as more and more companies in more and more sectors are starting to report real profit, and LOTS of money is still on the sidelines. Sagarin was never positive during this last run-up. It's significant too. Even short-term investors have made a killing since March. Do things go down from today? Perhaps. Should make no difference to a long-term investor.

6) I can see why you are siding with Sagarin, because you provide the same non-advice that he does, "...he wants people to be actual educated investors rather than suckers who just blindly throw money at the market. There are always money-making moves to be made in the market. But ignoring the true health of the market is just stupid." How is any of that helpful in any way? 1) you and he want people to be educated investors; good for you!; 2) You say there are always money-making moves to be made in the market; oh, I see. Thanks for the tip; 3) And finally you say ignoring the true health of the market is stupid; another pearl of wisdom.

7) As a long-term investor still 16+ years away from retirement, I am putting money in mutual funds and not worrying how they are doing today. I'm invested in a diversified manner, and with an appropriate mix of stocks and bonds for my age and closeness to retirement. It is never blindly done as I make changes once or twice a year to my portfolio, and when I see a real buying opportunity and I have extra funds, I will put more in on occasion. Study after study shows that putting money in and leaving it alone beats any other investment strategy, and ironically enough, it requires the least amount of time. I'm certainly happy with my spreadsheet over 20 years of investing, and when I hear people (who chase market bottoms and tops) complain about how they haven't made any money in umpteen years, I know I've done better than they have.

8) You say Sagarin is right. I still don't know about what. He provides two links about how the market could still see some bad times. No kidding. I'm in agreement with that. What does he suggest we all DO though with that knowledge? For me I think it's a reasonable risk to do 15-20% of your income into retirement accounts, and quite honestly other than the fact it would cause some older people some great concern, I would LOVE it if the DOW dropped to 2000 or so and stayed there for 10 years. Would absolutely LOVE it. That won't happen though.

Sagarin wrote:

Flagpole's still pissed off that I won his March Madness thread this year, though he never acknowledged it and I never touted it until now :)

Actually, there's value in what Flagpole says too over a very long period of time. But history doesn't ALWAYS repeat itself, and if that's your mantra, then you'd better be especially vigilant.

Brother, I'm no basketball expert, so I'm fine with the March Madness thing. Honestly I care very little about it other than I like watching it a lot, so I didn't mean to not give you props where due. I didn't even remember that you had won. Congrats.

You are CORRECT that there's value in what I say. To become wealthy though, history doesn't have to repeat itself. I'm not expecting 12% returns the next 16-20 years (or even longer as I hope to continue to make gains after I retire). It would not surprise me though to see similar gains over the next 20 years, but I'm not counting on them.