Seems you and others have been saying the market has another big drop in it in the next year or so. The last month has been very good, and there are many who think there are too many good signs right now to indicate any more big trouble. Just wondering your thoughts, since you seem to be the most knowledgable of the doom-sayers (and seem more balanced than a lot of the Flagpole types).
Dow will be sub-5000 at some point before December. Don't believe the positive spin.
market? wrote:
Seems you and others have been saying the market has another big drop in it in the next year or so. The last month has been very good, and there are many who think there are too many good signs right now to indicate any more big trouble. Just wondering your thoughts, since you seem to be the most knowledgable of the doom-sayers (and seem more balanced than a lot of the Flagpole types).
Umm...I've actually said I think there's one more drop in the market before a sustained rally that doesn't come back. I also though believe that we COULD be seeing the end of the downturn in the market. The reason I think there's a good chance of another "bottom" is because typically at the end of a recession investors test the bottom three times -- we did so in November 2008, and again at the beginning of March 2009. So, if we are to get out of this TYPICALLY, then another bottom is warranted. BUT, if you use that information for anything more than just a passing interest, you are a fool. Remember when the DOW hit 6400 and there were people on here saying they were going to wait for the DOW to hit 5800 or 3700 or some other super low number before getting back in -- well, see what that got them? I believe they're still waiting while the market has rocketed up more than 25%. Waiting for the bottom is silly.
Just curious what you're waiting for? The fact that Wells Fargo predicted a HUGE profit today...that's just fuel for this economic turnaround that was already chugging along nicely. Notice also that the unemployment initial filings dropped today too. The manufacturing index has risen three straight months, consumer confidence is going up, housing is taking off, retail numbers are looking good. What more do you want? Not out of the woods yet, but by the time we ARE out of the woods, it's too late to do any speculating. Those who were in the market when the DOW was at 6400 -- well, I for one can tell you I'm pretty happy about it. Not only has my whole pile of money increased over 25% since then, but the stuff I BOUGHT then will bring handsome returns when I'm finally ready to cash in my chips.
Sagarin though has not been balanced at all. He wasn't as crazy as Peeps with the buy guns and gold and head for the hills crap, but he warned of another Japan, zombies, and just about any doom and gloom standard you could muster. For those of you who haven't got it yet, the United States is NOT Japan. We are SOOOOOO different from Japan that to compare us is silly to the nth degree. We are a growing nation that must see economic growth just to maintain our population; no one is knocking down Japan's doors to get in as they do here.
As I've said all along, unless you are retiring within 5 years, it really matters not, and if you ARE retiring within 5 years you should have had your stuff more conservatively invested anyway.
I'm sure Sagarin will tell you that he's slowly getting back into stocks...well good for him -- it's about time...even if the market has another big drop -- he's far enough out from retirement that it should not matter one bit...other than another big drop is just another good buying opportunity.
It sounds like you are talking out of both sides of your keyboard. You say that you think there is one more big drop coming. But then you say the WF news is big fuel for the turnaround. So which is it? Are you predicting both a big drop and a big turnaround as to cover you ass? I guess what I'm asking the 'experts' is what do you see happening (in order) for the rest of the year. Of course, I seem to be learning that there are no experts in this area...it's all one big gamble. If there were any experts, we would have all gone to cash a year and a half ago.
I am an expert. This is the turn around. Buy buy buy!
You really arent THAT dumb are you? Dear god.
Wells Fargo's "huge profit" is MARK TO FANTASY accounting bulsh!t. Remember what people were so p!ssed off about with Enron? Well thats legal and encouraged by our government and the Federal Reserve now.
The nerve you have to try and dis Sagarin is beyond asanine. The guy takes BM's with more financial sense and foresight than you. Sheesh, you have no shame man. Just quit while your way waaaay behind.
Ok, so the population of the United States is growing. So we have more consumers. And those consumers have to buy products. But we don't make those products here so we import them. And since we don't produce those products here, we don't earn the profits on their sale. Also, we haven't saved any money. So we borrow the money to buy the products that are made somewhere else, and we pay interest on that borrowed money. Now tell me, exactly how does this lead to real economic growth? You're right that the United States is not Japan. Japan, unlike the United States, has a positive savings rate and a large manufacturing base. How can you not understand these things? I'm sure you're one of those people that believes that increases in GDP mean that our economy is actually growing.
For starters, I have reiterated time and again that I do not, will not, give MARKET advice, nor have I or will I ever claim that I can call exact turning points. Yes, I have been more constructive lately on the market as mentioned here previously and my orientation has been to "not get in front of the train," based on any number of technical indicators that foretold of a significant rally, as well as the Fed's all out bonanza of unsterilized credit "creation." BUT, I am still not committing LARGE, short-term (a relative term to be sure) capital to the bullish story. I believe the ramifications of the deleveraging and the Fed's curve distorting policy have yet to fully play out. We are in a brave new world.
As for the Japan comparisons, this was a good night to revisit this topic, and I have provided a timely link that elegantly echoes my very own concerns and provides a stern admonishment that you'd be foolish to ignore. Notice the nice rally coinciding with Japan's own ZIRP, all out printing press policy. My horizon in terms of the government's policy actions has always been one of several years, so to claim that I'm making foolish, extreme assertions or comparing our demographics to Japan's is utterly disingenuous. Moreover, our very own Fed does NOT know what the outcome of this panicked policy ultimately will be. In the short-run, the Fed may be able to continue to distort the price of credit and depress parts of the curve. In the long-run, forget about it.
http://www.financialsense.com/Market/daily/thursday.htm
"Bottoming" is a process, and many of the technical tealeaves have been residing at levels suggestive of a new cyclical bull -- even now, we are still at historical extremes as far as standard deviations from the norm in terms of price ratios, valuation based on normalized earnings, and sentiment. And we should NOT ignore such data. HOWEVER, technical and sentiment indicators are merely a GUIDE. They tell you where we've been, and maybe 50% of the time, they tell you where we are going. Ultimately, I believe our reflation efforts will beget nasty, unintended consequences. The probability of the artificial ballooning of the monetary aggregates in the wake of an unprecedented credit implosion ending well just simply cannot be very high. Bear-market rallies can last for many months, but they do ultimately peeter out and frequently slaughter the precociously optimistic. Personally, I remain wary. If I'm late to the party with some of my capital, so be it. Saved a lot of pain all the way down. If Flagpole and others erroneously framing the debate, mischaracterizing the time horizon, or misinterpreting previous analysis want to revisit this ZIRP, Treasury curve manipulation in 2019, I'm all for it. If he is once again implying the "all's-clear" signal, I'm really wary.
Sagarin = I have posted before and think highly of your posts.
So does my brother/well known economist/investment manager who posts here from time to time (I need to get him to post - his ability to understand the markets and yet at the same time distill economic notions into discrete chunks just as he did as a professor is remarkable).
He is indeed wary. Corporate earnings and dividends barely justify the market levels we have right now and in the foreseeable future. That is the core of his message right now (I listened to a speech he gave in NY last week).
The biggest looming problem is the incredibly naive and destructive budget proposed by the recent administration. This is not a political statement - merely a numbers statement.
We had over 20 years where per capita private debt increased 3.5 times of per capita GDP growth. How did we think that was going to work?
The budget proposed for the next several years essentially transfers that debt, along with the same depressing and increasing spread between debt and GDP, onto the Government's books. And let me ask, how is that going to work? Call it naivete or arrogance, the administration must realize that we, too could put ourselves in a situation where the US is a tin cup mendicant asking others to purchase our debt - akin to Bear and Lehman's "shock and surprise" at being locked out of the repo market.
I can't be bullish until we show some fiscal responsibility in Washington. It will be simply too much of a drain on our economy, and the giant sucking sound seeking tax revenues to try and pay for it all will choke both productivity and innovation.
Bingo. On every front. And this is why the structural dislocations will be immense and ominous. This is why I speak of "nasty, unintended consequences." This is why I was extremely reticent about the incoming administration back in November. We are currently experiencing massive attrition in the "buyers of last resort." The Fed will continue to attempt to plug the dyke for a time as it's been, but, ultimately unprecedented monetization efforts will succeed only in forging unprecedented consequences. I've maintained for awhile that the market will ultimately hold this administration hostage as it already has to a degree, and I still believe that very much to be the case.
Accentuating your brother's concerns about earnings and cash yields, I do not know how anyone with any kind of certainty can assign a multiple in a world of deleveraging, a new risk premium, and a Fed monetizing from a position of weakness. Historical comparisons are folly. Nonetheless, markets and economies can disconnect for brief periods of time and bear market rallies can be vicious.
So where is the safest place to put your cash these days? Are Cd's and money markets safe, since so many are tied to either a bank or the stock market? Where is everyone keeping their cash?
Personally, I started adding back a few months ago in my long-term portion of our portfolio (20%). If we go much further from here, I will likely step aside again. Another 20% is in fixed income, and the other 60% is in cash, some with a trading mentality. I've been mostly short, but have been going to Goldman with this rally. That stock is a street favorite when the euphoria comes back and somewhat of a bellwether, even now.
Here's the thing. Nobody should tell you what YOU should do. And, if you're young, advice like Flagpole's is ok. Certainly, his debt-reduction, savings advice is spot on. So is his quit whining and make your own situation advice. I prefer a more nuanced approach. I just don't see the historical premium over "risk" free Treasuries being anywhere near what's it's been, and I believe we will experience a period of stagnant growth for quite some time, and that's assuming we don't get negative repercussions from the Fed's pre-emptive "shock and awe" campaign, which I believe we will. I think our government has all but assured that now, even if we DO get a cyclical pop and a sustained market advance for a period of time. And that COULD happen, even with another leg down. But I'm not yet convinced that the market has been resurrected.
Believe me, I don't take any single persons advice. But I like to hear many different thoughts. You say you have 60% in cash, so does that mean it's just sitting in your checking account? FDIC only insures up to $250,000...does that matter?
market? wrote:
It sounds like you are talking out of both sides of your keyboard. You say that you think there is one more big drop coming. But then you say the WF news is big fuel for the turnaround. So which is it? Are you predicting both a big drop and a big turnaround as to cover you ass? I guess what I'm asking the 'experts' is what do you see happening (in order) for the rest of the year. Of course, I seem to be learning that there are no experts in this area...it's all one big gamble. If there were any experts, we would have all gone to cash a year and a half ago.
I agree with you that there are no experts -- myself included. I DO know historically what the market has done though which is why I brought up the possibility of another drop. I don't get into calling bottoms and tops though, so I can't tell you for sure what will happen...I just know that over time the market will go up. IF I were a betting man (which I'm not) I would say another big market drop right now is getting more and more unlikely and that we should see steady improvement through the summer months with a potential big upward tick right at the end of the year. The economic news right now is just too good to ignore -- there are no more calls for another Great Depression, and it seems we could be out of the recession as early as the end of the year -- as the market is forward looking, I sure wouldn't be sitting on the sidelines now.
Bottom line continues to be though...if you are more than 10 years a way from retirement, who cares? There is no doubt the market will go back up, and way before 10 years from now, so if it happens in 2009 or 2010 or 2012, what does it matter? Put your money in like clockwork, you won't miss it, and when you're ready to retire, you'll have money so that you can.
The only flaw in that theory is this: What if you just keep investing (with a 10 year+ horizon) and just as you near the end, the market collapses again. And it takes 10 more years to get back. It just seems like a HUGE gamble. But they say to not time the market, right? It all seems so sketchy.
fwrun wrote:
Ok, so the population of the United States is growing. So we have more consumers. And those consumers have to buy products. But we don't make those products here so we import them. And since we don't produce those products here, we don't earn the profits on their sale. Also, we haven't saved any money. So we borrow the money to buy the products that are made somewhere else, and we pay interest on that borrowed money. Now tell me, exactly how does this lead to real economic growth? You're right that the United States is not Japan. Japan, unlike the United States, has a positive savings rate and a large manufacturing base. How can you not understand these things? I'm sure you're one of those people that believes that increases in GDP mean that our economy is actually growing.
Manufacturing Base (I believe this is 2006 data)
1. US $1,545,400,000,000
2. Japan $961,930,900,000
3. China $748,078,800,000
4. Germany $565,520,200,000
The US makes 60% more stuff than Japan. It makes over twice as much stuff as China. It makes nearly 3 times as much stuff as Germany. The idea that we don't make anything is a myth.
While the US savings rate has been negative for part of the past decade, it currently stands at 4.2% (some economists estimate it's over 6%). The increase in savings may actually hamper the economic recovery as people save instead of spending and stimulating the economy.
market? wrote:
Believe me, I don't take any single persons advice. But I like to hear many different thoughts. You say you have 60% in cash, so does that mean it's just sitting in your checking account? FDIC only insures up to $250,000...does that matter?
I have it spread around in multiple brokerage accounts for that very reason, though I did that long before the FDIC increase. SIPC provides an "insurance policy" as well. Some of it is in a "high-yield" money market, which actually needs to be bought and sold like a mutual fund. The rest is in just a low-yield cash money market that can be actively traded, with a link to a futures account as well.
Eddie Munsters little boner wrote:
You really arent THAT dumb are you? Dear god.
Wells Fargo's "huge profit" is MARK TO FANTASY accounting bulsh!t. Remember what people were so p!ssed off about with Enron? Well thats legal and encouraged by our government and the Federal Reserve now.
The nerve you have to try and dis Sagarin is beyond asanine. The guy takes BM's with more financial sense and foresight than you. Sheesh, you have no shame man. Just quit while your way waaaay behind.
1) New accounting rules are new accounting rules. Gotta play with the rules you're given. It's just a reality. Call it mark to fantasy if you want, but it is reality.
2) I'm not dissing Sagarin. The OP said he was "balanced". Well, no, he hasn't been. He's been one of the loudest doom and gloom soothsayers here -- again, not as bad as Peeps. Of course Sagarin's doom and gloom is lessening as the market and the economy improve, but I've said all along not to worry...and I'm right; right today and right long term (when it really matters).
3) Dude, dislike my way of investing and staying out of debt if you like, but sorry brother, no one here has MORE financial sense than me. Statistically I have less debt (none other than what's left on my house that will be paid off in the next 7 years) and more money invested (at age 42) than 99+% of you. Also, nothing Sagarin has ever said about the economy or finances is news to me. He just takes a different (and I believe not as good) approach to it all than I do. So, I'm not behind anyone with regard to finances...my lack of debt, my disposable income because of that lack of debt, and my investment pile tell me otherwise.
fwrun wrote:
Ok, so the population of the United States is growing. So we have more consumers. And those consumers have to buy products. But we don't make those products here so we import them. And since we don't produce those products here, we don't earn the profits on their sale. Also, we haven't saved any money. So we borrow the money to buy the products that are made somewhere else, and we pay interest on that borrowed money. Now tell me, exactly how does this lead to real economic growth? You're right that the United States is not Japan. Japan, unlike the United States, has a positive savings rate and a large manufacturing base. How can you not understand these things? I'm sure you're one of those people that believes that increases in GDP mean that our economy is actually growing.
You listen to people tell you that the United States doesn't do any manufacturing and that we buy everything from over seas -- well, that's complete BS. I've been involved in manufacturing software (ERP, CRM, etc.) for 12 years, and while China is producing quite a bit of stuff, the United States is still a HUGE manufacturing country...cars, furniture, appliances, computers, consumer electronics, and on and on and on. The largest manufacturing software companies in the world sell most of their stuff in the United States. I'm a consultant for these businesses. You really don't know what you're talking about.
market? wrote:
The only flaw in that theory is this: What if you just keep investing (with a 10 year+ horizon) and just as you near the end, the market collapses again. And it takes 10 more years to get back. It just seems like a HUGE gamble. But they say to not time the market, right? It all seems so sketchy.
Flagpole (and most any investment advisor) has talked about a "dollar cost averaging" strategy, that is, buying into the market regularly over your working career in small increments rather than trying to time the market. The same strategy applies in reverse as you approach the need to draw down on that investment, that is, you should gradually decrease the percentage of your stock market holdings by moving into less volatile investments.