Current stock market (Nov. 2010) not reflecting reality

Smell the Coffee wrote:

You should catch up on your current events. Obama is in favor of extending the Bush tax cuts for all but the highest earners. Your tax cuts will remain in place for at least one more year, likely longer.

This is only half true. Yes, Obama wants to extend the tax cuts to individuals making less than $250K/year. Republicans want to extend all the tax cuts. If both stick to their guns and gridlock, then nothing will be done. If nothing is done, then all the tax cuts expire on 12/31/10. So it's not a sure thing that the tax cuts will be extended.

As for the market reflecting reality, the market never reflects reality, only perceptions of it. What's actually happening is far less important that what people think about what's happening. As Van Tharp would say, you don't trade a market, you only trade your ideas about the market.

I hope you're right, I really do. I just have a feeling my withholding will magically rise on Jan 1st if this isn't ironed out.

I think the market is about where it should be. For every positive trend you cite there is a countervailing one. Decline in housing prices, unemployment benefits running out, debt-riden economies in Europe, fear of inflation in China, increasing U.S. debt, etc.

The market oversold in 2008-2009 as panic ensued and then over-corrected last year. This year it is up only 5.6% as there have been a lot of mixed economic signals.

But I asked you a few months ago when you predicted 12000 to indicate what sectors you thought might drive that kind of growth in the market. It was my position that financial services still needed to see some resolution of underlying problems before that would occur and that housing would have to show some improvement. Take a look at the ytd charts for $BAC (the largest bank in the U.S.) and $PHM to understand how banks and housing are holding the market back. Those sectors are intertwined with the persistently high unemployment rates.

I think the market was due for a bit of a pull-back anyway after a very nice run up in Sept and Oct. I do think there will be a year-end rally and I have been buying some positions accordingly, but I think it will fall well short of 12,000.

I also think that next year will be a good one for investors. But who cares about what the DOW does anyway? There were abundant occasions to make money this year in the market if you focused on shorter term trends. There is money to be made in every type of market. By placing all of your bets on a 20 year horizon you are potentially missing out a lot of opportunities.

Flagpole wrote:

6) All projections are that this Holiday season is going to be huge.

A Dow that is continuing to hover at 11,000 is not reflecting reality. Even with some of the global concerns, this market is lower than it should be.

a) All projections are that this Holiday season is going to be huge.

b) A Dow that is continuing to hover at 11,000 is not reflecting reality. Even with some of the global concerns, this market is lower than it should be.[/quote]

I want reasons to think positively, so don’t get me wrong, but with that being said, the following is what I think of points (a) and (b), above.

a) How can this season’s holiday sales be huge if 10% of the country doesn’t have a job, and the 90% that does have a job has either seen:

i. Under employment, which isn’t captured in the current 10% unemployment snapshot

ii. A pay decrease because of employer cost-cutting measures

iii. Flat pay (at best)

b) Is there not any thought that a Dow of 11,000 today isn’t the same as a Dow of 11,000 that we saw in early 2006, which would also be different than the Dow 11,000 that we saw in 1999. Why, you ask? Inflation. Dow 11,000 isn’t comparable across all time periods.

Sorry Brother wrote:

Trying to build up an excuse for the DOW not hitting 12,000 by the end of the year?

No one says the market reflects reality.

But you said it would hit 12,000 and reality is the actual number it hits not what you say it should reflect.

Nope. If you think so then you do not understand Flagpole. I made a prediction that it would hit 12,000 before the end of the year. So far since then it has gotten as close as 11,452. If it doesn't reach 12,000 I will be wrong, and I will offer no excuses; I NEVER do when I'm wrong, and I won't start here. That being said though, I can still look at the situation and say the market isn't where it ought to be.

Still could be that people are waiting for the Bush tax cut thing to resolve itself. That should happen before the 11th of December, so we'll see what that, along with continued strong Holiday sales and company earnings does to the market. Could still climb 978 points in December.

Good questions:1) We're only 5% away from what is considered full employment, so if using the 90% as you are, it's not like it's EVER at 100%.2) Contrary to what you hear on Fox News, employee compensation has risen in 2010.3) Those WITH jobs are more confident than ever that the big job cutting is over, and so they are more willing to spend.4) Those with jobs have curtailed spending for 2+ years and so now this Christmas, they are going to buy things as gifts that they have been putting off. I'm in that boat. I'm finally going to get a Wii and an HD TV.5) Cyber Monday has already shown a 20% increase over last year's online sales. Part of that is just that all online sales will still increase for a while yet as more and more are internet savvy, but even considering that, a 20% increase is big.6) No one said anything about 11,000 Dow being the same or better than 11,000 in 2006. Inflation though since 2006 is VERY small.

jman1 wrote:

Flagpole wrote:

6) All projections are that this Holiday season is going to be huge.

A Dow that is continuing to hover at 11,000 is not reflecting reality. Even with some of the global concerns, this market is lower than it should be.

a) All projections are that this Holiday season is going to be huge.

b) A Dow that is continuing to hover at 11,000 is not reflecting reality. Even with some of the global concerns, this market is lower than it should be.

I want reasons to think positively, so don’t get me wrong, but with that being said, the following is what I think of points (a) and (b), above.

a) How can this season’s holiday sales be huge if 10% of the country doesn’t have a job, and the 90% that does have a job has either seen:

i. Under employment, which isn’t captured in the current 10% unemployment snapshot

ii. A pay decrease because of employer cost-cutting measures

iii. Flat pay (at best)

b) Is there not any thought that a Dow of 11,000 today isn’t the same as a Dow of 11,000 that we saw in early 2006, which would also be different than the Dow 11,000 that we saw in 1999. Why, you ask? Inflation. Dow 11,000 isn’t comparable across all time periods.[/quote]

Someone must have been reading what I've been writing...Dow is now UP today after being down. 942 points away from 12,000.

Tick, tick, tick.

The market has been bumping around 11,000-11,100 for the past few weeks. Up one day, down the next. To get to 12,000 in 24 trading days there needs to be some powerful catalyst. Care to let us know what that will be?

Flagpole wrote:

Someone must have been reading what I've been writing...Dow is now UP today after being down. 942 points away from 12,000.

Tick, tick, tick.

At this point I'm still just sticking to my prediction (realizing that every day that passes there's a smaller chance of it coming true), but I think catalysts are as follows:1) Resolution of Bush tax cuts.2) Realization from the masses that this market is undervalued and that good deals are at hand.3) Further realization throughout December that sales are strong, so investors will be predicting great earnings from companies in the next quarter.4) Further realization that some of the "seasonal" hiring will be permanent and that more hiring is expected in 2011.5) Closer to the American people having the elected officials that they want (which of course I think is BS, but this is still something that moves the markets...once right at election time and again right before they take office).

Silly Flag wrote:

The market has been bumping around 11,000-11,100 for the past few weeks. Up one day, down the next. To get to 12,000 in 24 trading days there needs to be some powerful catalyst. Care to let us know what that will be?

Flagpole wrote:

Someone must have been reading what I've been writing...Dow is now UP today after being down. 942 points away from 12,000.

Tick, tick, tick.

Thoughts on those.

1. So we are at double the unemployment for being full employed. Not great if you ask me.

2. Sure, it's likely risen 1-2%. But inflation is right there too, canceling out the real gains.

3 and 4 are really the same thing. Can't disagree there.

5. Cyber Monday was a much bigger deal this year than last year. I saw more sales and specials online yesterday than before. A few years ago, Amazon had all of their specials on Black Friday. Now it is the Monday. Isn't a big deal to me and doesn't really say much about this holiday season.

6. True...

I disagree with you that the markets are undervalued. The economy really hasn't picked up yet. Europe is getting to be in a larger financial crisis. Things may be getting better here, but we could easily see a double-dip recession. People still seem to be pretty conservative with money that they are spending.

All that being said, I do invest in a very similar manner to you. Just don't see a whole lot to get excited about right now.

Dude, regardless of whether the Dow hits 12,000 by end of December (short-term milestones don't matter much to me other than just a discussion point), you are wrong about the health of the economy.1) Incomes AND spending are up.2) Manufacturing has GROWN for 15 straight months. They're not making stuff just for the fun of it brother.3) 151,000 jobs created in October, and it's estimated that November will show another 200,000.4) No one worth their salt is calling for a double-dip recession now. That possibility has passed us by brother. Believe it!5) Good that you invest in a similar way to me. Just means that even though I have a rosier outlook than you do right now that eventually it matters not because we both will reap the rewards...because they ARE coming brother.Now, just a reality check...you do realize that let's say you bought stocks for years before the 14,100 in 2007 and then bought all the way down to 6400 and then all the way back up to whenever 14,100 is again that by that time virtually ALL of your purchases for YEARS would have been BELOW 14,100, and most of it WELL below 14,100. When the Dow hits 14,100 again, some news station will report that now after x amount of years that investors are back to even. That is complete BS. When it gets to 14,100 again, I will be WORLDS ahead of where I was when it was at 14,100 the last time (both with gains AND dividends)...if you invest as I do and have been as long as me, then you will too...too many investors don't get this, and they really should.

Sorry Brother wrote:

Trying to build up an excuse for the DOW not hitting 12,000 by the end of the year?

No one says the market reflects reality.

But you said it would hit 12,000 and reality is the actual number it hits not what you say it should reflect.

He can simply apply a Ventolin^3 adjustment and go with that as his reality.

I find this statement really funny in light of the fact that you started a thread predicting a Dow of 12,000 by the end of the year. Short term milestones DO matter to you. Just admit it. Its okay. No big deal.

Flagpole wrote:

Dude, regardless of whether the Dow hits 12,000 by end of December (short-term milestones don't matter much to me other than just a discussion point), you are wrong about the health of the economy.

Silly Flag wrote:

I find this statement really funny in light of the fact that you started a thread predicting a Dow of 12,000 by the end of the year. Short term milestones DO matter to you. Just admit it. Its okay. No big deal.

Flagpole wrote:

Dude, regardless of whether the Dow hits 12,000 by end of December (short-term milestones don't matter much to me other than just a discussion point), you are wrong about the health of the economy.

EXACTLY!! If it did hit 12,000 we would have all heard OVER & OVER about how right he was, why he was right, why the market CORRECTLY REFLECTS the reasons he said it would be at 12,000. If anyone suggested that the market at 12,000 "wasn't reflecting reality" we would have heard "Brotha, the market always reflects reality... it's EFFICIENT!!".

Well, let's hope that if it falls short of 12,000 we hear just as much about WHY THIS LOUDMOUTH WAS WRONG. Funny that a supposed good investor even makes stupid predictions like this... people who have been doing this for very long know that short-term predictions are a crapshoot.

downhill wrote:

...INTELLIGENT people who have been doing this for very long know that short-term predictions are a crapshoot.

You are definitely correct (with one key word added).

Ha! Wrong brother. I just find the market moving interesting, but I buy twice monthly like clockwork and have since 1989; once in a great while I dump in some extra when I have it and I think the market is really low, but I don't do that often. I couldn't care less what the market does this week or this month or in the next 6 months or even in the next 10 years (though beyond that I might care a little bit, but at this point, unless it drops to below 2700, I really don't care much). I'm in this for the long haul brother.

Silly Flag wrote:

I find this statement really funny in light of the fact that you started a thread predicting a Dow of 12,000 by the end of the year. Short term milestones DO matter to you. Just admit it. Its okay. No big deal.

Flagpole wrote:

Dude, regardless of whether the Dow hits 12,000 by end of December (short-term milestones don't matter much to me other than just a discussion point), you are wrong about the health of the economy.

Flagpole wrote:

Someone must have been reading what I've been writing...Dow is now UP today after being down. 942 points away from 12,000.

Tick, tick, tick.

What happened? Dow ends down for the day, down for the month. DOW returning about 6% so far this year. And you think it hits 12 grand by years end? That would mean the DOW would have to more than double it's 2010 gains in one month. And I dont think the big dogs are frequenting Letsrun to read what you have to say and invest based on your comments. But they should! To know exactly what NOT to do.

Dude, you still do not understand Flagpole.Short-term predictions, are a crapshoot, I agree 100%. That's why I don't bet money (as in invest based on short-term moves) that way. My investing isn't changed and wouldn't change if I thought the market would rocket to 15,000 or go down to 6400 again...I'm still too far away from retirement to care much. Now if it went right up to 20,000, I'd cash out a lot of my stocks into bonds, but that's not going to happen.I simply made a prediction which may or may not turn out to be true. If I cared about what you'd say if I were proven wrong, then I would never have made the prediction. I find the market moves interesting, but I don't bet my money on short-term moves, so, yes, I don't care how they do in the short-term.Besides, it was hardly a "stupid" prediction. There are plenty of "experts" who are calling for a bull market to start right now, AND, I got as close as 11,452, up 1,000 points from when I made the prediction, so I wasn't too far off if it never gets closer. And of course lots of people told me it wouldn't even break 11,000. I still think it gets closer to 12,000 yet and still has a chance to break it, but again, my investing will not change if it does or it doesn't.The prediction was more to get you people trying to see the good stuff that is out there in the economy. Man, we are sitting on the edge of a great run. I predicted end of 2010, but who knows, maybe it takes a little longer...matters not to me, but it IS coming, and already too many of you are left out in the cold because you weren't in when the Dow was at 6400.If the Dow doesn't make it to 12,000 by end of year, you won't hear all the reasons why not from me, because no one can ever really know the reasons. One day you hear the moves are because of X and then the next day it's Y, and it's usually just a bunch of crap...news reporters trying to find something to write about.Dow 12,000 by end of year 2010...I'll either be wrong or right. You think I care which one is true. You think so because you know that YOU are insecure enough to have cared. Flagpole doesn't roll that way brother. I can handle being wrong. I'm different from most people in that way...being wrong crushes most people.

Go re-read the thread that YOU started about Dow 12,000. You said to get ready for some "fun." If you only care about the long term and don't care about short term milestones then you wouldn't allude to fun when talking about the Dow rising to 12,000 near-term. Its funny how you never start threads predicting that the market will go down in the short-term. Only up.

Flagpole wrote:

Ha! Wrong brother. I just find the market moving interesting, but I buy twice monthly like clockwork and have since 1989; once in a great while I dump in some extra when I have it and I think the market is really low, but I don't do that often. I couldn't care less what the market does this week or this month or in the next 6 months or even in the next 10 years (though beyond that I might care a little bit, but at this point, unless it drops to below 2700, I really don't care much). I'm in this for the long haul brother.

Silly Flag wrote:

I find this statement really funny in light of the fact that you started a thread predicting a Dow of 12,000 by the end of the year. Short term milestones DO matter to you. Just admit it. Its okay. No big deal.