DOW up over 900 points today -- CRAZY

You beat me to it malmo. I believe much of the selling has been the small time investor in their 401K. I don't have any hard evidence, but I personally know several people who sold everything in their 401K/403B accounts. These are educated finance types who should have known better.

If you wanted to write a recipe of what NOT to do, this is it. I tried explaining to those people that 1) you will never be able to predict when the market will bottom and 2) by the time you want to get back in, you've missed out.

Inflation! More lay-offs and foreclosures for 2009. Savor the flavor girls. It's not gonna get any better.

wooo 17% in one day i cut 3 months of loses in half

Watching the DOW is useless, most are older big caps in mature markets (slower growth). Back in 1929 the DOW had all the new high tech companies of the day.

http://tinyurl.com/4f3c2y

Nasdaq 2001 = DOW 1929

So, what will earnings season bring.

More bad news, or is it already priced in.

They should have known better, but greed and fear are powerful forces.

I would think that soon someone will come out with that data. In May, the Thrift Investment Board, which oversees the Thrift Investment Plan, a 401k for Federal employees, issued restrictions on intrafund transfers to combat the minority of participants who were actively "trading" their TSP accounts. The actions of a few were adding onerous execution expenses to the funds, which effect everyone in the fund. With point and click reallocation available to most funds these days, I would assume that similar activities have been taking place in most 401ks. I'd love to see the hard data on this.

I'm not talking about what the money managers are seeing - their clients are coming from an entirely different place than the great mass of people and their 401ks. My point is simple, if you don't need to interact with a human, you're more likely to make that trade that isn't really in your best interests.

Again, I'd love to see the reconnaissance data.

malmo wrote:

Flagpole, I wouldn't read too much into this. It's just the masses locking in their losses. It's called an "inverted asset spread" commonly used by average Americans: buy houses that are 30% overvalued, then leg into the equity side of the spread by pulling money out of their 401ks when its 30% undervalued.

Yeah Malmo. I'm not reading too much into this. Trading was light today due to the US holiday, so it all could be an anomaly. People have sure made some horrible decisions. Anyone who sold anything last week ESPECIALLY was doing it at the wrong time. Can't time the market for sure, but man if you were trying to time the market, I don't know why you'd want to sell last week or even today after the big uptick.

Oh well. When it all comes down to it, I only have myself to prepare for my retirement, so I'll do what I know works, and I'll let others try to beat the odds by trying to time markets. That's for the foolhardy.

here is one wrote:

Flagpole wrote:

I neither crow loudly nor cry into my beer based on one day or one week or even one month moves or more in the market.

The existence of this thread (hmmmm...who started it again?) belies this fantasy.

Don't worry though. I'm sure that in your little head, you actually believe this.

Dude, you are obviously someone who is trying to bait me, but I'll respond this one time just for fun because you make it too easy to poke holes in your arguments. Look at the title of this thread -- I just said it was "Crazy". I did not say it was great or that it proves I was right or anything of the sort, only that it is a crazy market -- and it is. So, the starting of this thread does not disprove any "fantasy" I have about not crowing based on a one day or one week change in the market. To take it even further, I've said in this thread that bad things are still on the horizon.

Dude, I think you need to go over to the "I like shiny things" thread. Adults are talking here.

Flagpole wrote:

Can't time the market for sure, but man if you were trying to time the market, I don't know why you'd want to sell last week or even today after the big uptick.

Umm, actually it's pretty easy to time the market. There are a multitude of indicators, and if you're well-diversified, it's even easier. People (and stocks) are pretty predictable in large numbers.

Can someone explain to me how the government buying $250B of bank stocks helps? Doesn't that money go to the current stock holders? So how does that help the banks? How does that ease the credit liquidity crisis? Or are the banks issuing new shares of stock to raise capital?

UsedToBeKnowItAll wrote:

Can someone explain to me how the government buying $250B of bank stocks helps? Doesn't that money go to the current stock holders? So how does that help the banks? How does that ease the credit liquidity crisis? Or are the banks issuing new shares of stock to raise capital?

Current shareholders get nothing unless they sell their shares. I'd guess the government will probably get preferred shares, and if this rumor is true, I'd bet they'd demand voting rights for it.

Letsrunner wrote:

If you wanted to write a recipe of what NOT to do, this is it. I tried explaining to those people that 1) you will never be able to predict when the market will bottom and 2) by the time you want to get back in, you've missed out.

I have a very undiversified portfolio of only two stocks. I bought and have been holding on to them for 10+ years. It's only 2 stocks because I don't like to think about financial stuff (I had to do some searching to dig up my E*Trade user name and password) and have basically bought, held, and ignored. One stock (AMAT) is from the employee stock purchase plan when I used to work there, and the other is IBM, where my dad used to work. Combined, my stocks are down about 40% from their 2008 high right now ($80K to $56K). I plan to hold on to them.

I just checked my E*trade savings account. I hadn't looked at my on-line statements in a year and didn't remember how much I had there. There is $38K there. I was pleased to find that it is still making 3.3% interest ($100/month). I also have $12K in my Wells Fargo checking account making zero interest. I'll shift most of it over to the savings account after I finish writing this.

This past weekend, it occurred to me that it might be a good time to put some or most of my savings into investments. I know I can't time the exact bottom of the market, and if it's volatile until spring or next year, that doesn't matter too much to me. The market is low relative to a month or a year ago, and will go back up eventually. Even if it takes 5 years, I've always held my investments long term. (In hindsight that hasn't always been the best move... Ionce had about $7K in a mutual fund that went up to $70+k, that I continued to I hold onto as it crashed down to $3k or $4k back in 2000-2001?). What would be a good investment now? Index funds? Which? Any particular stocks that good deals now like microsoft, apple or google? Don't worry, I'll take your suggestions with a grain of salt, but I can definitely do a better job than I am doing now of investing my savings.

Other possibly pertinent info: I am single and don't own a house, but don't pay much in rent $300-600 per month depending on number of roomates. Won't look into buying a house until I get married, which is probably at least 2 years off. I drive an old car that I bought with cash back in 2000. I don't make much money... after earning a masters in a different field than my bachelors (in engineering), I make $40-45K per year after 3 years (made $50+K 10 years ago)... but don't worry about it all that much. I don't spend very much money.

This is idiotic. Diversify now. The broader market is much more likely to recover 40% before any two individual stocks. Downside risk on a two stock portfolio is obscene.

BINGO! This is a once in a lifetime opportunity.

You are in a unique situation. Take advantage of it.

Index Funds: The 12 step program for active investors (if you have to own just one book on investing, this is the one to get)

The Random Walk Guide to Investing

The Bogleheads Guide to Investing

Or let Warren Buffet manage your money. Note his performance in bear markets. Put $5000 in a Roth IRA, purchase one unit of BRK.B, then on January 1, put another $5000 in the Roth and buy another unit of BRK.B or buy index funds.

Last 15 months

Last 12 years

Last 18 years

Put some money into peer-to-peer lending. You can easily get 10-12%. More if you're good at picking. Plus it will give you a mechanics view of the consumer credit markets.

Yes, I guess should know - from the past 10 years, not just the last week. Thanks for saying that.

Yes, I want to do that.

Hmm, I'm not exactly an active investor. I've learned about the rational for index funds in the past few years. I guess the book suggests how to pick a good balance of index funds? Can your or anyone simplify it for me to start me out in the right direction? I have $50K to invest. Put 10K into _____, put 10K into_____, etc. OK, maybe I should buy the book.

Sounds good. I just started contributing to my current employer's 401K fund this year, putting, I think, 10% into the normal 401K and 10% into the Roth 401K. Both in the "All stock" fund (Dain Rausher) I haven't checked, but it's probably being hammered. Could be worse because I only started contributing this year. I didn't contribute prior to this year because there is no company match, and I didn't think I wanted to stay with the company (still not sure). I still have a 401K from my old employer, kinda out-of-sight, out-of-mind. It's probably not worth very much, $10-20K?, because I left before any of the company match vested, and it's in dumb company stock. I think I need to consolidate some of this to make it easier to manage.

Brk.b is good for non-retirement savings too?

I'll look into it. Maybe it would be instructional (or fun?) I don't think I want to be that active with money issues. I just don't want to be as dumb about it as I have been.

Far from being a sign of improvement, it is a clear indication of just how bad things really are, when the market swings wildly based on government action.

malmo wrote:

Put some money into peer-to-peer lending. You can easily get 10-12%. More if you're good at picking. Plus it will give you a mechanics view of the consumer credit markets.

http://www.prosper.com/

lazy investor wrote:

I'll look into it. Maybe it would be instructional (or fun?) I don't think I want to be that active with money issues. I just don't want to be as dumb about it as I have been.

Would you lend money to her?

When in doubt do Nothing.

Kept buying on the decline and still buying now.

Come see Me in 3 years time.

You know, it's amazing how over and over the market timers get burned over the long haul, but 401K holders STILL think they can "find" the bottom of the market. I can't wait to see how many people took huge real losses by selling their 401K last week in an effort to avoid paper losses.In yesterday's WSJ, there was an article on how investors are panicked. A financial advisor was quoted on how he was forced to sell shares because they had dropped too far! If I heard that reasoning from anyone managing my investments, I'd fire him on the spot. I'd look for a financial advisor who sells shares because they've RISEN too much and who is confident in his/her judgment even if prices fall.Then again, where would the financial services industry be without this behavior?

Letsrunner wrote:

You beat me to it malmo. I believe much of the selling has been the small time investor in their 401K. I don't have any hard evidence, but I personally know several people who sold everything in their 401K/403B accounts. These are educated finance types who should have known better.

If you wanted to write a recipe of what NOT to do, this is it. I tried explaining to those people that 1) you will never be able to predict when the market will bottom and 2) by the time you want to get back in, you've missed out.

Just curious how many of you equity investors remember to think before buying? What I mean is what does the price of a stock or basket of stocks represent in theory? Current or future earnings right? In the current environment do you think earnings are going to go up or down in the next say 2 years? Would you buy now into a declining earnings environment?

I would certainly argue that until you see a definite trend in earnings forecasts up you would do well not to buy into the manic swings up or down in the equity markets. Why not build up at least a heavy cash reserve? You'll sleep better at night. Yeah you might miss some great swings up but that works both ways; be prudent don't be a sheep in either case.

Bank stocks like what treasury invested in today are a good example. Would you expect their earnings over the next two years to go up or down....they've still got a boatload of losses to realize...and guess what their divvies potentially might get cut because the US Treasury is senior to all other stockholders, if they can't pay the Treasury their divvy, no divvy for common holders...would you want to own that stock if you counted on the divvy, do you want to chance that? Maybe it will work out just fine but don't jump in just because the Dow's up (Market's flat as I write this).

Look behind the headlines on Yahoo.

jeb