Is the market considered a leading indicator? It's not looking that way it in this chart.
I'm thinking this correction will be in the 30-40% range. Too much debt floating about, and stocks prices have driven up in part by profits that are at record highs as percentage of GDP.
CR, Even if we do get to the median tomorrow...I think this recession is likely to be "above average", meaning we still have a pretty large drop in front of us.
For a while recently, the price of gold was moving in the opposite direction of equities... Looks like it is now joining the stock market in decline.
All asset prices should be declining in this environment. But it will be interesting to see what happens with gold when the Fed and congress step up their attempts to juice the economy...
We are in our current state because everyone has spent too much and saved too little. Am I supposed to think it is a good thing that the government is working on a bailout where everyone gets a check, in the hope that they go out and spend it?
poszi, this isn't dividend adjusted, and that really wouldn't change this graph much. The key here is the severity of the declines. How much would you dividend adjust the recent 15.9% decline since last October? Not much.
ShortCourage, it depends on how far earnings fall during the recession - and on investors' perception of future earnings.
I doubt the financials will return to the recent level of earnings for some time - but other companies will probably recover fairly quickly (like in '09 or '10)
Here is a positive comment: even though earnings were too high (mostly in financials) and this distorted the PE ratio, the overall PE ratio wasn't ridiculous (like in the late '90s).
Funny, I don't see 1929 in the list. Oh, that's right, it wasn't a "recession".
There's no way we don't ultimately blow out the top end of the range. 2000 almost matched 1974, and we're in the same basic fix as 2000 with much higher debt and far greater economic dislocations.
"We are in our current state because everyone has spent too much and saved too little. Am I supposed to think it is a good thing that the government is working on a bailout where everyone gets a check, in the hope that they go out and spend it?"
"here's no way we don't ultimately blow out the top end of the range. 2000 almost matched 1974, and we're in the same basic fix as 2000 with much higher debt and far greater economic dislocations."
1975 was PAINFUL. 2000-2003 not so much. Hair of the dog. We're now out of booze.
I'd like to see an overlay of this graph on top of a graph of the market's real returns over the same period of time. This way, it's easy to see what the net effect of a recession has been in the past.
The following is excerpt of Project Wing - the executive summary of a plan, put together by
Merrill Lynch, Citi and The Blackstone Group, to sell stricken mortgage lender Northern Rock,
code-named Blackbird. This Briefing Memorandum has been sent to all potential acquirers
Blackbird is currently pursuing a sale of its business as a whole (WholeCo or the Whole
Company). This is Blackbirds preferred outcome. As an alternative to the sale of WholeCo and to
assist interested parties, Blackbird has defined two discrete preferred asset sale structures, namely
the acquisition of either (i) the Companys existing infrastructure/operational platform and/or
Blackbirds retail deposits and matching assets (PlatformsCo of the Platforms Company) or (ii)
PlatformsCo plus further selected assets and liabilities, including the securitisation and covered
bond funding programmes (PrimeCo or Prime Mortgage Company). Blackbird and its advisers
encourage offers for assets and liabilities of the business which are different from those
contemplated under the preferred structures. For example, this Memorandum also gives separate
financial information on the retail deposits platform.
"Instead of the Bushies giving 100M people $800/$1600 they could give 3M people $50K tax-free. That'd be a lot more fun."
Even better, let's randomly select 300 people and give them 500 million each, on the condition that they allow the next two years of their lives be filmed for a reality TV show. It would be a huge hit.
I agree with CR: I think there's a good chance the global economy will bail out non-financials fairly quickly this time around. Unless of course we have a 1930-style global depression, but I think that's unlikely. A lot depends on how gracefully China and other emerging markets slow down and deal with their own bubbles.
But it will be interesting to see what happens with gold when the Fed and congress step up their attempts to juice the economy...
Hedgies say 450-500, that be a long way down but then again with money being vaporised on a scale like this it seems plausible. Oil 55-65, Ag look out below.
tj & the bear, OK, I added the DOW back to the Depression decline. Ouch. It kind of makes the other declines look mild!
ShortCourage, if you compare historic PEs to interest rates, the market was fairly valued BEFORE the recent decline. That tells me that investors weren't buying into the suspect earnings too strongly - imagine if we had suspect earnings AND a PE of 25 or 30!
Still dodgy earnings are dodgy earnings, and the market is paying a steep price.
Got this link from Mish: Northern Rock: Labours fig-leaf for failure
By Philip Stephens
Published: January 21 2008 18:09 | Last updated: January 21 2008 18:09
I cannot help thinking that there is something more than a touch ironic about the British government putting its reputation in the hands of an investment bank as it struggles to salvage something from the wreckage of Northern Rock. The financial chicanery that brought the roof down on global markets last summer is now to be set to the purpose of rescuing one of its casualties.
Anything but nationalisation, one of Prime Minister Gordon Browns cabinet colleagues told me the other day as he mulled the governments narrowing options.
London Times - Day of reckoning in the US glasshouse (Tuesday is going to be hell. I will be out for lunch with a retired FDIC friend hopefully getting some information but otherwise following the news of the day and of course CR) Day of reckoning in the US glasshouse - Times Online
Dow to slice thru 10K and settle at 8500, at that point economic realities such as the price of oil will point to any meaningful economic recovery which might be reflected in future equity prices. All the news noise that our economy was less dependent on oil then the 80's was nonsense, if anything it is more ingrained into the consumer lifestyle then before, 3 car family, boats, RV, ATV's, fly anywhere anytime, mega farms, 3000 sq ft homes, its a long list.
Yeah, like 3 out of 4 Americans expect a recession this year. That's almost as high a percentage as CR posters. Since when has the mass ever been right?
Still dodgy earnings are dodgy earnings, and the market is paying a steep price.
Under the Pension Protection Act of 2006, companies with defined benefit pension plans have to basically move any changes in liabilities from "off balance sheet" to "on balance sheet." If the plan's investment performance bombs, it could directly impact reported quarterly earnings.
Equity-heavy DB plans would be vulnerable to sharp market decline (e.g., now). Debt-heavy plans would be vulnerable to rising interest rates, because bond returns would go down. Almost all sponsors of DB plans could have big drags on earnings in a year when equities drop while interest rates rise. This drag has not been a factor in down markets or up rate cycles prior to PPA 06.
The thing about earning is that going forward is what really counts, not last quarter. Most companies will be giving guidance but how believable will guidance be if the enconomy is in a downturn.
My guess is more big hits on high p/e stocks. I expect that good earnings will not be enough for Apple, Google, RIMM etc. However, since most of my puts are in finance and consumer discretionary, like retail, hotels, casinos and builders, I hope that these areas still have some downside.
That would require disclosure, which would blow people away, as they find out that pension money has been fueling hedge funds; that is not going to go over well when the balance sheets actually connect to your losses and then your inability to understand hoe the DOL has granted exemptions to underwriters that packaged derivatives and then renamed them as money market funds, etc., etc... not good, and we have The Senate & Congress to thank for that impending CRISIS, which will become very political in terms of blending Social Security shortfalls into privatized pension reforms, which is one of the last remaining dreams that Bush is now pushing. Happy MLK Day!
Sometimes the consensus is right for good reason. I remember in the 90's Barrons, especially Alan Abelson, always quoting a contrarian to justify their bearish view. Yet, the consensus proved to be right. I wish I had listened to the consensus more back then.
On another note, nobody seems to be talking about the market at the office. Complacency seems to rule the roost. Anybody else see that where they work?
1975 was PAINFUL. 2000-2003 not so much. Hair of the dog. We're now out of booze.
My timing is impeccable.
I graduated from HS in '75... from college in '81. My two oldest & their SOs are all looking for work now (just finished college or working their way through school - my son's SO just found out she's pregnant - ugggh).
Back in '75 my folks all but carried the family on little more than a large garden and cut firewood. Karma recycled.
Yeah, like 3 out of 4 Americans expect a recession this year. That's almost as high a percentage as CR posters. Since when has the mass ever been right?
O-Joe
Optimistic Joe | 01.21.08 - 2:24 pm | _______________________________
Everyone forecasted Katrina to hit NOLA. Doesn't mean they were wrong.
mp, Excel 2007 (sometimes I add a little with Photoshop).
jg, I'd never seen the data presented this way before - but this is what I wanted to know!
This graph doesn't need to be adjusted for dividends, inflation or anything else because the declines are over a relatively short period - it just answers the question REBear asked in the earlier thread: How far does the index typically fall in a recession (and one very ugly Depression!)
15% to 45% off the highs seems to be the typically range. Note that the severe recession of the mid-70s had the same decline as the recent market bubble burst (and mild recession). I think this shows every recession and bear market is different.
I have been reading this blog for some time and I have yet to figure out who Conjure is and why he has a clock (though obviously I can deduce that it has some sort of end-of-the-financial-world implications)
The DOW finally regained it's 1929 high in 1954. Maybe it would have happened sooner with IBM - but Big Blue can have it's long droughts too. IBM's low point in 1994 was approximately the same as it's low for 1967...
LONDON (MarketWatch) -- After the heavy losses nursed by Asian and European stock markets, U.S. stock futures are pointing to huge losses when markets re-open on Tuesday. Futures on the Dow Jones Industrial Average dropped 476 points, the S&P 500 futures contract fell 62 points and the Nasdaq 100 futures contract declined 81 points. End of Story
Soooo... the bullfools are finally beginning to get the message. Late of course.
Okay, who expects an emergency rate cut tomorrow and how much? 50 bips? 100 bips? Time for the PPT to move into action!
Denzel | 01.21.08 - 2:44 pm | #
I do....at least 50bps if the market is down over 500pts.
I raised my sons as geeks though so they haven't knocked anyone up. And they are taking for-freaking-ever to get through college.... ;^)
So is-was he... studying CSci at a local community college. My first question to him was... "So when did you find time to accomplish this between D&D and 'World Of Warcraft'?" All he did is smirk... damn kids. But if it is any consolation - once he learned this is for real his grades immediately improved... I wouldn't advise this as a way to motivate lagging students however.
the market WILL drop 85%, just as it did over '29-'32. We have never-before-seen levels of debt and assets to writedown.
i recently read a good september bit by the bank credit analyst lately -- they see recession but nothing like the end of the global debt supercycle. the halcyon days may be gone, but they think the blowoff is still coming. and one has to admit that their key tell for The End -- capital flight from the united states -- isn't happening yet.
Okay, who expects an emergency rate cut tomorrow and how much? 50 bips? 100 bips? Time for the PPT to move into action!
if they don't cut tomorrow before the open, bernanke should be replaced. one can argue the moral hazard all day, but a big part of his job is to prevent panic unwinds with large economic ramifications. this is exactly the scenario emergency cuts are designed for.
in the end, there's nothing he can do to prevent long-term rebalancing. it's the panic he is supposed to stem, and panic is what we;ve got.
Anyway, I would expect somebody bullish right now to at least provide fundamental (heck, even technical) support to their argument, beyond "everybody thinks there is a recession, so there won't be."
In the core of my heart, I think Bush is seriously retarded and never should have been in office, but my opinion is now about as important as his ratings and rankings throughout the world; however, what is he supposed to do here, or what is Paulson or Ben to do? Anything these boobs say in the next few weeks will cause more damage and they shut the hell up and and go play golf or do something that doesnt require a model, thinking, planning, collusion, corruption, starting wars, etc...
Sheeesh
We have had 10 years of non-stop synthetic derivative tsunami cash flow from printing presses that tried as hard as possible flood every economy around the globe with synthetic liquidity. People talk of a housing bubble, but this is a chain of bubbles that will become a problem that will not be solved by anything other than time, and you can take that to the bank; this will destroy the global economy and have long reaching tails that will last for many years, and not be something that is solved by snakeoil lubed political rhetoric! These people that have spun this web have no clue how to get out of the trap they engineered as a collusive team!
See also: Rates of inflation of several hundred percent per month are often seen. Extreme examples include:
Germany in 1923 when the rate of inflation hit 3.25 × 106 percent per month (prices double every 49 hours)
Greece during its occupation by German troops (1941-1944) with 8.55 × 109 percent per month (prices double every 28 hours).
The most severe known incident of inflation was in Hungary after the end of World War II at 4.19 × 1016 percent per month (prices double every 15 hours).
More recently, Yugoslavia suffered 5 × 1015 percent inflation per month (prices double every 16 hours) between 1 October 1993 and 24 January 1994.
Judging by how the rest of the world is doing equity wise, tomorrow is going to reek.
Looked at my kids's college funds last night and considered moving to TIPS but held off and kept them conservatively weighted to bonds. Fortunately for me, managed via Vanguard; as far as my kids go, my wife and I ride them about their grades. Screw up once and a warning, again then loss of privileges or the dreaded conversation with the teacher.
I want to spend my old age letting them take care of me and not vice-versa...
My friend and I are betting on what the S&P 500 is going to close at tomorrow. Things I'm taking into consideration are a possible flight into US equities after today's plunge on the world market, possible emergency rate cuts, and the PPT. What are your thoughts? Are there any futures or other indicators for tomorrow that are available? Thanks.
Looks like 18 of the 1929 DOW components were still on the list in 1954.
Allied Chem
American Can
American Smelting
American Tobacco
Beth Steel
Chrsyler
General Electric
General Foods
GM
International Harvester
International Nickel
Sears
Standard of NJ
Texas Company
Union Carbide
US Steel
Westinghouse
Woolworth
My friend and I are betting on what the S&P 500 is going to close at tomorrow.
who can say, but one technical to note is the 1252 area -- not only is that a heavy consolidation level from the mid-2006 correction, but it is also a fibonacci retracement level. i really didn't think we'd see it so quickly.
"There is an earnings recession," said Hugh Johnson, chief investment officer of Johnson Illington Advisors, noting that S&P 500 operating earnings growth was lower in the third quarter of 2007 than in second quarter, and is sure to be lower in the fourth quarter of 2007 than in the third.
"The real key question is not whether there's going to be an economic recession. It's not when the economic recession is going to end," Johnson said. "It's when is the earnings recession going to end?
Hiker90 at 2:40
Long, long ago when I had a personal broker, i.e. before computers were even invented, he told me "Never tell your father-in-law what is in your portfolio. That would make it too hard to sell your losers."
Maybe something similar is happening to office chit-chat about "the market".
Sorry, I'm a convert. Wanted to buy some more physical today, but my dealer is closed. That's okay, it'll probably correct further and I'll be able to get more.
--
The spoils of the bear markets go to those who foresee recession at least 6-9 months ahead and, preferably, to those who see it 12-18 months before it begins (to accumulate positions, especially, long-term puts).
As I said months ago: CR WILL NOT PREDICT RECESSION UNTIL AFTER THE RECESSION HAD BEGUN.
CR admitted that recession began in December 2007. And when did he admit? In January 2008. I rest my case.
Also, CR is slowly slipping and sliding his way into admitting that the real demand for housing has been and would continue to be way below his estimate of 1.7M annual units.
And CR is grossly ignorant of CRE overbuilt compared to the RRE overbuilt. He will start to correct himself next year.
My IRA, excluding the UST STRIP which is for safety only, is up 348% in 6.5 months and my son's IRA, excluding gold (a long-term position in lieu of holding gold bullion), that I manage is up 346% in 6.5 months. Tomorrow that gain could be well over 400% (or five fold). My target for 2008 is 900% (or ten fold).
Obviously, foreseeing recession more than a year ago and housing bust also a year before it materialized has its rewards.
There are leaders and then there are followers. Herd likes to follow the herd.
Well we're pretty sure the decline will be between 15 and 100%. 15% because we've got that, and 100% for mathematical reasons. Other than that, we don't know. Times change, markets change. I don't think history is of much use here, quite frankly.
On the eve of historic inflationary measures by central banks (tsunami's of debt monetization) all of the world to combat the current deflationary trends... "Beware of Gold", ..you've gotta be kidding. Now is precisely the time to load up.
The Reverse Minsky Journey has now gone into overdrive: systemic debt deflation, begetting rapid de-levering and asset price deflation, is upon us. The neutral real Fed funds rate is plummeting. The Fed must catch it, not on the installment plan, but for cash delivery. The negative feedback loop that (Fed chairman) Ben Bernanke and (Fed governor) Ric Mishkin (recent speech HERE ) have spoken so eloquently about is no longer a risk, but a reality. Such a loop is self-feeding, not self-correcting. Only the Fed can interrupt it. Time is of the essence. What needs to be done needs to be done. Now.
Long term charts adjusted for inflation are much more informative and show the true severity of bear markets.
RCA bought at the top in 1929 did not recover ,adjusted for inflation, until the late 1990's and then only because RCA shares were swapped for GE shares.
TJ & duh bears - Im guessing we'll get an emergency 100bp cut tomorrow, but my feeling is that it will only make matters worse. A short blip up, and then another plunge down.
I figure you could get a gold rise, and oil price fall, and after that, it gets very murky. I dont think much of a move for oil down however, unless global growth really pulls back, and for now, Im not forecasting that, although I inch closer to global systemic meltdown by the day.
--
CR: " tj & the bear, that one was 90% of so! My data source for the S&P only goes back to 1950. I guess I could plot the same graph with the DOW. I'll check it out!"
Hello CR,
You may want to use Shiller's reconstructed data for S&P 500. I have it and have been updating myself for the past ten years. I am sure that you should have no difficulty in finding the data. I find it very useful.
i honestly think that certain commodities will continue to rise: gold, oil, agriculture. i'm a believer in peak oil and i think that the global decrease in grain production is a real symptom of global warming.
short term these things will obviously deflate but i think they represent buying opportunities. i'm also a believer in stagflation for the time being.
If we crash, gold will likely crash along as hedgies and others cash out winners to cover margins. Great buying opportunity.
Just don't know where we're headed tomorrow though. Just can't see the Fed not jumping in before tomorrow's open. Given all the current carnage, we're talking serious systemic risk staring them right in the face.
i don't think theres anyway the mkts cannot drop tomorrow. its only a matter of degree and thats taking into acct an emergency rate cut. too much damage done worldwide today.
If we can forgive 3rd world debt why can't we forgive the debts of Americans?
Well for starters, "we" can't forgive the debts because "they" (foreigners) hold it.
yogurt
LOL !
Is the brainwashing of many citizens of the USA sooo complete that they make insane statements like "why can't we forgive OUR debt?".
It must be the modern "Morning in America " generation - they can't adjust to the current realities. Back in the 70s, if the movies are anything to go by, plenty of Americans knew the plight they were in.
in retrospect i'm kicking myself for closing out 40% of my shorts last Th tho i still have massive dollar amts short for tomorrow.
however last Fri was a hi risk situation for shorts given Bush's plan, Bernanke's interview and opex. it would have been the perfect time for a rate cut given the Ambac anncmnt as well. it may even have neutralized whats happening today at least for a while. oh well, history will be the judge.
CR admitted that...
Also, CR is slowly slipping and sliding...
And CR is grossly ignorant of...
Jas Jain
Jas you need to read more carefully. CR has opinions just like you but what you read here are his conclusions supported by the data. The recession starting in December wasn't supported by the data until very recently. That's what you read here. Your criticisms are entirely misdirected.
CR's wealth of integrity and decency towers over your trinkets of gold. Your view of leadership is truly lacking. CR leads by making all of us smarter and better decision makers. Managing your son's accounts shows that you don't understand this concept. Did you also do his science fair projects for him when he was a schoolboy? When will your son learn to think for himself?
Whatever they say, I will do the opposite and feel confident!
crispy&cole..."
I'm playing golf tomorrow. So I guess you will not play golf (smile).
I won't be doing anything with bonds tomorrow. So you can do something.
With regard to equities - the only thing I do is trade the 42 Fidelity sector funds - mutual funds - long only. I trade on the basis of technicals - longer term position trading system based on daily EOD closing prices. As of the close Friday - I only had 7 sectors left on buys. Many of the sectors have been on sells for weeks or months. Some are more recent sells. I am 83% in cash - and down about 4.5% YTD. With regard to tomorrow - I'll run my charts tomorrow morning - and see if I have any new green buy arrows (doubt it) - or any new red sell arrows (possible). And I'll follow the arrows.
If you want to try to do the opposite of that - be my guest (smile).
Actually - a washout tomorrow could be pretty good for the market from a technical basis. Do any of you recall the '87 crash? The scariest day wasn't Monday (although it was plenty scary - down 20% in a single day) - it was Tuesday - because - at the open - the specialists couldn't get a lot of big stocks open. Then - someone (exactly who has been the subject of speculation over the years) came in and started buying up tons of futures contracts - and the market stepped back from the brink of the abyss.
I guess the only general comment I have is that if you didn't have a game plan for this market a month or a year ago - today is a bad day to develop one. Also - BB would be a fool to do anything tomorrow. It would show that he is panicking - which isn't something people want to see. Roby
Balls man. I'm taking physical. Got burned too many times in the paper market. I'll blow my money in Vegas. (Not saying you're blowing money...it's me) At least I get a beer or two and a pretty young thing brining it to me.
Agreed about the inevitability of a drop tomorrow. If nothing else, foreign investors will likely sell US company stock holdings and other commodities to cover losses from today. All a rate cut will do is "soften" the blow in the following days. Maybe even a one day dead-cat bounce followed by a couple days of light volume weak gains and losses. That is, until the next round of bad news.
I think gold has several problems
-it's a commodity, and real prices of commodities always shrink over time (with ups and downs along the way). Think of it this way - if the only thing in the world was coal, then you'd want lots of it to keep toasty - rich people would have huge piles of coal. Introduce a new good (say down jackets) and you'd switch some of your consumption to the new goods. The price of the commodity falls. Also, people find substitutes (say oil).
- long term trend since the 1600s has been that money has moved away from metals towards symbolic forms of value (bills of exchange, cash, derivatives etc). If the SOuth Seas Bubble didn't show the folly of some non-metallic monies, nothing did. But a couple of years later, and everyone was back to using notes. Bottom line is people find metal based systems a poor base for credit-based systems.
-Average price of gold has been "a fine man's suit" over time. At $900 an oz, that's a pretty nice suit. Three years ago was the time to buy gold - then you could only buy an off the rack suit at Sears.
Anyway, I would expect somebody bullish right now to at least provide fundamental (heck, even technical) support to their argument, beyond "everybody thinks there is a recession, so there won't be."
I'm not bullish on equities yet, but here's a chart of the S+P that I had to go way back for. 2007 lows are toast, as are all moving averages. 2006 lows come in at 1290, which we'll take out at the open (if we follow everyone else.) Next up is the 2005 lows at 1168. 2004 lows at 1060, then we have to start talking 800ish. I'm expecting extreme volatility for the rest of the year. I use the E-mini futures contract...for me it's easier than trying to short or buy puts although I do sell oex call premium if the price is right. Lotta bears I know (that are still around) have just now gotten used to getting paid for the first time in a while so I expect some sharp short covering rallies, which I will be selling into. Will be interesting to watch the teevee personalities on cnbs tomorrow. I think I will turn the sound on for the first time this year.
Conjure is not saying that he's bearish on gold. He's neutral, but is saying that one should be very careful with it, as it could easily bite one in the ass.
Gold is a commodity. 1/3rd is used in electronics and such. It is also a natural resource that is influenced by recovery technology. Why people never learned from aluminum I'll never understand.
--
hiker90: "CR's wealth of integrity and decency towers over your trinkets of gold."
I am simply pointing out CR's deficiencies. Anyhthing wrong with that?
I don't disagree with most of the things CR says, but sionce others are reluctant I take up the slack in pointing out CR's serious problems.
Forecasting a storm after it has already passed by would be considered pathetic weather forecasting, no? Similarly, forecasting a recession after it has been confirmed is a very bad habit that economists develop.
CRs grossly wrong estimate of the actual housing demand is extremely serious, especially, because he ignored the actual data from Census.
CRs belief that CRE is nor as overbuilt is based on assuming no recession and definitely no depression during 2008-10. Making bad assumptions lead to all kind of bas forecasting.
Jas
PS: Are there cowards here who make comments on someone without really saying who they are commenting on? Disgusting people.
Even though Florida RE is totally hosed,one good thing is concealed carry. As prior military I did the paperwork,pics and sent it all off and had a permit in 11 days. Best part...now when I travel the state and hit up pawn shops I can walk out with the gun at the time...No wait. It sucked finding something really nice and having to drive all the way back 3 days later.
Oh,one other thing...Dillon 650,doesn't save any money cause ya just shoot more(1-3k rds month for me).
"in retrospect i'm kicking myself for closing out 40% of my shorts last Th tho i still have massive dollar amts short for tomorrow."
Idoc, don't feel too bad, I did the same thing and so, I gather, did quite a few others short the market. It was a matter of risk control, and you can't fault yourself for that. Plenty more opportunities will present themselves this year -- tomorrow, sit back and watch the fireworks.
My comment from earlier today "If we can forgive 3rd world debt why can't we forgive the debts of Americans?" has been the subject of some humorous commentary. Thanks for that.
Talk of stimulus, rate reset freezes, and moratoriums on foreclosures are not going to help solve the problem. Can't make your house payment, here is $1600. Go buy a new plasma TV.
Re-organization under bankruptcy is only way to manage the damage.
Definition of a write-down: Reducing the book value of an asset because it is overvalued compared to the market value.
You banker types like to call it "loss mitigation" or maybe a "work-out".
To any who would conjecture:
Would ANY size cut tomarrow be enough to reverse this trend or would it be a temporary bandaid?
P.S I am thoroughly enjoying the input from everyone ...as scary as it may be
Jim: "RCA bought at the top in 1929 did not recover ,adjusted for inflation, until the late 1990's and then only because RCA shares were swapped for GE shares."
Good point. Also note that RCA was the 'Google' of its day.
Why not look at the SPX 500 instead or the NDX. The Dow captures so little. In the Great Depression the market fell and then recovered and with that first fall everyone poured into real estate which soared. Two years later the stock market fell again and this time the housing market crashed with it.
This time the same thing happened but it took an extra three years before the two (stockes/RE) took eachother under.
--
CR: "IvyLeague, the stock market is worthless as a predictor of recessions. It is a conincident indicator for economic downturns (it does lead recoveries)."
Are we being loose with the facts, CR? There is approx. a 3-6-monnth lead-time. It is true that in every economic cycle there are usually two Scam Market cycles, but this is not a hard and fast rule. So, there are Scam Market downturns, roughly half of them, that are not related to economic downturns and are more due to speculative excesses.
"The stock market is" A FAR SUPERIOR "predictor of recessions" than economists! Samuleson was being dishonest when he quipped, Stock market has predicted 9 of the past 5 recessions. He didnt say that economists have predicted none of the past 5 recessions. Dishonesty is very common among economists on the subject of recessions and depressions. They must be ignored.
"CR's work is never meant to guide your investment, jass"
And what gives a jackass like you the idea that I would use CR's work to guide my investment? Am I here to learn ways to lose money? CR knows very little about anything that is useful for investing.
IMHO ultimately, I think that while how far down is an important call, how LONG will clearly be the most difficult and therefore the most critical of calls for this bear market.
There are going to be many false dawns that not only will grind down bulls but disilluion the bears. At the end of it, stocks will revert to being a game played by the relative few, shunned and despised by the public at large, with both bulls and bears bereft of profits.
Look at the Nikkei- 39k in 89/90 followed by a looooooonnnggg painful decline, then a decent bounce and here in 2008 selling off substantially again. Was that bubble any less damaging than the US RE/Stock/Credit bubble? Lots of confidence and capital has yet to be destroyed in this downturn. The bottom will be no less than 40% from the highs.
Long bicycles , aspirin and maloxx. Short Porsche, ToysRus and Tiffany's.
Regarding the price of Gold, my understanding of its price decline today was that its been a safe harbor for those who thought the market inflated. Some folks have moved from Gold to equities today thinking they have spotted an opportunity.
So it is really true: the stock market has forecast 9 of the last 5 recessions!
(not that I agree with Sebastian or anything)
"So it is really true: the stock market has forecast 9 of the last 5 recessions!"
Maybe so, but I'm betting this time will make it 10 of 6.
Is it dividend adjusted? It would be also more suitable to compare inflation adjusted numbers because inflation used to be higher in 1970-1990s.
Is the market considered a leading indicator? It's not looking that way it in this chart.
I'm thinking this correction will be in the 30-40% range. Too much debt floating about, and stocks prices have driven up in part by profits that are at record highs as percentage of GDP.
is it just me, or are those some major "v-bottoms"? I guess the long duration of the chart compresses all the monthly/yearly noise?
CR, Even if we do get to the median tomorrow...I think this recession is likely to be "above average", meaning we still have a pretty large drop in front of us.
IvyLeague, the stock market is worthless as a predictor of recessions. It is a conincident indicator for economic downturns (it does lead recoveries).
Housing is still the best leading indicator for recessions.
Best Wishes.
Forecasts and predictions are never reliable.
"Recession" might not be accurate.
Call it what you will, something big, dangerous, and painful is coming. It will change the world as we understand it.
But it's not necessarily a "recession", per se.
Feel better?
For a while recently, the price of gold was moving in the opposite direction of equities... Looks like it is now joining the stock market in decline.
All asset prices should be declining in this environment. But it will be interesting to see what happens with gold when the Fed and congress step up their attempts to juice the economy...
We are in our current state because everyone has spent too much and saved too little. Am I supposed to think it is a good thing that the government is working on a bailout where everyone gets a check, in the hope that they go out and spend it?
poszi, this isn't dividend adjusted, and that really wouldn't change this graph much. The key here is the severity of the declines. How much would you dividend adjust the recent 15.9% decline since last October? Not much.
ShortCourage, it depends on how far earnings fall during the recession - and on investors' perception of future earnings.
I doubt the financials will return to the recent level of earnings for some time - but other companies will probably recover fairly quickly (like in '09 or '10)
Here is a positive comment: even though earnings were too high (mostly in financials) and this distorted the PE ratio, the overall PE ratio wasn't ridiculous (like in the late '90s).
Best to all.
Regarding PE ratios, it is the E part that is really concerning me going forward.
Funny, I don't see 1929 in the list. Oh, that's right, it wasn't a "recession".
There's no way we don't ultimately blow out the top end of the range. 2000 almost matched 1974, and we're in the same basic fix as 2000 with much higher debt and far greater economic dislocations.
2008 is quite the year so far, isn't it?
How far down was the stock market in the last 'humdinger?
"We are in our current state because everyone has spent too much and saved too little. Am I supposed to think it is a good thing that the government is working on a bailout where everyone gets a check, in the hope that they go out and spend it?"
Thank you redstateblues!
Can we just start over?
I'll take -50% for 2008.
Instead of the Bushies giving 100M people $800/$1600 they could give 3M people $50K tax-free. That'd be a lot more fun.
Funny thing, I expect the market to GO UP tomorrow.
tj & the bear, that one was 90% of so! My data source for the S&P only goes back to 1950. I guess I could plot the same graph with the DOW.
I'll check it out!
Best to all.
It's not the same sp500 as it was in '03, '98, '87
Financials, for one, now have a huge weighting...
If we can forgive 3rd world debt why can't we forgive the debts of Americans?
tj,
"here's no way we don't ultimately blow out the top end of the range. 2000 almost matched 1974, and we're in the same basic fix as 2000 with much higher debt and far greater economic dislocations."
1975 was PAINFUL. 2000-2003 not so much. Hair of the dog. We're now out of booze.
Cheers,
Financials, for one, now have a huge weighting...
"Now" being the operative word.
I'd like to see an overlay of this graph on top of a graph of the market's real returns over the same period of time. This way, it's easy to see what the net effect of a recession has been in the past.
Misean,
Stricly speaking stock market impact, not real world. Otherwise, you know we're pretty much in agreement overall.
The following is excerpt of Project Wing - the executive summary of a plan, put together by
Merrill Lynch, Citi and The Blackstone Group, to sell stricken mortgage lender Northern Rock,
code-named Blackbird. This Briefing Memorandum has been sent to all potential acquirers
Blackbird is currently pursuing a sale of its business as a whole (WholeCo or the Whole
Company). This is Blackbirds preferred outcome. As an alternative to the sale of WholeCo and to
assist interested parties, Blackbird has defined two discrete preferred asset sale structures, namely
the acquisition of either (i) the Companys existing infrastructure/operational platform and/or
Blackbirds retail deposits and matching assets (PlatformsCo of the Platforms Company) or (ii)
PlatformsCo plus further selected assets and liabilities, including the securitisation and covered
bond funding programmes (PrimeCo or Prime Mortgage Company). Blackbird and its advisers
encourage offers for assets and liabilities of the business which are different from those
contemplated under the preferred structures. For example, this Memorandum also gives separate
financial information on the retail deposits platform.
PS... Bill&Hillary are already Out...
"Instead of the Bushies giving 100M people $800/$1600 they could give 3M people $50K tax-free. That'd be a lot more fun."
Even better, let's randomly select 300 people and give them 500 million each, on the condition that they allow the next two years of their lives be filmed for a reality TV show. It would be a huge hit.
I agree with CR: I think there's a good chance the global economy will bail out non-financials fairly quickly this time around. Unless of course we have a 1930-style global depression, but I think that's unlikely. A lot depends on how gracefully China and other emerging markets slow down and deal with their own bubbles.
But it will be interesting to see what happens with gold when the Fed and congress step up their attempts to juice the economy...
Hedgies say 450-500, that be a long way down but then again with money being vaporised on a scale like this it seems plausible. Oil 55-65, Ag look out below.
CR,
Thanks for replying. I agree it depends on what earnings do, and I believe they will go much lower.
But with de-leveraging, I see stocks being priced BELOW historic PEs. That means dramatic price drops.
Hedge Fund Web Design : Website technology for Hedge Fund Managers - Home
Whats up with Northern Rock?
tj & the bear, OK, I added the DOW back to the Depression decline. Ouch. It kind of makes the other declines look mild!
ShortCourage, if you compare historic PEs to interest rates, the market was fairly valued BEFORE the recent decline. That tells me that investors weren't buying into the suspect earnings too strongly - imagine if we had suspect earnings AND a PE of 25 or 30!
Still dodgy earnings are dodgy earnings, and the market is paying a steep price.
Best Wishes.
CR,
Thanks for the additional chart.
Even I am not seeing a 90% drop this time around, but I can see 60+% eventually (since I expect us to go below the 2002 lows).
CR, Conjure and I would like to know the name of your neat graphics software.
Please?
Got this link from Mish: Northern Rock: Labours fig-leaf for failure
By Philip Stephens
Published: January 21 2008 18:09 | Last updated: January 21 2008 18:09
I cannot help thinking that there is something more than a touch ironic about the British government putting its reputation in the hands of an investment bank as it struggles to salvage something from the wreckage of Northern Rock. The financial chicanery that brought the roof down on global markets last summer is now to be set to the purpose of rescuing one of its casualties.
Anything but nationalisation, one of Prime Minister Gordon Browns cabinet colleagues told me the other day as he mulled the governments narrowing options.
London Times - Day of reckoning in the US glasshouse (Tuesday is going to be hell. I will be out for lunch with a retired FDIC friend hopefully getting some information but otherwise following the news of the day and of course CR)
Day of reckoning in the US glasshouse - Times Online
Dow to slice thru 10K and settle at 8500, at that point economic realities such as the price of oil will point to any meaningful economic recovery which might be reflected in future equity prices. All the news noise that our economy was less dependent on oil then the 80's was nonsense, if anything it is more ingrained into the consumer lifestyle then before, 3 car family, boats, RV, ATV's, fly anywhere anytime, mega farms, 3000 sq ft homes, its a long list.
Yeah, like 3 out of 4 Americans expect a recession this year. That's almost as high a percentage as CR posters. Since when has the mass ever been right?
O-Joe
CR,
Thanks for the update. I'll bottom fish near that 90% mark.
Cheers,
O-Joe,
3 out of 4 Americans aren't expecting a recession, they're experiencing one. Not hard to expect what's already happening.
O-Blow, you know where to go...
CR, very nice work. I have not seen a graph like that -- historic drops from top -- before.
Keep up the good work, sir!
tj, the market WILL drop 85%, just as it did over '29-'32. We have never-before-seen levels of debt and assets to writedown.
Consumption is going to get slaughterd; hence, so will company stock prices.
Under the Pension Protection Act of 2006, companies with defined benefit pension plans have to basically move any changes in liabilities from "off balance sheet" to "on balance sheet." If the plan's investment performance bombs, it could directly impact reported quarterly earnings.
Equity-heavy DB plans would be vulnerable to sharp market decline (e.g., now). Debt-heavy plans would be vulnerable to rising interest rates, because bond returns would go down. Almost all sponsors of DB plans could have big drags on earnings in a year when equities drop while interest rates rise. This drag has not been a factor in down markets or up rate cycles prior to PPA 06.
As I recall, the DOW didn't recover the 1929 losses until the late 40's or early 50's -- but it would have recovered much sooner had it included IBM.
The thing about earning is that going forward is what really counts, not last quarter. Most companies will be giving guidance but how believable will guidance be if the enconomy is in a downturn.
My guess is more big hits on high p/e stocks. I expect that good earnings will not be enough for Apple, Google, RIMM etc. However, since most of my puts are in finance and consumer discretionary, like retail, hotels, casinos and builders, I hope that these areas still have some downside.
rich,
Yes Pension Funds. And I'm begining to think insurance. Not monolines.
Cheers,
rich,
Re: If the plan's investment performance bombs
That would require disclosure, which would blow people away, as they find out that pension money has been fueling hedge funds; that is not going to go over well when the balance sheets actually connect to your losses and then your inability to understand hoe the DOL has granted exemptions to underwriters that packaged derivatives and then renamed them as money market funds, etc., etc... not good, and we have The Senate & Congress to thank for that impending CRISIS, which will become very political in terms of blending Social Security shortfalls into privatized pension reforms, which is one of the last remaining dreams that Bush is now pushing. Happy MLK Day!
jg,
I've stated time and again that conditions are arguably worse than those during the Great Depression, so you'll get no argument from me.
O-Joe,
3 out of 4 Americans aren't expecting a recession, they're experiencing one. Not hard to expect what's already happening.
tj & the bear
Where's my recession, dude?
O-Joe
O-Joe,
Sometimes the consensus is right for good reason. I remember in the 90's Barrons, especially Alan Abelson, always quoting a contrarian to justify their bearish view. Yet, the consensus proved to be right. I wish I had listened to the consensus more back then.
On another note, nobody seems to be talking about the market at the office. Complacency seems to rule the roost. Anybody else see that where they work?
Best,
1975 was PAINFUL. 2000-2003 not so much. Hair of the dog. We're now out of booze.
My timing is impeccable.
I graduated from HS in '75... from college in '81. My two oldest & their SOs are all looking for work now (just finished college or working their way through school - my son's SO just found out she's pregnant - ugggh).
Back in '75 my folks all but carried the family on little more than a large garden and cut firewood. Karma recycled.
Time to start looking at seed magazines I guess.
Yeah, like 3 out of 4 Americans expect a recession this year. That's almost as high a percentage as CR posters. Since when has the mass ever been right?
O-Joe
Optimistic Joe | 01.21.08 - 2:24 pm | _______________________________
Everyone forecasted Katrina to hit NOLA. Doesn't mean they were wrong.
British shares in worse fall since Sept. 11 attacks
British shares suffer worst performance since Sept. 11 attacks - MarketWatch
mp, Excel 2007 (sometimes I add a little with Photoshop).
jg, I'd never seen the data presented this way before - but this is what I wanted to know!
This graph doesn't need to be adjusted for dividends, inflation or anything else because the declines are over a relatively short period - it just answers the question REBear asked in the earlier thread: How far does the index typically fall in a recession (and one very ugly Depression!)
15% to 45% off the highs seems to be the typically range. Note that the severe recession of the mid-70s had the same decline as the recent market bubble burst (and mild recession). I think this shows every recession and bear market is different.
Best to all.
I have been reading this blog for some time and I have yet to figure out who Conjure is and why he has a clock (though obviously I can deduce that it has some sort of end-of-the-financial-world implications)
Thanks for your ...
Okay, who expects an emergency rate cut tomorrow and how much? 50 bips? 100 bips? Time for the PPT to move into action!
Are we getting a fake O-Hoe in here?
dryfly, I'm right there with you! 76 HS grad, though....
Man, weren't the 70s fun?
I raised my sons as geeks though so they haven't knocked anyone up. And they are taking for-freaking-ever to get through college.... ;^)
OJoe
r u long this mkt? i hope u r b/c for all your blathering u deserve to get stuffed.
Look at the five or six increasing downwaves in the first chart. Looks like we are just starting the fourth one of the next series.
Denzel,
If they cut...run. That's pure panic.
Cheers,
Dryfly I think they've rewritten the rules so that your kids are now entitled to live with you until their 35.
My supervisor retired last year, 3 in and out of college, 2 back home. Luckily he's got a good pension.
dry,
u got that right. i have 3 young sons and i fear i may be supporting them for the rest of my life. glad i'm short.
even worse, this could be just the excuse Bush needs to start another war to pull us out of this debacle.
The DOW finally regained it's 1929 high in 1954. Maybe it would have happened sooner with IBM - but Big Blue can have it's long droughts too. IBM's low point in 1994 was approximately the same as it's low for 1967...
IBM: Basic Chart for INTL BUSINESS MACH - Yahoo! Finance
How a French banker's comments derailed stocks
How a French banker's comments helped derail global stocks - MarketWatch
U.S. stock futures point to major decline on re-open
Stock futures pointing to sharp losses when U.S. re-opens Tuesday - MarketWatch
idoc,
Wars do not pull countries out of recession. They just kill off the unemployed. Not a happy scenario.
Cheers,
LONDON (MarketWatch) -- After the heavy losses nursed by Asian and European stock markets, U.S. stock futures are pointing to huge losses when markets re-open on Tuesday. Futures on the Dow Jones Industrial Average dropped 476 points, the S&P 500 futures contract fell 62 points and the Nasdaq 100 futures contract declined 81 points. End of Story
Soooo... the bullfools are finally beginning to get the message. Late of course.
trail,
How many DOW stocks from 1929 were still a part of the index in 1954?
We haven't heard from Stag-Mark in a while. FWIW, Roubini talks about why stagflation won't occur in his latest.
RGE - Will the U.S. Recession be Associated with Deflation or Inflation (i.e. Stagflation)? On the Risks of “Stag-deflation” rather than “Stagflation”
Best,
CR,
thanks. it would be great to see a f/u post showing the 10yr treas note in price appreciation during recessions. where are we on that pendulum?
Okay, who expects an emergency rate cut tomorrow and how much? 50 bips? 100 bips? Time for the PPT to move into action!
Denzel | 01.21.08 - 2:44 pm | #
I do....at least 50bps if the market is down over 500pts.
I raised my sons as geeks though so they haven't knocked anyone up. And they are taking for-freaking-ever to get through college.... ;^)
So is-was he... studying CSci at a local community college. My first question to him was... "So when did you find time to accomplish this between D&D and 'World Of Warcraft'?" All he did is smirk... damn kids. But if it is any consolation - once he learned this is for real his grades immediately improved... I wouldn't advise this as a way to motivate lagging students however.
the market WILL drop 85%, just as it did over '29-'32. We have never-before-seen levels of debt and assets to writedown.
i recently read a good september bit by the bank credit analyst lately -- they see recession but nothing like the end of the global debt supercycle. the halcyon days may be gone, but they think the blowoff is still coming. and one has to admit that their key tell for The End -- capital flight from the united states -- isn't happening yet.
Okay, who expects an emergency rate cut tomorrow and how much? 50 bips? 100 bips? Time for the PPT to move into action!
if they don't cut tomorrow before the open, bernanke should be replaced. one can argue the moral hazard all day, but a big part of his job is to prevent panic unwinds with large economic ramifications. this is exactly the scenario emergency cuts are designed for.
in the end, there's nothing he can do to prevent long-term rebalancing. it's the panic he is supposed to stem, and panic is what we;ve got.
May be a fake O-Joe?
Anyway, I would expect somebody bullish right now to at least provide fundamental (heck, even technical) support to their argument, beyond "everybody thinks there is a recession, so there won't be."
That said, I think those forecasting DOW
Dow 36,000* man.
[N.B. *Yen]
How a French banker's comments derailed stocks
lol -- no depth to which the crowd will not sink to blame the french.
got cut off!
I think those that are forecast the DOW at sub-10k levels are little too doom-and-gloom.
P/Es, even discounting the "E", will be extremely reasonable at those levels.
In the core of my heart, I think Bush is seriously retarded and never should have been in office, but my opinion is now about as important as his ratings and rankings throughout the world; however, what is he supposed to do here, or what is Paulson or Ben to do? Anything these boobs say in the next few weeks will cause more damage and they shut the hell up and and go play golf or do something that doesnt require a model, thinking, planning, collusion, corruption, starting wars, etc...
Sheeesh
We have had 10 years of non-stop synthetic derivative tsunami cash flow from printing presses that tried as hard as possible flood every economy around the globe with synthetic liquidity. People talk of a housing bubble, but this is a chain of bubbles that will become a problem that will not be solved by anything other than time, and you can take that to the bank; this will destroy the global economy and have long reaching tails that will last for many years, and not be something that is solved by snakeoil lubed political rhetoric! These people that have spun this web have no clue how to get out of the trap they engineered as a collusive team!
See also: Rates of inflation of several hundred percent per month are often seen. Extreme examples include:
Germany in 1923 when the rate of inflation hit 3.25 × 106 percent per month (prices double every 49 hours)
Greece during its occupation by German troops (1941-1944) with 8.55 × 109 percent per month (prices double every 28 hours).
The most severe known incident of inflation was in Hungary after the end of World War II at 4.19 × 1016 percent per month (prices double every 15 hours).
More recently, Yugoslavia suffered 5 × 1015 percent inflation per month (prices double every 16 hours) between 1 October 1993 and 24 January 1994.
Judging by how the rest of the world is doing equity wise, tomorrow is going to reek.
Looked at my kids's college funds last night and considered moving to TIPS but held off and kept them conservatively weighted to bonds. Fortunately for me, managed via Vanguard; as far as my kids go, my wife and I ride them about their grades. Screw up once and a warning, again then loss of privileges or the dreaded conversation with the teacher.
I want to spend my old age letting them take care of me and not vice-versa...
sorry -- that link to the BCA bulletin again.
dunham,
The DOW was at 10K a little over 2 years ago. The P/E's are all smoke & mirrors anyway -- review Hussman going back the past year and you'll see why.
Helps to remember that bear markets bottom around 6x earnings, and at the bottom of the market there aren't much for earnings.
Awesome plot with the Dow back to 1929! It does put the rest into perspective.
Superdollar - Wikipedia, the free encyclopedia
My friend and I are betting on what the S&P 500 is going to close at tomorrow. Things I'm taking into consideration are a possible flight into US equities after today's plunge on the world market, possible emergency rate cuts, and the PPT. What are your thoughts? Are there any futures or other indicators for tomorrow that are available? Thanks.
Love the graph-it's the blood dripping from the market tops!!
Looks like 18 of the 1929 DOW components were still on the list in 1954.
Allied Chem
American Can
American Smelting
American Tobacco
Beth Steel
Chrsyler
General Electric
General Foods
GM
International Harvester
International Nickel
Sears
Standard of NJ
Texas Company
Union Carbide
US Steel
Westinghouse
Woolworth
http://www.djindexes.com/mdsidx/downloads/DJIA_Hist_Comp.pdf
"If we can forgive 3rd world debt why can't we forgive the debts of Americans?"
We can, if we'd like to drive them to 3rd world poverty. It's called the road to serfdom.
My friend and I are betting on what the S&P 500 is going to close at tomorrow.
who can say, but one technical to note is the 1252 area -- not only is that a heavy consolidation level from the mid-2006 correction, but it is also a fibonacci retracement level. i really didn't think we'd see it so quickly.
just to clarify -- i think that could be the reaction low. the close could be anything, including up if bernanke finally does his thing.
"If we can forgive 3rd world debt why can't we forgive the debts of Americans?"
Many third worlders do not have the capacity to pay the debts that their corrupt overlords committed them to.
Most Americans do - they'd just prefer not to.
Look at it this way - working our way out of debt will be a huge character-builder...
The Nattering Naybob Chronicles: Largest Market Declines Since 2001
We could be down 20% after tomorrows global tidal wave (Ambac downgrade) slams the US stock market.
dunham
For the bullish case check out Louis Gave at GaveKal.
Summary of his 3 points for recovery:
Stop comparing this downturn to 2000.
2000 was a flight from quality, because large-cap growth stocks got hammered, even relatively strong ones.
This is a classic flight to quality. Big companies with strong balance sheets, global markets, no pension liabilities, etc. will do okay.
Small, overleveraged companies with exposure to consumer spending have got murdered and will get murdered worse.
Focus on quality. If you want to be conservative go long the S&P and short small-caps, emerging markets and REITs. Play the spread.
The highest quality of all might be gold.
OT
I just posted in the prior thread an overview of the workings of the levered ETF's for anyone who cares.
On recession calls from a Yahoo story:
"There is an earnings recession," said Hugh Johnson, chief investment officer of Johnson Illington Advisors, noting that S&P 500 operating earnings growth was lower in the third quarter of 2007 than in second quarter, and is sure to be lower in the fourth quarter of 2007 than in the third.
"The real key question is not whether there's going to be an economic recession. It's not when the economic recession is going to end," Johnson said. "It's when is the earnings recession going to end?
If we can forgive 3rd world debt why can't we forgive the debts of Americans?
Well for starters, "we" can't forgive the debts because "they" (foreigners) hold it.
rich,
This could ultimately be "the flight from everything" but gold. IMO those quality stocks will still suffer, just not as much by comparison.
Conjure says, "Beware of Gold."
Hiker90 at 2:40
Long, long ago when I had a personal broker, i.e. before computers were even invented, he told me "Never tell your father-in-law what is in your portfolio. That would make it too hard to sell your losers."
Maybe something similar is happening to office chit-chat about "the market".
Thanks for the prompt, WoW:
mp/CB, what time is it!?
mp,
If conjure is so sure, then present an argument. Gold has been very good to me. I'm not sniffing anything to the contrary.
Cheers,
mp,
Sorry, I'm a convert. Wanted to buy some more physical today, but my dealer is closed. That's okay, it'll probably correct further and I'll be able to get more.
Telegraph UK
Nightmare on Wall Street haunts banks (#1 most viewed)
Nightmare on Wall Street haunts banks - Telegraph
Anyone here done a calc on the S&P fair valuation today?
--
The spoils of the bear markets go to those who foresee recession at least 6-9 months ahead and, preferably, to those who see it 12-18 months before it begins (to accumulate positions, especially, long-term puts).
As I said months ago: CR WILL NOT PREDICT RECESSION UNTIL AFTER THE RECESSION HAD BEGUN.
CR admitted that recession began in December 2007. And when did he admit? In January 2008. I rest my case.
Also, CR is slowly slipping and sliding his way into admitting that the real demand for housing has been and would continue to be way below his estimate of 1.7M annual units.
And CR is grossly ignorant of CRE overbuilt compared to the RRE overbuilt. He will start to correct himself next year.
My IRA, excluding the UST STRIP which is for safety only, is up 348% in 6.5 months and my son's IRA, excluding gold (a long-term position in lieu of holding gold bullion), that I manage is up 346% in 6.5 months. Tomorrow that gain could be well over 400% (or five fold). My target for 2008 is 900% (or ten fold).
Obviously, foreseeing recession more than a year ago and housing bust also a year before it materialized has its rewards.
There are leaders and then there are followers. Herd likes to follow the herd.
Jas
O Joe,
I apologize - I thought you were a tedious blowhard - I stand corrected by the master.
Well we're pretty sure the decline will be between 15 and 100%. 15% because we've got that, and 100% for mathematical reasons. Other than that, we don't know. Times change, markets change. I don't think history is of much use here, quite frankly.
On the eve of historic inflationary measures by central banks (tsunami's of debt monetization) all of the world to combat the current deflationary trends... "Beware of Gold", ..you've gotta be kidding. Now is precisely the time to load up.
FFDIC,
Seems like my prediction that PAIn is word of the year is going swimmingly. Why I'm happy about that remains a mystery.
Cheers,
Now might be a good time to load up on gold but two years ago was far better...
PIMCO's McCulley in an email response to Lansner:
The Reverse Minsky Journey has now gone into overdrive: systemic debt deflation, begetting rapid de-levering and asset price deflation, is upon us. The neutral real Fed funds rate is plummeting. The Fed must catch it, not on the installment plan, but for cash delivery. The negative feedback loop that (Fed chairman) Ben Bernanke and (Fed governor) Ric Mishkin (recent speech HERE ) have spoken so eloquently about is no longer a risk, but a reality. Such a loop is self-feeding, not self-correcting. Only the Fed can interrupt it. Time is of the essence. What needs to be done needs to be done. Now.
Long term charts adjusted for inflation are much more informative and show the true severity of bear markets.
RCA bought at the top in 1929 did not recover ,adjusted for inflation, until the late 1990's and then only because RCA shares were swapped for GE shares.
iTulip.com - Real DJIA 1924 to 2006
Jim
"I apologize - I thought you were a tedious blowhard - I stand corrected by the master."
thanks for making my day. still lol.
.
TJ & duh bears - Im guessing we'll get an emergency 100bp cut tomorrow, but my feeling is that it will only make matters worse. A short blip up, and then another plunge down.
coming from a true bear i sincerely hope they cut that full 1%. i'm locked and ready...
Geoff,
Zugzwang again -- anything 75bp or less and they'll disappoint, anything 100bp or above and they'll panic. Tough stuff.
idoc - what's your take on what that cut would do to GSG? (Commodities etf)
That's an amazing stat, Jim. Puts a whole new twist on "buy and hold".
I figure you could get a gold rise, and oil price fall, and after that, it gets very murky. I dont think much of a move for oil down however, unless global growth really pulls back, and for now, Im not forecasting that, although I inch closer to global systemic meltdown by the day.
--
CR: " tj & the bear, that one was 90% of so! My data source for the S&P only goes back to 1950. I guess I could plot the same graph with the DOW. I'll check it out!"
Hello CR,
You may want to use Shiller's reconstructed data for S&P 500. I have it and have been updating myself for the past ten years. I am sure that you should have no difficulty in finding the data. I find it very useful.
Jas
--
Sorry, the data goes back to 1870.
Jas
trail,
"Now might be a good time to load up on gold but two years ago was far better..."
1999 was FAR better.
idoc,
If they do cut 100bps, I'm buying 1000 rounds of .40, and at least 500 00 shot.
Cheers,
Geoff
i honestly think that certain commodities will continue to rise: gold, oil, agriculture. i'm a believer in peak oil and i think that the global decrease in grain production is a real symptom of global warming.
short term these things will obviously deflate but i think they represent buying opportunities. i'm also a believer in stagflation for the time being.
will be interesting to see what happens to the asian+euro market tomorrow ..2 big down days in a row?
india--crash?
Geoff,
If we crash, gold will likely crash along as hedgies and others cash out winners to cover margins. Great buying opportunity.
Just don't know where we're headed tomorrow though. Just can't see the Fed not jumping in before tomorrow's open. Given all the current carnage, we're talking serious systemic risk staring them right in the face.
Jiz;
If you were really making that kind of money, you'd be too busy to be in here trolling for the virtual approval of strangers.
cd
Misean
i am also literally locked and ready at work and at home if u catch my drift.
idoc,
I do.
Cheers,
i don't think theres anyway the mkts cannot drop tomorrow. its only a matter of degree and thats taking into acct an emergency rate cut. too much damage done worldwide today.
Misean,
Here's hoping the Supreme Court rules favorably on the 2nd Amendment this year. CA's laws irritate the sh!t out of me.
If we can forgive 3rd world debt why can't we forgive the debts of Americans?
Well for starters, "we" can't forgive the debts because "they" (foreigners) hold it.
yogurt
LOL !
Is the brainwashing of many citizens of the USA sooo complete that they make insane statements like "why can't we forgive OUR debt?".
It must be the modern "Morning in America " generation - they can't adjust to the current realities. Back in the 70s, if the movies are anything to go by, plenty of Americans knew the plight they were in.
-K
in retrospect i'm kicking myself for closing out 40% of my shorts last Th tho i still have massive dollar amts short for tomorrow.
however last Fri was a hi risk situation for shorts given Bush's plan, Bernanke's interview and opex. it would have been the perfect time for a rate cut given the Ambac anncmnt as well. it may even have neutralized whats happening today at least for a while. oh well, history will be the judge.
tj,
I have to bring in a utility bill, CA ID, pass a test, and wait 10 days to get a fire arm. Unfortunately the 2nd is quite dead.
Cheers,
CR admitted that...
Also, CR is slowly slipping and sliding...
And CR is grossly ignorant of...
Jas Jain
Jas you need to read more carefully. CR has opinions just like you but what you read here are his conclusions supported by the data. The recession starting in December wasn't supported by the data until very recently. That's what you read here. Your criticisms are entirely misdirected.
Jas i just tell it like it is Jain,
CR's wealth of integrity and decency towers over your trinkets of gold. Your view of leadership is truly lacking. CR leads by making all of us smarter and better decision makers. Managing your son's accounts shows that you don't understand this concept. Did you also do his science fair projects for him when he was a schoolboy? When will your son learn to think for himself?
Best,
"I need to hear from Sebastion, Robyn and O-Joe.
Whatever they say, I will do the opposite and feel confident!
crispy&cole..."
I'm playing golf tomorrow. So I guess you will not play golf (smile).
I won't be doing anything with bonds tomorrow. So you can do something.
With regard to equities - the only thing I do is trade the 42 Fidelity sector funds - mutual funds - long only. I trade on the basis of technicals - longer term position trading system based on daily EOD closing prices. As of the close Friday - I only had 7 sectors left on buys. Many of the sectors have been on sells for weeks or months. Some are more recent sells. I am 83% in cash - and down about 4.5% YTD. With regard to tomorrow - I'll run my charts tomorrow morning - and see if I have any new green buy arrows (doubt it) - or any new red sell arrows (possible). And I'll follow the arrows.
If you want to try to do the opposite of that - be my guest (smile).
Actually - a washout tomorrow could be pretty good for the market from a technical basis. Do any of you recall the '87 crash? The scariest day wasn't Monday (although it was plenty scary - down 20% in a single day) - it was Tuesday - because - at the open - the specialists couldn't get a lot of big stocks open. Then - someone (exactly who has been the subject of speculation over the years) came in and started buying up tons of futures contracts - and the market stepped back from the brink of the abyss.
I guess the only general comment I have is that if you didn't have a game plan for this market a month or a year ago - today is a bad day to develop one. Also - BB would be a fool to do anything tomorrow. It would show that he is panicking - which isn't something people want to see. Roby
I can still buy ammo though.
idoc,
Balls man. I'm taking physical. Got burned too many times in the paper market. I'll blow my money in Vegas. (Not saying you're blowing money...it's me) At least I get a beer or two and a pretty young thing brining it to me.
Cheers,
NEW THREAD
Misean,
Not necessarily. The SC has a majority that looks to be favorably disposed towards recognizing the "individual right".
If not, I'm going to buy a cheap 2nd place just over the border in NV, switch my residency (temporarily), and stock up.
Oh yeah, and thanks Robyn...
Seb and Robyn have brains in their heads. They may be bulls, but they are not stupid. O-Joe...well...I just ignore him.
Cheers,
idoc,
Agreed about the inevitability of a drop tomorrow. If nothing else, foreign investors will likely sell US company stock holdings and other commodities to cover losses from today. All a rate cut will do is "soften" the blow in the following days. Maybe even a one day dead-cat bounce followed by a couple days of light volume weak gains and losses. That is, until the next round of bad news.
I think gold has several problems
-it's a commodity, and real prices of commodities always shrink over time (with ups and downs along the way). Think of it this way - if the only thing in the world was coal, then you'd want lots of it to keep toasty - rich people would have huge piles of coal. Introduce a new good (say down jackets) and you'd switch some of your consumption to the new goods. The price of the commodity falls. Also, people find substitutes (say oil).
- long term trend since the 1600s has been that money has moved away from metals towards symbolic forms of value (bills of exchange, cash, derivatives etc). If the SOuth Seas Bubble didn't show the folly of some non-metallic monies, nothing did. But a couple of years later, and everyone was back to using notes. Bottom line is people find metal based systems a poor base for credit-based systems.
-Average price of gold has been "a fine man's suit" over time. At $900 an oz, that's a pretty nice suit. Three years ago was the time to buy gold - then you could only buy an off the rack suit at Sears.
jass's outrage is perhaps due to happenings exact opposite of what he wrote..
CR's work is never meant to guide your investment, jass
Anyway, I would expect somebody bullish right now to at least provide fundamental (heck, even technical) support to their argument, beyond "everybody thinks there is a recession, so there won't be."
That said, I think those forecasting DOW
dunham | 01.21.08 - 2:54 pm | # [ got cut off]
Barchart.com - Charts - $INX S&P 500 INDEX INDEX
Barchart.com - Charts - $INX S&P 500 INDEX
I'm not bullish on equities yet, but here's a chart of the S+P that I had to go way back for. 2007 lows are toast, as are all moving averages. 2006 lows come in at 1290, which we'll take out at the open (if we follow everyone else.) Next up is the 2005 lows at 1168. 2004 lows at 1060, then we have to start talking 800ish. I'm expecting extreme volatility for the rest of the year. I use the E-mini futures contract...for me it's easier than trying to short or buy puts although I do sell oex call premium if the price is right. Lotta bears I know (that are still around) have just now gotten used to getting paid for the first time in a while so I expect some sharp short covering rallies, which I will be selling into. Will be interesting to watch the teevee personalities on cnbs tomorrow. I think I will turn the sound on for the first time this year.
Conjure is not saying that he's bearish on gold. He's neutral, but is saying that one should be very careful with it, as it could easily bite one in the ass.
If they do cut 100bps, I'm buying 1000 rounds of .40, and at least 500 00 shot.
Misean | 01.21.08 - 4:10 pm | #
Don't forget the gear lube!
Conjure Clock
11:59:04
Keerist. If New Zealand is any indication, it wasn't just one day carnage overseas.
rcryan,
You blew it when you stated gold was a commodity.
Gold is a commodity. 1/3rd is used in electronics and such. It is also a natural resource that is influenced by recovery technology. Why people never learned from aluminum I'll never understand.
Let me clarify: Gold is not just a commodity. Pigeonholing it as strictly a commodity misses the point.
--
hiker90: "CR's wealth of integrity and decency towers over your trinkets of gold."
I am simply pointing out CR's deficiencies. Anyhthing wrong with that?
I don't disagree with most of the things CR says, but sionce others are reluctant I take up the slack in pointing out CR's serious problems.
Forecasting a storm after it has already passed by would be considered pathetic weather forecasting, no? Similarly, forecasting a recession after it has been confirmed is a very bad habit that economists develop.
CRs grossly wrong estimate of the actual housing demand is extremely serious, especially, because he ignored the actual data from Census.
CRs belief that CRE is nor as overbuilt is based on assuming no recession and definitely no depression during 2008-10. Making bad assumptions lead to all kind of bas forecasting.
Jas
PS: Are there cowards here who make comments on someone without really saying who they are commenting on? Disgusting people.
Misean | 01.21.08 - 4:20 pm |
Cobradriver,
Erm?
Cheers,
Misean | 01.21.08 - 4:20 pm |
Well above was supposed to say...
Even though Florida RE is totally hosed,one good thing is concealed carry. As prior military I did the paperwork,pics and sent it all off and had a permit in 11 days. Best part...now when I travel the state and hit up pawn shops I can walk out with the gun at the time...No wait. It sucked finding something really nice and having to drive all the way back 3 days later.
Oh,one other thing...Dillon 650,doesn't save any money cause ya just shoot more(1-3k rds month for me).
Chris
tj,
"rcryan,
You blew it when you stated gold was a commodity."
Weeeelll blew it is a bit strong. But it goes to show the understanding of gold AND silver's role in history.
~200 years of fiat vs 1000's of years.
I'll take 1000's. Oh look...so I have.
Cheers,
"in retrospect i'm kicking myself for closing out 40% of my shorts last Th tho i still have massive dollar amts short for tomorrow."
Idoc, don't feel too bad, I did the same thing and so, I gather, did quite a few others short the market. It was a matter of risk control, and you can't fault yourself for that. Plenty more opportunities will present themselves this year -- tomorrow, sit back and watch the fireworks.
My comment from earlier today "If we can forgive 3rd world debt why can't we forgive the debts of Americans?" has been the subject of some humorous commentary. Thanks for that.
Talk of stimulus, rate reset freezes, and moratoriums on foreclosures are not going to help solve the problem. Can't make your house payment, here is $1600. Go buy a new plasma TV.
Re-organization under bankruptcy is only way to manage the damage.
Definition of a write-down: Reducing the book value of an asset because it is overvalued compared to the market value.
You banker types like to call it "loss mitigation" or maybe a "work-out".
Sort of like debt forgiveness don't you think?
Hey I think I got a merit badge!
To any who would conjecture:
Would ANY size cut tomarrow be enough to reverse this trend or would it be a temporary bandaid?
P.S I am thoroughly enjoying the input from everyone ...as scary as it may be
Just to play devil's advocate: What would be needed to trigger a massive short squeeze on tuesday?
Jim: "RCA bought at the top in 1929 did not recover ,adjusted for inflation, until the late 1990's and then only because RCA shares were swapped for GE shares."
Good point. Also note that RCA was the 'Google' of its day.
Why not look at the SPX 500 instead or the NDX. The Dow captures so little. In the Great Depression the market fell and then recovered and with that first fall everyone poured into real estate which soared. Two years later the stock market fell again and this time the housing market crashed with it.
This time the same thing happened but it took an extra three years before the two (stockes/RE) took eachother under.
--
CR: "IvyLeague, the stock market is worthless as a predictor of recessions. It is a conincident indicator for economic downturns (it does lead recoveries)."
Are we being loose with the facts, CR? There is approx. a 3-6-monnth lead-time. It is true that in every economic cycle there are usually two Scam Market cycles, but this is not a hard and fast rule. So, there are Scam Market downturns, roughly half of them, that are not related to economic downturns and are more due to speculative excesses.
"The stock market is" A FAR SUPERIOR "predictor of recessions" than economists! Samuleson was being dishonest when he quipped, Stock market has predicted 9 of the past 5 recessions. He didnt say that economists have predicted none of the past 5 recessions. Dishonesty is very common among economists on the subject of recessions and depressions. They must be ignored.
Jas
god i just wish they'd spend $150 billion on a new energy initiative or better transportation or something freaking USEFUL!!
"There are leaders and then there are followers. Herd likes to follow the herd."
Jas,
Why don't you start your own blog and see if anyone shows up? Then you could talk to yourself endlessly and convince yourself you are right.
"CR's work is never meant to guide your investment, jass"
And what gives a jackass like you the idea that I would use CR's work to guide my investment? Am I here to learn ways to lose money? CR knows very little about anything that is useful for investing.
Jas
IMHO ultimately, I think that while how far down is an important call, how LONG will clearly be the most difficult and therefore the most critical of calls for this bear market.
There are going to be many false dawns that not only will grind down bulls but disilluion the bears. At the end of it, stocks will revert to being a game played by the relative few, shunned and despised by the public at large, with both bulls and bears bereft of profits.
Look at the Nikkei- 39k in 89/90 followed by a looooooonnnggg painful decline, then a decent bounce and here in 2008 selling off substantially again. Was that bubble any less damaging than the US RE/Stock/Credit bubble? Lots of confidence and capital has yet to be destroyed in this downturn. The bottom will be no less than 40% from the highs.
Long bicycles , aspirin and maloxx. Short Porsche, ToysRus and Tiffany's.
Regarding the price of Gold, my understanding of its price decline today was that its been a safe harbor for those who thought the market inflated. Some folks have moved from Gold to equities today thinking they have spotted an opportunity.
Jas,
Have you ever bought an expensive piece of art without regard for its investment value?
Helps to remember that bear markets bottom around 6x earnings, and at the bottom of the market there aren't much for earnings.
Tactical Flashlights
r c helicopter