squawk

Despite Its Recent Run-Up, The DJIA Isn't Expensive

Re: "but this market is WAY OVERSOLD." Presume you meant to say "WAY OVERBOUGHT."

Fellow alum.


On Jul 25 01:30 PM HATEFEEBAY wrote:

> As a trader that trades nearly $10 Million a month in my home, I
> am literally buying physical silver, silver stocks and DXD against
> the DJIA. This is CLEARLY a bear rally, no forward earnings, unemployment
> increasing where revenues will shrink, the US printing money both
> literally and figuratively monetizing the debt to levels not seen
> in history, the US dollar is GONE, I want nothing to do with it and
> I am an American, a very scared one. Finance is my gig, Wharton Alumni
> Class of 2003, look me up and one that has done well even in this
> mad market, but this market is WAY OVERSOLD and it should be at 7000
> IMHO and I am shorting it because of quantifiable metrics will come
> into play and this economy will tank thanks to Obama and Company
> and all their idiotic policies. Going forward, I will not live in
> the US much longer and I have been overseas a lot and this country
> is socialism and rewarding people for not working-a very sad time
> in our country, perhaps the saddest yet. Gary

This Bear Market is Worse Than I Thought

"The fact of the matter is that this market is not like 1987, the fundamentals and technicals are much worse. "

Please backup your assertion that fundamentals are "much worse" than 1987. Valuations today are much more reasonable, historically, then then they were in 1987, when I believe stocks were trading about 25X earnings.

As for technicals, duh! We don't need anyone to state the obvious.

Talk of a Real Estate Bottom Already Is a Waste of Breath

Your ball analogy illustrates a complete lack of understanding of the real estate market. First, as an early poster comments, real estate prices are driven by LOCAL economic factors. In markets like Ohio, Michigan, where there is little or no economic growth, your analogy might have a bit of merit. However, in continually proven high growth markets, your ball analogy comes crashing to the ground, as it should.

Granted, high growth markets, particularly markets like South Florida, Vegas, Phoenix, Inland Empire (San Bernardino-Riverside), where price appreciation has clearly outstripped economic growth, a correction was, & is, inevitable. However, in certain traditionally strong markets in California, such as Los Angeles, Bay Area, where there has been a LONG TERM shortage of "affordable" housing due to a CONTINUAL influx of population, you cannot expect prices to fall 50% as you postulate.

Yes, an "equilibrium" will be reached. But to say that such equilibrium is a "ground level" after a period of years of significant price appreciation, shows a basic lack of understanding of real estate economics. Beyond the cost of capital, which is still at historically at low levels despite relative tight underwriting standards, look to the LOCAL economy for a better understanding of how supply and demand interact to determine real estate prices.

Local markets with historically growing economies and limited supply of housing will continue to appreciate, where your so called "ground" equilibrium is not flat, but "climbing" over time.

California's Sate of Fiscal Emergency Coming Soon to a Theatre Near You

California impending fiscal woes will the be next "big story" to hit the media corridors. As home prices fall, so do ad valorem tax revenues. State operates on a shoe string budget, much like many of the subprime borrowers who purchased assets they could ill-afford.

Treasury Secretary Paulson: Voluntary Subprime Deal by Next Week

I'll believe Paulson's idea is not a government subsidy when I they "show me the money" that is going to fund this program. If not the government, then who? What mortgage lender/underwriter is going to "fund" this program? If the argument can be made that the lender stands to gain by freezing the mortgage rate to one far below current, then I'd like to see it in B&W. Until then, Paulson's idea is nothing but a lotta air. JMO.