The ongoing financial turmoil and financial discussion thread

[macker]

Originally Posted by Glenflame

Why nobody mentioned Buffett is getting caught by buying Bank of America, GE, and etc.?

He paid 4-6 times of current value of Bank of America.

__________________________________________________ _____________

Between that and him losing over a billion last year shorting the US dollar vs the Euro he shows us that even he isn't perfect!

[macker]

If you want to follow to see who is buying what these sites are quite informative :

http://www.gurufocus.com & http://www.stockchase.com

[pepper24]

Originally Posted by MoneyGuy

I think the economy will start to improve near year end. The market tends to lead the economy by about half a year. I think young folks with lots of years who are talking GICs or going into cash for a couple of years are crazy. When the market recovers, it tends to make up a third of what was "lost" in the downturn within the first 40 days of the recovery. I don't think the recovery will happen immediately but I would DCA in over 2-4 months, so that in four months your fully invested.

Great advice. A young buck like myself (late 20's) has been doing this with a long term focus and it's great to hear others agree.

[Claeren]

I was sitting with someone who felt themselves quite knowledgeable on such matters at a party on last Sunday night who felt the worst was over and the recovery was well on its way (with oil prices to boom in a couple months). I laughed and said I had a feeling the DOW was heading below 7300 (a mark I mentioned about 4 months ago?) and would likely get below 7000 before a recovery ever happens. He thought I was crazy..... haha


The scary part to me is that STILL the following things are true, all themes I mentioned in late summer and fall when this all started:

1) Stimulus will fail. It is being directed at 'solving the symptoms' not 'solving the problems'. Deficit funded tax cuts are about the worst thing to do for a stimulus in this situation and corporations and the finance industry are not being forced into tough decisions, just easy ones. So when they get around to actually solving the problems they will have already wasted $3 Trillion (or more?) dollars -- just having thrown it at the corrupt people who CAUSED the problem in the first place, leading to problem two:

2) The banks will need to be nationalized. Japan waited 10-12 years and wasted Billions and Billions fighting nationalization before they finally gave in and did it. When other smaller countries (like S.Korea) had banking corruption/failures the American government always said they had to nationalize and restructure their banks before they could receive aid, yet here they are fighting their own nationalization every step of the way. Likely because those who must do the nationalizing are such good friends with those who would be nationalized out of their wealth.

3) American auto industry will collapse. And this means the collapse of the industrial base of the Unitd States. This has been partially priced in to a 7300 point market but I think the actual reality of this situation, with GM and Chrysler on the brink, is that the market is scared to even contemplate what full collapse means, largely due to point 4:

4) America does not produce anything anympre. After Boeing, Caterpillar and arms sales it starts to get pretty lean. Service Industry is the only area creating meaningful jobs now that the (false) job producing finance industry has collapsed. Not sure how long one stays a super power when burgar flippers and coffee pourers are your top new jobs?


The market cannot recover until America once again is producing something the world needs more of (other than bad banking advice), has nationalized their banks and dealt with the massive income gap/corruption at the top of corporate America, and likely spent $5-$10 Trillion doing so.

^ Has the market priced in that reality? I am not sure it has.... ??



The scary thing to me is that currency markets are still the wild card. Does the USD collapse? Do other world nations simply do a mass devaluation to match that collapse? Do other major currencies drop while the fearful hold up the USD longer than they should? Does the Loonie collapse (as reality that Canada is no better off than America but lacks the stability that US tresuries represent)? Does the ponzi scheme that is world finance collapse completely before nationalization starts? Who knows....


I stand-by my original advice that there is nothing wrong with (poor-to-normal) people staying completely in cash. There is a good chance you (or members of your family) are going to lose your job, something more people probably realize than the first time I wrote it. And if they don't lose their jobs there will be plenty of chances to spend/invest that money later on into this mess....




Claeren.

[Glenflame]

Originally Posted by Claeren

I was sitting with someone who felt themselves quite knowledgeable on such matters at a party on last Sunday night who felt the worst was over and the recovery was well on its way (with oil prices to boom in a couple months). I laughed and said I had a feeling the DOW was heading below 7300 (a mark I mentioned about 4 months ago?) and would likely get below 7000 before a recovery ever happens. He thought I was crazy..... haha


The scary part to me is that STILL the following things are true, all themes I mentioned in late summer and fall when this all started:

1) Stimulus will fail. It is being directed at 'solving the symptoms' not 'solving the problems'. Deficit funded tax cuts are about the worst thing to do for a stimulus in this situation and corporations and the finance industry are not being forced into tough decisions, just easy ones. So when they get around to actually solving the problems they will have already wasted $3 Trillion (or more?) dollars -- just having thrown it at the corrupt people who CAUSED the problem in the first place, leading to problem two:

2) The banks will need to be nationalized. Japan waited 10-12 years and wasted Billions and Billions fighting nationalization before they finally gave in and did it. When other smaller countries (like S.Korea) had banking corruption/failures the American government always said they had to nationalize and restructure their banks before they could receive aid, yet here they are fighting their own nationalization every step of the way. Likely because those who must do the nationalizing are such good friends with those who would be nationalized out of their wealth.

3) American auto industry will collapse. And this means the collapse of the industrial base of the Unitd States. This has been partially priced in to a 7300 point market but I think the actual reality of this situation, with GM and Chrysler on the brink, is that the market is scared to even contemplate what full collapse means, largely due to point 4:

4) America does not produce anything anympre. After Boeing, Caterpillar and arms sales it starts to get pretty lean. Service Industry is the only area creating meaningful jobs now that the (false) job producing finance industry has collapsed. Not sure how long one stays a super power when burgar flippers and coffee pourers are your top new jobs?


The market cannot recover until America once again is producing something the world needs more of (other than bad banking advice), has nationalized their banks and dealt with the massive income gap/corruption at the top of corporate America, and likely spent $5-$10 Trillion doing so.

^ Has the market priced in that reality? I am not sure it has.... ??



The scary thing to me is that currency markets are still the wild card. Does the USD collapse? Do other world nations simply do a mass devaluation to match that collapse? Do other major currencies drop while the fearful hold up the USD longer than they should? Does the Loonie collapse (as reality that Canada is no better off than America but lacks the stability that US tresuries represent)? Does the ponzi scheme that is world finance collapse completely before nationalization starts? Who knows....




Claeren.

In the current market, most so called "experts" look like idots.

I agree to most points.

1. Some banks including Bank of America and Citi will collapse without further help and it is not surprising to see they need hundreds of billions more before stabilizing. This is why they have to be nationalized (their net value is minus due to CDS).

2. In theory US dollar will be significantly devalued due to the fact that they have to print more paper to hand out the stimulus funds. However, other countries will be facing similar troubles so it will be balanced between different currencies. Huge inflation will be coming after economical stabilization as the printed paper without backup(gold was strong backup for US dollar in history).

3. This recession could be extended into depression, which fortunately won't be as bad as 1930's. Don't trust those experts who claim this recession will be over before the end of this year. Be ready for a bigger shock later this year.

[Slava]

Well I've been labelled as a perma-bull before, so I might as well wade in here again. These re-tests of the market lows are not unexpected at all. Actually this has happened historically a number of times and certainly does not mean that we are heading to zero faster than we are heading back to 15,000 points.

Most of the trading that brought us back to 9000 points in Canada was on low volumes and not broad-based at all. In other words, it was a foregone conclusion that it wouldn't last. Again this is not saying that we are doomed to ten years of this, or even that we are definitely headed for a depression. It means that the thin volumes that pushed the market to 9000 points collapsed and once the institutional investors start moving money in here the tide changes on the stock market.

None of this is to imply that we won't suffer economically over the coming months; far from that things will be painful. But the stock markets will recover in the midst of this. The news will be bad and yet the markets will gain ground almost in spite of the continued bad news.

[metal_geek]

Originally Posted by Slava

Well I've been labelled as a perma-bull before, so I might as well wade in here again. These re-tests of the market lows are not unexpected at all. Actually this has happened historically a number of times and certainly does not mean that we are heading to zero faster than we are heading back to 15,000 points.

Most of the trading that brought us back to 9000 points in Canada was on low volumes and not broad-based at all. In other words, it was a foregone conclusion that it wouldn't last. Again this is not saying that we are doomed to ten years of this, or even that we are definitely headed for a depression. It means that the thin volumes that pushed the market to 9000 points collapsed and once the institutional investors start moving money in here the tide changes on the stock market.

None of this is to imply that we won't suffer economically over the coming months; far from that things will be painful. But the stock markets will recover in the midst of this. The news will be bad and yet the markets will gain ground almost in spite of the continued bad news.

How can the markets recover any time soon when alot of companies that have slashed projections, are still missing them low. Untill companies start meeting projections I see nothing but more and more bad news. Nobody knows where the markets are gonna stop, but when they do it will likely only be a true reflection of the value and potential of the companies that make it up.

With a heavily debt laiden consumer base, the excess spending and market share potential driving huge profits and stock values is gone for a while. I think the markets will bottom out and stay there with little volatility for a long time.

Where is the money from institutional investors gonna come from?... Credit? Leveraging their assets? Sure there is cash around but without the "mistakes" and "creative financing" (we're only just starting to pay for) to fuel the market there is no way it goes back to anywhere near what it was at it's peak...

The average person will need to have their house in order before the market sees any real positive movement. For sure the market will move before the average person sees the end, but things have only just started to get bad, and there is a long way to fall yet. We're only 2 months from the foreclosure starting to hit Canada, and we'll see what that does to the average Canadians bottom line, consumer confidence, jobs and earnings projections...

[Nancy]

Well, seems we are all bad-newsed-out when today passes without comment in the face of news like "Major stock market indexes fall to 1997 levels."

http://finance.yahoo.com/news/Major-...-14445908.html

Here is my graph of the day:


http://dshort.com/charts/bears-nomin...alternate-real

[Slava]

Originally Posted by Nancy

Well, seems we are all bad-newsed-out when today passes without comment in the face of news like "Major stock market indexes fall to 1997 levels."

http://finance.yahoo.com/news/Major-...-14445908.html

Here is my graph of the day:


http://dshort.com/charts/bears-nomin...alternate-real

If that is your graph then I've been an avid reader of your site for a long time!

[Daradon]

Is anyone else getting some sick pleasure out of watching the markets continue to drop? It's almost like we're past the pain (numb to it), now I just wanna see how low it goes.

[Slava]

Originally Posted by Daradon

Is anyone else getting some sick pleasure out of watching the markets continue to drop? It's almost like we're past the pain (numb to it), now I just wanna see how low it goes.

A) No.

B) I still think that we are close to a bottom, so enjoy it while you can! (Hopefully I'm right)

[Daradon]

Lol, I know it's an obvious problem for those CLOSE to retirement. A huge problem. But for everyone else 2 things will happen. It will eventually recover, or it will never recover. Not much point worrying about it.

You've been saying it was near the bottom for about 1500+ points now... I dunno anymore.

[Slava]

Originally Posted by Daradon

Lol, I know it's an obvious problem for those CLOSE to retirement. A huge problem. But for everyone else 2 things will happen. It will eventually recover, or it will never recover. Not much point worrying about it.

You've been saying it was near the bottom for about 1500+ points now... I dunno anymore.

Well in my other thread where I predicted I said that the bottom would likely be 7500-7700 in Canada. I still think that people who bought at 9000 will be thrilled with those purchases in 5 years...but still for the sake of the average guy I do hope that the recovery is sooner rather than later.

[Displaced Flames fan]

I have a modest 401K. It lost more money last year than 10% of my income could toss into it. I continue to buy shares each pay period and I think, in the long run, it will end up paying off nicely with all of these low priced shares I'm picking up now.

[Glenflame]

Originally Posted by Daradon

Lol, I know it's an obvious problem for those CLOSE to retirement. A huge problem. But for everyone else 2 things will happen. It will eventually recover, or it will never recover. Not much point worrying about it.

You've been saying it was near the bottom for about 1500+ points now... I dunno anymore.

People keep saying it is the bottom from 12000 to 7xxx.

[macker]

http://www.reuters.com/article/polit...e=politicsNews

Paul Volcker's comments are the equivalent of having Mike Keenan saying our team sucks and we won't get out of the first round Sometimes you need to keep your honesty to yourself!

[Daradon]

Originally Posted by Displaced Flames fan

I have a modest 401K. It lost more money last year than 10% of my income could toss into it. I continue to buy shares each pay period and I think, in the long run, it will end up paying off nicely with all of these low priced shares I'm picking up now.

That's the way to do it, you'll probably be laughing in 5-10 years.

As for the trend, I dunno, I'm hoping this whole economic downturn will get people to see how serious the problems are facing the world. Time to rethink the way we do a LOT of things. I know people say the best time to worry about things like pollution and such is when we have money to tackle these problems, but the truth is, it just doesn't happen. People get to complacent when things are going well. However it's during times of hardship and turmoil that people come together to help out, outdated institutions and ideas are gotten rid of, people try to build things better than they way they were before.

[I-Hate-Hulse]

Originally Posted by MoneyGuy

I think the economy will start to improve near year end. The market tends to lead the economy by about half a year. I think young folks with lots of years who are talking GICs or going into cash for a couple of years are crazy. When the market recovers, it tends to make up a third of what was "lost" in the downturn within the first 40 days of the recovery. I don't think the recovery will happen immediately but I would DCA in over 2-4 months, so that in four months your fully invested.

With all due respect to MoneyGuy's here - I'm going to disagree here. DCA is fine, but I think it's over a much longer time horizon, depending on when you think things will bottom out. Personally, it's at LEAST another 6-9 months out. Buying into the market before Q1 and Q2 numbers are released this year is pretty much signing yourself up for a loss IMHO. I'm not the bear Claren is, but I'm certainly bearish on the next 9 months. At least. We're in it deep kids.....

My recommendation: Make the contributions, but hold them in cash. I've got mine in a combination of Money Market / High interest savings that I can sell and deploy into the markets within a week's notice.

There's no point trying to catch a falling knife....

[Slava]

^ I know what you are saying here. In the 74-75 though the markets began their uphill climb with a lot of bad news at the same time in the media. (There is a great graph on the dshort site that nancy linked earlier as well). Because when we are in a bear market all of the news is bearish, most investors miss that initial upswing.

[Nancy]

Originally Posted by Slava

If that is your graph then I've been an avid reader of your site for a long time!

Ahem, "here is a graph of the day..."