Will the DJIA drop below 10,000 This Year? (10/6 Update: Welcome back, 2004!)

[quote name='BillyBob29']I'm not saying we aren't going through some very difficult times but how does a 2-3 year downturn, or even stretching it out and saying 10 years bubbles and busts that have returned us to 97-98 levels = 100 year failed experiment?[/quote]

I would say the latest downturn shows us deregulation can be abused.

The whole system broken? Nope.

The whole system damaged by overvalued property and risky investments? Yep.
 
[quote name='speedracer']Aside from the ginormous body of evidence other than the Dow that supports that hypothesis, the Dow is certainly a symptom. Don't you think?[/quote]

I don't think you understand economics. Or, more to the point, I don't think you know what the Dow is.
 
[quote name='BillyBob29']I'm not saying we aren't going through some very difficult times but how does a 2-3 year downturn, or even stretching it out and saying 10 years bubbles and busts that have returned us to 97-98 levels = 100 year failed experiment?[/QUOTE]
Because I don't think it's reasonable to call this a part of the normal wax and wane of the market. This was the specific ignoring of risk, huge ridiculous risk, to make a quick profit at the obvious detriment of the capital holders. I'm not saying we won't rise again.

Capitalism at its essence is the management of risk. When you remove risk from the equation and socialize losses, you are a socialist. There are two reasonable conclusions to draw from this exercise:

1. Entities involved cared only for their own short term gain and acted with no fiduciary duty to the capital stakeholders. That is an abject failure of capitalism, and this is on a massive enough scale that we have to reappraise virtually all of capitalism, including limited liability and the act of accounting if we truly want to reform, or:
2. Entities involved priced the risk correctly if they assumed they would be saved by the government. In which case they acted as if we are socialists and are therefore thieves and criminals.

So, was it #1, as seen in exhibit A and B:
"Expect fallout, expect foreclosures, expect horror stories," California mortgage lender Paris Welch wrote to U.S. regulators in January 2006
Click to expand...
"An open market will mean that different institutions will develop different methodologies for achieving this goal," Joseph Polizzotto, counsel to now-bankrupt Lehman Brothers, told U.S. regulators in a March 2006.
Click to expand...
Translation: Don't even think we aren't going to make our bonus this year.

Or #2, as seen in now bankrupt exhibit C and D:
"These mortgages have been considered more safe and sound for portfolio lenders than many fixed rate mortgages," David Schneider, home loan president of Washington Mutual
Click to expand...
"It is not our role to be the regulator for the third-party lenders," wrote Ruthann Melbourne, chief risk officer of IndyMac Bank.
Click to expand...
Right. Only to profit from them, Ms. Melbourne.
Link the story about how bad they f'ed up here
[quote name='DarkSageRK']I don't think you understand economics. Or, more to the point, I don't think you know what the Dow is.[/QUOTE]
Mmmmmmmmmmmmok.
 
I understand what you are saying, and for the most part I agree, but I still don't see how this crash means the "100 year experiment" has failed. I think it far more accurate to say our 20 year experiment in completely unchecked capitalism is a failure.

Again, our problems come directly from actions we have taken over the past 10-15 years. To throw out 100 years worth of progress because of 10-15 years of trouble would just be crazy.
 
So, the question today won't be *will* we go back below 8,000, but *how far below 8,000* will we go?

I predict a close of 7,700, give or take 35 points.
 
[quote name='mykevermin']So, the question today won't be *will* we go back below 8,000, but *how far below 8,000* will we go?

I predict a close of 7,700, give or take 35 points.[/QUOTE]
Sure, I like horses. I think the Dow will wait another day or two to *finish* under 8k as people fight the thought of it.
[quote name='BillyBob29']I understand what you are saying, and for the most part I agree, but I still don't see how this crash means the "100 year experiment" has failed. I think it far more accurate to say our 20 year experiment in completely unchecked capitalism is a failure.

Again, our problems come directly from actions we have taken over the past 10-15 years. To throw out 100 years worth of progress because of 10-15 years of trouble would just be crazy.[/QUOTE]
I think it depends on whether you think it's a structural issue or not. I think finding new and creative ways to hide shit on your balance sheet is the new real business. I think it's now a part of business DNA. I think the collective "they" will just scour the earth looking for the next cheap, low regulation economy to knock over while we recover. In 20 years (or 10, or how long since Enron??) they'll come back for their pound of flesh and suckle till they knock us down again. Again and again.
 
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[quote name='mykevermin']So, the question today won't be *will* we go back below 8,000, but *how far below 8,000* will we go?

I predict a close of 7,700, give or take 35 points.[/quote]

Today, tomorrow or whenever's close isn't the big deal.

The bigger deal is the actual bottom of the market.

7,000 - No worries.

6,000 - Hmm, perhaps I won't buy a newer car for a while.

5,000 - Maybe I can't the personal loan to cover the loss from the sell of my house.

4,000 - Hey, kids! Let's try out that new soup kitchen. Remember, Saturday is stand in line all day at the food bank day.

3,000 - That gang leader with a steel hockey mask is recruiting again.

EDIT: The one blessing in all of this is the extremely low gas prices since this summer. If my cars didn't incur $100-$200 in car repairs every month we did our long commutes and everybody in the Middle East didn't have a hardon to get oil north of $100 a barrel again, I would move back to my house and start paying down debts.

My realtor says I have to drop the price on my house again to get it to move by February. I would be upset, but EVERYBODY selling a house is in the same position as me. If somebody takes $10K out of my hide when I sell, I'll just pay it forward.
 
Capital is going to be tied up for at least a couple of years, and will inevitably overtighten before it cleans its act up again. The question is how long will we go before we see the liquidity of today again? If you think it's going to be a long damn time, drop the price and get the hell out of the way.
 
i think im going to be taking all of my cash out of my broker account around xmas when my 41k in cds roll over..

2 month CD only gets like 1.6% now total BS 54.66 per month it draws

when it was 5.25 was almost 180 per month

just think of all of the people who got cars last year and took the 2 year gas at 2.99 instead of the rebate

man they got #$#$#$#

local bank offers a 6 month CD at around 4% and might just go there
 
[quote name='slidecage']
just think of all of the people who got cars last year and took the 2 year gas at 2.99 instead of the rebate
[/QUOTE]

I was thinking about that the other day. Not only did they screwed on the "gas savings" but due to the problems in the auto industry, resale values have plunged and average depreciation rates have gone up dramatically so a large % of these auto buyers are upside down on their cars, even if they put 10% down.

I was also thinking about all those people that ran out to buy hybrids and paid premiums of $3-$5k over sticker.
 
[quote name='slidecage']i think im going to be taking all of my cash out of my broker account around xmas when my 41k in cds roll over..

2 month CD only gets like 1.6% now total BS 54.66 per month it draws

when it was 5.25 was almost 180 per month

just think of all of the people who got cars last year and took the 2 year gas at 2.99 instead of the rebate

man they got #$#$#$#

local bank offers a 6 month CD at around 4% and might just go there[/quote]

The best place to put your money is canned beans, soup, any unsecured and any secured debts. There is going to be some inflation coming in 2009. When inflation hits, the interest on that debt is going to jump. Food? Prices may or may not go up, but canned food prepared at home is usually cheaper and healthier than any restaurant fare.
 
[quote name='DarkSageRK']So your point is that capitalism fails because... the Dow is low? All right, enjoy your Venezuela.[/quote]

No. The Dow is just an indicator. For the record, Venezuela isn't anything I'd enjoy.
 
[quote name='mykevermin']So, the question today won't be *will* we go back below 8,000, but *how far below 8,000* will we go?

I predict a close of 7,700, give or take 35 points.[/QUOTE]
This is also the same reason why I don't buy lotto tickets. I know I theoretically have a chance to win, it just never quite comes out that way.
 
[quote name='GuilewasNK']No. The Dow is just an indicator. For the record, Venezuela isn't anything I'd enjoy.[/QUOTE]

Yeah but... if I heard correctly, Venezuela has had more Miss Universes than any other country....
 
[quote name='thrustbucket']Yeah but... if I heard correctly, Venezuela has had more Miss Universes than any other country....[/quote]

Yeah, but I wouldn't want to try nailing all that Universal ass with FARC running around.


Besides, my favorite beauty contestant ever is Miss Angola Micaela Reis. :drool:
 
[quote name='fatherofcaitlyn']I can't believe that recession is already over.[/QUOTE]

WTF makes you say that? All the reports such as job reports and export/import are still not going well and the dow ended down 2% today.
 
[quote name='MSI Magus']WTF makes you say that? All the reports such as job reports and export/import are still not going well and the dow ended down 2% today.[/quote]

A desire to be sarcastic towards speedracer.

"What a long strange trip it(has) been" would suggest said trip is over.

Yeah. We're not done falling yet. We're just bouncing off of some ledges on the way down.
 
[quote name='fatherofcaitlyn']A desire to be sarcastic towards speedracer.

"What a long strange trip it(has) been" would suggest said trip is over.

Yeah. We're not done falling yet. We're just bouncing off of some ledges on the way down.[/QUOTE]

Was going to say you would be pretty stupid to say this is over already.
 
I don't think we're going to hit a depression. Well, unless something horrible happens that just destroys the morality of the country in a flash.
 
So what are the chances that this thing will end by mid 09? Secondly will this be a fast or slow recovery (that might not be the right word to use for this situation) I have never lived through a recession the I remember.
 
[quote name='cindersphere']So what are the chances that this thing will end by mid 09? Secondly will this be a fast or slow recovery (that might not be the right word to use for this situation) I have never lived through a recession the I remember.[/QUOTE]

I am no economic major but just from watching things unfold and listening to various people it seems like the most popular guess and probaly a good one is late 09 is the average guess for when things start to turn around but it might take till early 2010. At the same time as far as turn around no probably not immediate but several years. Who knows though, Obama is investing some SERIOUS money into the economy and not by stupidly giving it to us to spend/hoarde but actual investment. Maybe it will actually do what its supposed to do and turn us around or send us into a boom late next year vs taking several years.
 
I've been thinking what I am going to do next.

As my personal economic situation improves, I am not going to put any additional money (beyond what my company matches) towards my 401K until the Dow hits 14K again.

I'm going to put my money on debts first, a 6 month emergency fund second and my next mortgage third.

My reasoning is that it is better to go after the guaranteed return on investment than risk anything in this market.

I know this is all obvious, but it really needs to be put out there.
 
[quote name='fatherofcaitlyn']I've been thinking what I am going to do next.

As my personal economic situation improves, I am not going to put any additional money (beyond what my company matches) towards my 401K until the Dow hits 14K again.

I'm going to put my money on debts first, a 6 month emergency fund second and my next mortgage third.

My reasoning is that it is better to go after the guaranteed return on investment than risk anything in this market.

I know this is all obvious, but it really needs to be put out there.[/QUOTE]

I have gone back and forth on all this but personally I am thinking that me and my fiancee are 26 and 24 that we should probably take a little risk right now. Not huge risk......but keep matching her 401k at work and investing $200-$500 here and there into her IRA.
 
[quote name='fatherofcaitlyn']I've been thinking what I am going to do next.

As my personal economic situation improves, I am not going to put any additional money (beyond what my company matches) towards my 401K until the Dow hits 14K again.

I'm going to put my money on debts first, a 6 month emergency fund second and my next mortgage third.

My reasoning is that it is better to go after the guaranteed return on investment than risk anything in this market.

I know this is all obvious, but it really needs to be put out there.[/QUOTE]

Definitely a good idea to pay off debts, build up savings etc. before investing. But when you get that done don't necessarily wait until the Dow is back up to 14,000.

The goal in investing is to buy low and sell high. Ideally what you'd do is try to find the time when the stock market is going to begin a steady rise bacu up to 14,000 then you profit off that rise. But of course there's no sure fire way to know if any rise that starts occuring will be a prolonged trend of if their will be another bust--hence the inherent risk that's always present in investing.

But if you wait for it to get back to the top, then likely at that point growth will slow down and you won't earn as much on the investment.
 
[quote name='fatherofcaitlyn']I've been thinking what I am going to do next.

As my personal economic situation improves, I am not going to put any additional money (beyond what my company matches) towards my 401K until the Dow hits 14K again.

I'm going to put my money on debts first, a 6 month emergency fund second and my next mortgage third.

My reasoning is that it is better to go after the guaranteed return on investment than risk anything in this market.

I know this is all obvious, but it really needs to be put out there.[/QUOTE]

Paying off debt is always a good idea but waiting until the Dow hits 14k again??? That is just completely backwards. You will basically be waiting for the Dow to double from its most lows before you get back into the market again. I guarantee you that will result in you missing the vast majority of the gains from the next bull market, whenever it comes around. You will basically be buying at the top....again. There is going to be a ton of resistance at the 14-15k area on the Dow due to recent top and hard reversal from that area last year.

Of course there is a great deal of risk out there now, there always is after market crashes but there is absolutely no debate that buying after market crashes is historically the very best to buy stocks.

Of course there is no way to know that this crash is over. We could very well just be resting before we make another huge plunge after the new year but if you average in to something easy, like an S&P fund or even just the SPY, then history tells us you will be sitting pretty in a few decades. I think you would be foolish to be investing aggresively at this point but if you are a long term investor with a 20-30 time horizon then you should be dipping in to long term value and growth plays and continuing to build positions in them over the quarters to come if they continue to drift lower.
 
[quote name='BillyBob29']Of course there is no way to know that this crash is over. [/quote]

It isn't.

GM, Chrysler, AIG and many banks aren't going to be the same animals this time next year.

We could very well be looking at a "lost decade". If it takes 10 years to reach 14k again, that rate of return is barely better than paying off your mortgage ahead of schedule.

I understand the market has regained 1000 points from its low, but this market is on life support. The government is using every trick in the book and making up a few new ones just to keep this market looking as good as abysmal.
 
I agree. I was just commenting on how it would be a mistake to wait until the market is almost back to its all time highs before getting in again, that would just be asking to be left holding the bag.

Also, it may end up being a lost decade for long term, buy and hold, investors but this market is absolutely fantastic for active traders like myself. There are plently of gains to be had.
 
The market will look healthy again when it hits 10k, maybe 10.5k. The only question is how long that will take. When it hits 10k, people will begin to sigh of relief and start spending again. There's just something special about a 5 digit Dow Jones (To the left of the decimal point) that makes people wanna spend.
 
People won't give a damn about where the markets are if they don't have jobs.

Yes, there is a connection between stock market performance and consumer spending but that connection is about 1000x times stronger between consumer spending and the job market.
 
[quote name='dmaul1114']DIJA had a pretty solid week, was up 258 yesterday to close at 9,034.69.[/QUOTE]

Ya its up like 6% today alone last I looked. Crazy....again makes it so hard to decide between investing and saving in case of job lose. Now with Christmas over we are buckling down for winter and heavily curtailing our spending. Hopefully by the end of this month we will have about $4,000 in the bank(half a year or mores bills can be payed with that and we are already payed off on rent till March)so ill probally start dumping money into my IRA. Anyone know when the new finacial year for an IRA starts? Just want to know how long I have to hit that $2,000 a year limit.
 
[quote name='MSI Magus']Anyone know when the new finacial year for an IRA starts? Just want to know how long I have to hit that $2,000 a year limit.[/quote]

You can contribute to last years IRA up until April 15th of this year. You can contribute to this years IRA now.

I'm not sure if you're aware, but the limit on an IRA is $5000 for 49 and under, $6000 for 50 and up.

Edit: MSI, what are you talking about the market being up 6% today alone. The market isn't open on the weekend.
 
[quote name='dmaul1114']It was up 258% Friday, but that was just 2.86%, so not sure where he got 6% from.[/QUOTE]

Sorry got it from nytimes main page and forgot its Saturday. Fiancee is home from work for vacation for the last 2 weeks and its tossed my routine off and made me lose track of days(as well as not check the news daily).
 
Stocks are super cheap right now from a fundamental analysis perspective. There are rock solid blue chips at bargain prices, especially if you take into account their dividend yields. Stocks like MO, PFE, GE, DOW etc have dividend yields heading into the double digits in some cases which I suspect will become more attractive to investors as interest rates drop. However, as crazy as the market behaved last season, who knows what will happen but in the long run, the market will eventually recover. The absolute wrong thing to do would be to stop contributing to your 401k at this point.
 
Yes, the market has been rallying since late Nov but it has been on pathetic volume. So far this is the very definition of a bear market rally, a light volume retracement to heavy resistance. There is no conviction to this rally, there is no strong buying just an absence of strong selling or shorting.

I personally think we are set up for a Jan rally that takes us up to the 1000 area on the S&P. Then Obama takes office and we "sell the news" and look to retest the November lows sometime in late Q1 or Q2. This rally off the Nov lows started when Obama began announcing his plans, that was the "buy the rumor" play. Now when these plans are officially put in place, these trades will be unwound and profits will be taken.

I will agree that many stocks are cheap when looked at through a fundamental perspective and with a 5-10 year time horizon. However, earnings expectations for 2009 are still way to high. The street is still expecting S&P earnings to come in around the $80 range and that isn't going to happen. Those estimates are going to come down and that is going to put pressure on multiples. The market is really only "cheap" on a valuation perspective when you consider current prices and use the $80 S&P earnings estimate for 09. When you bring that number down to more realistic levels, the market doesn't nearly as cheap at current levels.....especially considering that we have already rallied about 20% off the November lows.
 
I was watching Squawk Box last week like always. Those people were too chipper.

And, of course, the market went up on no real positive news.

For a moment, I almost reconsidered whether my earlier statement of avoiding the market was still correct.

Then, the local economic report might as well have been given by somebody dressed as the Grim Reaper.

I'm sure we can have a nice artificial recovery backed by the government for the next month or so. However, I can't see anything sustainable while there are net job losses in the millions and several gigantic companies are receiving "loans" to stay alive.
 
[quote name='fatherofcaitlyn']I was watching Squawk Box last week like always. Those people were too chipper.

And, of course, the market went up on no real positive news.

For a moment, I almost reconsidered whether my earlier statement of avoiding the market was still correct.

[/quote]

That's part of your problem right there. If you get your financial input from Squawk Box, it's no wonder you have a skewed view of the market. They're a joke.

The market "went up" on very low volume. Good news or bad wouldn't have mattered considering the volumes for the past two weeks.

If you have time to buy and hold, and do so smartly, you stand to come out quite well.
 
[quote name='mtxbass1']
If you have time to buy and hold, and do so smartly, you stand to come out quite well.[/QUOTE]

Yep. You want to buy low and sell high, so now's a pretty good time to buy. I doubt will see any huge drop offs, probably just bounce around from 7500-9500 or so for the next year. So it's a good time to buy in, and hold stuff for a while--especially if you're young.
 
[quote name='fatherofcaitlyn']I was watching Squawk Box last week like always. Those people were too chipper.

And, of course, the market went up on no real positive news.

For a moment, I almost reconsidered whether my earlier statement of avoiding the market was still correct.

Then, the local economic report might as well have been given by somebody dressed as the Grim Reaper.

I'm sure we can have a nice artificial recovery backed by the government for the next month or so. However, I can't see anything sustainable while there are net job losses in the millions and several gigantic companies are receiving "loans" to stay alive.[/QUOTE]

Everyone is too positive. We went from "the financial world is imploding" in mid November to "we are starting the next upturn" over a matter of about a week. Overall sentiment is way too bullish. Current readings show it back above 65 already. The majority of the street is expecting 09 to 15-20% return year and that is just way to optimistic, IMO.

Don't get me wrong, I would love to see a nice upturn this year and we have actually created a nice short term technical series of higher highs and higher lows, but I just don't think this downturn is anywhere close to being done.
 
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