irondoor91

The Dow at 4000? Don't Laugh, It Could Easily Happen

Why don't we have inflation now and likely won't in the near term future, even though the FED is "printing" dollars like crazy? Because they aren't printing them as fast as the dollar-based debt underlying levered illiquid assets (primarily real estate around the world and unusable industrial capacity) is being destroyed through foreclosures and bankruptcies.

Before the start of the melt-down in 2007, there was approximately $75 trillion of dollar-denominated debt around the world. We know that most of the world's illiquid levered assets, primarily real estate, is down on the order of 25% or more. Knock 25% off the value of the $75 trillion and you have a loss of $18.75 trillion. And much of the assets have still not been liquidated and converted to cash, just marked down.

Dollars are in demand around the world to pay for necessities such as oil, which is priced in dollars. People are hoarding dollars in the most liquid investments available and not in banks (T-bills at less than 0% last week). The FED can't print fast enough to inflate themselves out of the problem at present. Inflation may be coming, its just going to take a few years to flush out the system.

More Weakness, More Volatility

On Oct 31 02:58 AM bob adamson wrote:

> The stock market and investor sentiment have swung widely with the
> rapidly changing perceptions of economic performance over the past
> two years. Performance of different sectors of the market diverged
> significantly through 2007 and first 8 months of 2008 as their respective
> prospects seemed so different. All sectors save precious metals and
> Government securities suffered a major collapse in value during the
> October to March period reflecting the fear of possible economic
> collapse. The simple lessening of that pervasive sense of fear from
> March to October resulted in a dynamic relief rally but little sense
> of attainment or security. Recently that sense of relief has run
> its course and, while anxiety has not taken its place, uncertainty
> about the pace and shape of further recovery is assuming a more central
> spot in investors’ minds.
>
> In short, we’ve been through a lot over a very short span of time.
> Both the economy and our expectations of it (and for the stock market)
> have now reached a wary equilibrium as we search for clearer indications
> where the economy is heading. Consequently, views are now decidedly
> mixed (and subject to rapid change). The best guess is that the stock
> market will move alternatively up and down rapidly within a narrow
> range over the next few weeks until the future direction of the economy
> becomes clearer.

Question:

What was the "future direction of the economy" in July, 2007? Here

Why Another Stock Market Collapse Could Be Imminent

Based on your theory about market manipulation and the massive liquidity available to the PPT, please explain the 50% decline from the Oct 07 top. I assume that the PPT is always on duty.


On Aug 05 09:45 PM vicelord wrote:

> The one thing that you're failing to take into account is the - how
> to put this? - blatant manipulation and propping up of the market
> being conducted in broad daylight through the Supplemental Liquidity
> Provider program being run by GS. Otherwise known as the Plunge Protection
> Team. There were no super computers in 1932; there was no High Frequency
> Trading; there were no Dark Pools and no bottomless barrel of dough
> at the Fed window for the likes of JPM, GS and BLK to pump taxpayer
> money into equities. $4 Trillion so far has bought us a 45-50% rally
> on the S&P (and counting.)
>
> I have been grappling with this question for MONTHS now, after getting
> squashed like a bug in May trying to short too early. I, and I don't
> think ANYBODY, thought it would go this far. We've jumped about 135
> points on the S&P in roughly 2 weeks without even a mild correction.
> So, with that in mind, the question remains - if they can get away
> with pumping the market up this far, who's to say they can't keep
> it up here? Or at lease forestall another plunge to the March lows
> or lower? It stands to reason that if, with all the computers doing
> the trading, and the average retail investor out of the game, and
> volume being what it is, they could get it up this far, they might
> just be able to keep it there. At least make it trade sideways for...
> years? Who knows?
>
> I know it's ludicrous to buy at these prices. Every bit of data that
> comes out is either counter-intuitive to a bull market, or manipulated
> in such a way as to make it seem like a recovery is on the way. (Shit,
> today there was a piece in the Financial Times today about how Prime
> Loans in default or delinquency are up 13.8% from March - June, and
> this was from a study done by S&P itself. These are PRIME LOANS
> we're talking about. Up 13.8% during the same exact time we had a
> 40% market rally. But you didn't hear a peep about it on CNBC. Shocking,
> I know.)
>
> They'll come out with some optimistic unemployment numbers one week,
> and the market will rally 2% on the news that day... and then a month
> later you get an upward revision on those same numbers pouring cold
> water all over any hope. Lather, rinse, repeat. Where does it stop?
> When does it end? Every word that CNBC says or puts into print should
> come with a disclaimer saying they are owned by GE. There are too
> many people with a vested interest in inflating another bubble. Even
> the NYT and the WSJ have to play it cool, lest they end up with their
> stocks trading on the pink sheets for pennies.
>
> My question is can the powers that be that have run up the market
> from the March lows keep it from falling back down? Or is there a
> collapse coming that is inevitable and no one can stop, no matter
> how powerful their computers are or how much taxpayer money they
> have to play with?
>
> I just don't know.

Why Another Stock Market Collapse Could Be Imminent

Not bad, not bad at all. Congratulations on a lucid explanation of the debt problem.


On Aug 05 04:10 PM User 353732 wrote:

> 1. It is true that at every level of society(individual, household,
> municipality, corporation, county, state, Federal) there is excessive
> debt and this debt must be repaid or repudiated(bankruptcy or inflation
> or combination). Howver, the debt carrying capacity is not zero:
> all debt need not be redeemed; only enough to bring into the correct
> balance 2 relationships:First, the ratio of debt service to income.
> Second, the ratio of debt to assets. At the moment these ratios are
> frighteningly bad at every level of society and at the Govt level
> are getting worse.
> Nonetheless, private and corporate incomes are not going to zero
> even if there is a 10 year depression and of course tax receipts
> are not going to zero although they certainly are and will continue
> to decline. The credit contraction for individuals, households, corporations,
> almost all municipalities and counties,and most states will continue
> until the two ratios are in proper balabce, which could take several
> years. The entire $ 100 trillion of private and public debt does
> not have to extinguished but a third to half (??) surely must be
> discharged or dishonored.
> At the Federal level, the ratios will not be brought into Voluntary
> balance. The ruling bosses believe they have untrammeled power to
> issue unlimited money. Federal debt will continue to grow out of
> all proportion to repay. Therefore, it will not be repaid: it will
> be repudiated by virulent inflation, leading to a loss in the dollar's
> status as sole reserve currency, leading to the inability to swindle
> foreign buyers of US Govt debt, leading to the demise of the US as
> global hyperpower.
> 2.The citizens of the US will eventually pay for the debts of their
> Govt in 3 ways: visibly compressed material standard of living for
> a generation; loss of global status and erosion of national security
> and a sharply extended working life( no retirement for 90% of Americans
> capable of working, even if part time....greaty reduced retirement/healhcare
> and disability benefits for those too feeble or too impaired to work
> )
> 3. Federal Government debt is a far greater threat to the economy
> and the security of the Nation than private debt. A great majority
> of Americans continue to believe that the Govt is external to the
> economy and that it is a bottomless magic well. The Govt, Wall St
> and Media encourage this belief or rather cruel delusion because
> it is the very basis for issuing fantasy money.
> All economic delusions ,of course end, either when the spell is broken
> or when the delusion consumes the entire substance of the deluded.
>
> Reason and self control can end an economic delusion. So can enforced
> and prolonged destitution and servitude.

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

The cars traded in don't necessarily have to be "clunkers". They could be very well-maintained automobiles that don't get the higher gas mileage the government is trying to promote. The qualifications for the rebate are the differences between the gas mileage on the car being traded in and the one being purchased. It turns out that the FICO scores of the customers under this program are higher than expected. It seems to me that these are the smart buyers who would have normally traded sooner or later and who know a good deal when they see one.


On Aug 02 09:41 PM BuyABizInFlorida.com wrote:

> The author is inferring that Edmunds is stating that 200,000 cars
> would be traded in and assumes that they are all "clunkers". However,
> we do not know to what extent they are clunkers, nor do we know that
> they are replace with Government mandated qualified replacements.
> So inferring that they are all clunkers and are all replaced with
> qualifying units that would have taken place in the ordinary course
> of events, we the tax payers are subsidizing these trade-ins that
> would normally occur.
>
> What is "BS" is the actual financial intelligence of the average
> American.

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Hey dancing dad,

He meant low "gas"-mileage cars, not low "odometer"-mileage cars. Can't you people figure anything out for yourselves rather than commenting before giving it a little thought?


On Jul 31 01:43 PM dancingdad wrote:

> His arguments are like the ones Bush made going into Iraq. First
> note he said 200,000 low mileage cars are traded in a normal 3 month
> period. ( I'm willing to bet a large percentage of the clunkers coming
> in are high mileage ones.) He then assumes that all the clunker cars
> replace all the normal trades (bad assumption). His faulty logic
> leads him to conclude that 222,000 clunkers - 200,000 normal trades
> so we get 22,000 additional trade activity for $1B. All wrong, all
> worst case assumptions.

Market Timing: Either Lead, Follow, or Get Out of the Way

Very good article and probably addresses many of the concerns of us "old heads" out here away from Wall Street where the bonuses aren't handed out by the government. My only advice, learned from bitter experience, is to stay away from the leveraged inverse ETF's. The singles, which I see you favor, are ok to use in non-margin accounts. Give it time.

Could the Dow Sink Another 50% by 2012?

Where would the price of Gold be if the Dow went down to 3800? Probably around $650, which is where it is headed after making a series of lower highs and lower lows since the top. Dow 3800 is the reasonable next target in Elliott wave terms, after a stab at 10,000 at the end of the current uptrend, of course. The bottom for the Dow, sometime in the period 2012-2014, could be as low as 500 which is generally the low of 1974. All mass manias always completely correct their blowoff 5th waves.

Of course, society as we know it will be completely changed by then. It is difficult to predict what type of governments will exist around the world, or even here in the US.


On Apr 05 11:28 AM Mutual Fund Wealth wrote:

> Personally I don't see the Dow going down at all and certainly not
> 50%
> If the market sunk to anywhere near the 3800 mark I can't imagine
> how high the price of Gold would go...
>
> Mentioned on my web page awhile ago that I believe the Dow will settle
> around the 8,000 mark and I believe proceed upwards from there. It
> seems experts-analysts-finan... gurus can't see or predict anything
> past yesterday, so I believe my predictions to be pertinent.
>
> Doug T
> www.mutualfundwealth.com/

The Beginning of a New Bull Market?

Re: Prudent Man says:

"The "stock market" is not investing. Buying stocks and holding them as their corporate value increases or selling when it appears to be slowing is investing. An investor must have adequate liquidity to handle bad markets. Better still, realistic to sell into manias and buy in panics. "

I agree with his thesis, but would substitute the word "price" for his word "value". Then you could avoid the bear markets. To a value investor, lower prices means more value, thus more buying.

When "price" is increasing (along with earnings, etc), it is time to buy. When "price" is decreasing (by some pre-determined amount or %), it is time to sell. There are other fish in the sea.

Laszlo Birinyi: S&P 750's the Bottom - Barron's Interview

The S&P dividend yield @ 6% might be the sign of a tradable bottom. Altria and GE are special situations. Everybody hates them for the wrong reasons, so the high dividend rate.

The Dangers of Timing the Market

Most general equity mutual funds (approx 85%) cannot beat the market even when they are supposed to be more or less fully invested.

Statistically, half of the top quartile funds in one year or five year period will fall into the bottom quartile over the next measurement period. And, of course, the inverse is true that half of the bottom quartile funds will end up in the top half over the future period. Investors tend to be in active funds rather than the index funds, since those are the ones that their advisors recommend, they are always chasing the top performers, which are naturally going to be underperformers in the future.

Active mutual funds investors' returns are approximately half the market returns because of this chasing plus the layers of fees inbedded in the funds and the overlay of advisory fees.

Decades of Negative Returns: A Long-Term Look at the Dow

So long as you need to find someone else to blame (repub or dem or short sellers or hedge funds, etc) you will never get it. You, you, you, are the one in control of your own decisions and destiny. You have to live it out day by day.

Some day far down the path when you are old and broke, you will lament; "If only I'd gone short in 2008".

The Calm Before the Storm?

Dear Givemeabailout: Paulson had to sell his Goldman stock when he became Treasury Secretary. It was a great trade, since he got out at a much higher price and he did not have to pay capital gain taxes. If he then put it into Treasuries, he's further ahead.

Will the Stock Market Continue Its Upward Trend?

I assume you neglected to look at a chart that was longer than the last 3 hours of yesterday's data. Try starting with, say, October 11, 2007, when discussing trends.

Dittos to CrossProfit and jlounsbury59.

Bear Market In Its Final Stages?

The stock market is the perfect reflection of the people's mood. When that changes, it will begin to show up in the averages. Check out mutual fund cash politions, dividend yield, a/d line, etc. The banks are loaded with under-performing real estate that is about to get even worse. We are just beginning to enter the worst phases of the economic downturn. The reasons for individuals and businesses accumulation of cash is obvious: They are going to need it.