Scary Numbers 22 comments
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At right is a snapshot from the close on Thursday. Wow, those are some small numbers. The market caps respectively are $105 billion, $19.7 billion and $13.6 billion. I'm surprised General Electric (GE) is still that big and kind of surprised that Bank of America (BAC) and Citi (C) are that small. Obviously BAC and C were mega cap stocks not too long ago.Not that this is a news flash, but these numbers are a reminder of how FUBAR the stock market is these days and it may be a while before things get back on track. While I was struck by a lack of (relative) negative sentiment the other day in the 4.5% drop, and yesterday's action didn't seem to cause panic exactly, it feels like the anxiety ratcheted up some.
From 30,000 feet it is fascinating how long this has been going on and how fast the decline was (38% in just one year is huge) and understandably people are very worried. If the SPX-going-to-600 crowd ends up being right, that will scare a lot more people, but at 778 the market is down 50% from its peak. Another 178 points from here is 22% more (11% as measured from 1565), so in that light we have already endured the worst in terms of numbers. I imagine that another 178 points from here would be worse in terms of fear created. I don't know about you, but I think these numbers are important.
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'I think we are setting up for a massive rally - much more than the 20% rallies we have had...While 30-40% might seem laughable, the biggest up years for U.S. markets that I know of occurred during the 1930s.'
On Feb 20 10:56 AM Jake Berzon wrote:
> Why is 600 such a magic number for S&P 500? Some very smart people
> have pondered 400 and even 250. Government actions are adding lots
> of uncertainty to an already bad situation, so anything is possible
> at this point. The worst may be over or it may be not - the key is
> to attempt to be ready for anything that comes next.
if all we had was the msn...
we may have done even more stupid things...
IMHO, we do not know when the economy will turn around and what will cause it to do so.
All we can do is our best. More transparency will help. Unemployed people getting jobs will help improve their collective mindsets. And taking it one day at a time.
My feeling on this is that perhaps more investors are beginning to realise that we have attained a semi-stable point in stock valuations; which reasonably reflect current realities, as well as prospects for the next 12-18 months.
On Feb 21 09:04 AM peterthepainter wrote:
> thank yo lukky stars fo the bloggers...
>
> if all we had was the msn...
>
> we may have done even more stupid things...
>
Look at DOW in February of 1930, that is where we are now.
Throw in 600,000+ loss of jobs each month, toss with insolvent banks and insurance companies, and states, sprinkle in fraud, corruption, and a clueless government, garnish with entitlement class, arrogant upper class, ever shrinking and disgusted middle class ready for revolt and you have a lovely DEPRESSION and possibly CIVIL WAR salad.
This is not your Father's Buick, this is your Grandparents or Great-Grandparents soup line, New Deal, lead to World War DEPRESSION.
The sooner people realize it and stop smoking the hookah of infinite optimism in the face of reality the better. Prepare. Look at what happened to the DOW from Februrary 1930 to July of 1932. Through April of 1930, the "money on the sides" bought into the market, ignoring the collapse in employment and production. True capitulation (reality)came two years later.
US stocks are impaired in every asset class except perhaps the gold miners which actually seem to be about to break out upwards.
The problem with these numbers is that they are just numbers backed up by nothing. Your argument is that since we have gone down 50% we can't go down another 50%. Tell that to the Nikkei or the DJIA from 1929-1932 or to all of the stocks that continue to plummet today.
You really need to wipe out your memory of the past several decades and take a good look at reality. The economy HAS to deflate after it has been inflated the way it has been. IT HAS TO. Get it? The damage has been done and it was done by me and you and everybody else over the past 2-3 decades and there is no way back. We must move forward and that means deflating.
Deflation is worse for the stock market than inflation because in deflation wealth just disappears and it happens to everyone and so people quit spending because they have less to spend and why spend now when it will be cheaper next year?
With inflation people spend more and the long-term effect on the stock market is good, once the inflation slows.
Every deflationary bust like this lasts for years. We are about a year into this; Dow 5,000 before the year is out and much lower in 2010 with the possibilty of retracing all the way down to 1,500...but we'll see about that.
My play is to judiciously invest in SDS when the market goes up and sell after the typical rollover. Most people should just be in cash. GLD or gold itself is also a good hedge against things really getting bad. I have 10% of my portfolio in GLD.
Over time, once the DJIA passes "fair value" of about 6,000, I will begin dollar-cost-averaging into a long position so I am well positioned for the eventual turn in 2 years or more.
My strategies so far have me up 45% since the market top in late 2007. It's a simple stratgey that relies on listening to smart people like Nouriel Roubini and Merdith Whitney and trading counter to prevailing emotion.
I also suggest researching the "4th turning" using Google. There is a great article at www.bullnotbull.com/ar...
Good luck to you all!
The economy dropped out from under the market. I would suggest a focus on projecting an economic turn around first, as the best way to project a bottom. Of course I also do not see that as an easy prospect.
You say that like it was a bad thing!
This is from the the Market reaction to the next bump on the trail; there is a bigger one due in the fall. The real mountain crossing starts with calendar 2010 and will take more than two years (30 months). The first trek across the peaks (2007-2008) took 18 months.
If this week is the anticipation of the mortgage resets for March, the Dow Jones and the S&P 500 may hold for awhile. A slight recovery and a lot of volatility until the leaves begin to turn to their autumn hues.
Beyond that, maybe we all need to research how our parents, grandparents, nation really endured through the 1930's.
On Feb 20 04:04 PM Paulo wrote:
> Richard wrote just a month and a half ago:
> 'I think we are setting up for a massive rally - much more than the
> 20% rallies we have had...While 30-40% might seem laughable, the
> biggest up years for U.S. markets that I know of occurred during
> the 1930s.'
>
>
As for getting back to normal? what is normal, the last 30 years of idiocy??
I don't think you will get there in your lifetime! By the time the stock market recovers its numbers, you are talking monopoly money. Yes you will get the S+P or DOW up again. And then you can wheel your barrow with cash to go and buy a bread. The unmitigated theft of the working people is in full swing, and only vigilance and civil resistance will have any chance of slowing it down. The ruling class is busy enslaving the population. Wake up, buy gold!