Dow Back below 8000

I meant DOW BACK BELOW 9000

mh23 - you wont believe me if I told yo what i did past 4 trading days

"for investors that have cash that they can put to work"

Need money to make it.

urbandigs, you really can't leave us hanging like that!

Whatever's left in the stock market I'm keeping there. In the meantime, I have a year's worth of cash saved up. I lived through 1987 and this is no 1987 - from a market perspective it's worse. No one I know was alive in 1933, though from an economic perspective it's nowhere near like it.

I also know that I made my first small fortune (in my mind) after the 1987 crash by buying BAC.

Not this time, though.

mh23, I would be surprised if the market didn't try to retest its old lows, but I wouldn't be so sure about putting in any money until volatility is back to normal - not 25% swings in one day. It's very damaging to the economy - like a diabetic's blood sugar level.

You think they'll bring back the uptick rule?

"You think they'll bring back the uptick rule?"

You've mentioned that a few times, but that has nothing to do with what it going on right now.

this is what I told a broker friend...

OF COURSE, its a damn recession. like there was any surprise there.

But, looks like we avoided armageddon. Which is the important part.

So, if its just a regular 'ol recession, even a big one, that means its also usually the time to start stocking up... (no pun intended). A mega recession was already priced in, so I say pick up what you know you can hold for at least 6 months. In a few years, ask yourself if you want to be the guy saying "yeah, I picked up the dow when it was below 9k"

And then stop watching the fing marketing every 10 minutes.

Here is my life: call broker on Friday morning saying buy. Broker convinces me to come in and talk - on Monday. Go in Monday - tell broker - time to buy. Buy orders executed on Tuesday. Brilliant! Oh well - its all long term investing anyway. Sigh.

October, why don't you just trade direct on line?

Stevejhx: Could you elaborate on a compare/contrast among now, 1987 & 1933? History almost never repeats exactly the same, but other than bubbles, what are similarities/differences, IYO?
Thanks.

Noah, please tell me, I always value your opinion. Steve, you would think that they would have brought back the uptick rule already if they were going to. The truth is, Cox is so stupid, it is impossible to predict what he will do. I do think that the next administration will, especially if it is McCain. I shar your concerns about volatility, and I also think that it is a distinct possibility that, if we break through 7800, we could go down and test 7000. That being said, I feel compelled to at least start building positions on days like this. The one silver lining may be the dropping price of oil. If we can see a continued drop, even in the face of equities rallying, that will not only help the consumers, it will definitely help nwl and wmt (which I don't yet own, but I will start to buy if I see another 10% dip). However, my fear is that oil will rally when the market does, which makes no sense from a fundamental standpoint, but as we have seen, to a certain extent, fundamentals are out the window.

"And then stop watching the fing marketing every 10 minutes."

:)

the risk you run mh23 is that your positions are making the assumption that the equity market will rebound within 5 years or so.

this will not be a "V" bottom/rebound but more like an "L" similar to Japan's lost decade.

MMAfia, you may very well be correct. If I need to hold longer, I will. 5 years is the earliest that I see a turnaround. After that, there are so many variables that it is hard to speak in any sort of decisive or meaningful manner. I am patient, and I am not looking to make a quick buck. That being said, if this market has a few back to back rallies like Monday, and I can make 30% or more on some of my positions, I would cash out and reload. That's the great thing about making time your ally, it gives you lots of options.

Also, MMAfia, while we may have an L recession, it will not be because what we are experiencing is analogous to the Japanese. You keep making historical comparisons that don't fit. This is not 1933, it is 1907 when there was panic because the Trust Banks failed. The reason why Japan had the lost decade was due to an ossified financial system that refused to act until it was way too later, and because there was far to little government action to facilitate great transparency in financial institutions. I would recommend, The House of Morgan by Ron Chernow.

nikkei down 10% already.. its going to be another bloodbath..

"1987 & 1933? History almost never repeats exactly the same, but other than bubbles, what are similarities/differences, IYO?"

In 1933 there was no FOMC. The country was deep in depression. Unemployment was about 25%. There were no computers. Trades took a long time to execute. There had been a previous collapse in 1929, which came upon the heels of excess leverage and a housing boom. (Did I say "housing boom"?) It would take until 1956 for the Dow to return to 1929 levels.

In 1987 the market crash was caused by computerized trading, which was relatively new. Interest rates were high. The Dow had increased very quickly over the prior two years. It represented a very good buying opportunity.

In 2007 the Dow reached an all-time high, but just slightly surpassing the 2000 high. It took 7 years to recover what it lost after the dot.com bust. But the dot.com bust was very different from this - there were companies with no earnings that were trading for thousands of dollars a share. There was outright fraud (which we will find here, as well, with CDS's, rumors, naked shorting, excessive bonuses, etc.) in research.

This time, there are foreclosures at a very high rate - that's the fundamental problem. After that, the problem is in opacity - what is in all of these securities? No one knows, so they don't trade, so they're marked to zero. Someday, they will be marked right back up to their real value, and it will be an earnings boom.

"The truth is, Cox is so stupid, it is impossible to predict what he will do."

Or won't do.

"I do think that the next administration will, especially if it is McCain."

There is virtually no chance of McCain.

"I share your concerns about volatility, and I also think that it is a distinct possibility that, if we break through 7800, we could go down and test 7000. That being said, I feel compelled to at least start building positions on days like this."

The only thing I have is cash and 2x long China, which has been painful recently. But the Chinese have said on multiple occasions that they plan on buying stock directly to prop up the market. I think you saw some of that yesterday when the Hang Seng recovered.

With this volatility I won't mind missing an upswing, because with a trading range of 30% in a day, it's just too nerve-wracking. I will add to the China position, and that's it. They are the next economic superpower. The US is dead. We don't produce anything, all we seem to know how to do is create money by trading in nonexistent things, selling it and letting it crash. Let's see: dot.com, housing, CDS's....

stealth1 - I should trade on-line - this old school stuff is killing me.

Steve-
Are you looking to move into other China positions or are you only going to stick with the Direxion bull fund?

"Are you looking to move into other China positions or are you only going to stick with the Direxion bull fund?"

I'm staying where I am but not adding anything, and when it returns to breakeven I might even sell it, depending on the market conditions. I'm very uncomfortable right now with just about everything, and I like my cash position. I may even sell my cats to make more money. :)

> I meant DOW BACK BELOW 9000

You sure about that?

;-)

I'm not so hot on emerging markets, personally. I think they're going to find a lot of completely made up numbers in the next couple of yers...

Don't sell your cats! :)

I bring it back to... SSO (double long S&P)

"I think they're going to find a lot of completely made up numbers in the next couple of years."

I think they are vastly oversold now with huge potential for growth. Stocks listed as ADR's must comply with US accounting rules - and if you buy something like the XLI, they are ADR's.

Look - BOVESPA is trading now at 34,000. It was at 74,000 in May. It's fallen 46% and trades at a forward p/e of about 7.

Everything is oversold right now. The economy certainly is slowing, but not the 25% we saw in the Depression. Yet that's the level decline we're seeing.

Tellingly, as of today the Dow has fallen more than BOVESPA.

This is hard, but things will calm down. Leadership would be nice - too bad it came so little, so late.

> Stocks listed as ADR's must comply with US accounting rules - and if you buy something like the XLI,
> they are ADR's.

One can comply with GAAP accounting and still be lying.... those two things have little to do with one another.

"Everything is oversold right now. The economy certainly is slowing, but not the 25% we saw in the Depression. Yet that's the level decline we're seeing.

Tellingly, as of today the Dow has fallen more than BOVESPA."

i think what just about everyone (including myself) has underestimated is the amount of deleveraging that still needs to happen before we truly bottom. it's about selling into this in order to survive for many firms.

I don't doubt that... but it still makes this IMHO a pretty darn good buying opportunity.

The world isn't ending, and you're talking about historical lows.

> i bring it back to... SSO (double long S&P)

Wow, that was a VERY nice bump for anyone listening...

"Wow, that was a VERY nice bump for anyone listening..."

I find the statement hilarious, coming from a guy who said:

"And then stop watching the fing marketing every 10 minutes."

Did you sell the VERY nice bump?

yes, I did.

Unfortunately, I can't stop watching. Its a curse.

That being said, the "just buy and watch" is for buying SPY. SSO is another game... its a derivative. For 99% of humans, buy some SPY today, then don't look.

16% off the bottom!

(I definitely have a problem)

;-)

We need to replace teh current tax system with a flat tax. No deductions! Not even for mortgage interest! Just a flat 10% tax on all income.

We need to get our economy out of the hands of the Wall Street villains, and back into the hands of our Main Street heros. Like Senator McCain, who spent 7 years of his life in prison. There is nothing like prison life to turn a man into a man.

Thanks, Steve.

"The US is dead & I may even sell my cats." :-0

So Steve, a smart guy like you supports Nobama?

ugh, more economic and investing tips from people who have no credentials, no track record, no nothing other than the ability to type a lot

ootin, read Buffet's piece in the Times today, he echoes what I began posting on this blog about three weeks ago. Look, there are some people on this blog, like MMAfia and Urbandigs who think they can predict the gold market 2 years out and outsmart the market through day trading (no disrespect), and maybe they can. I am not that smart, so I don't even try. What I do know, and have a track record of success with, is identifying value in assets, buying them, and then having the patience and discipline to use time as my ally, and then sell for a profit.
Let's take a moment to look at what has happened over the past month:
- Panic selling of historic proportions (retail, hedge funds, mutual funds) people have been running over each other to get out, not because the want to because because they need to, or at least feel they do.
- Massive government intervention to stabilize financial markets and ease up liquidity. Yes, this may cause inflation down the road, but for purposes of the value investor, it appears we are not going to see a collapse of the financial system.
- Oil prices dropping to one year lows with the potential to go to 60 or below.
- A major rally in the dollar, suggesting the the US is going to lead the world out of what may be a prolonged and painful recession. Also further suggesting that, during these troubled times, the US is still the place where people turn for safety.
- Fed fund interest rates cut to 1.5% with the almost certain likelihood of going down to 1%

For value investors like me, this is a perfect storm, the same way that Manhattan real estate was in Q1 03. Like Buffet, I have no idea where the market will be in a year. However, when I can start to build positions in nwl, mhp, bac, msft, wfc, v at these valuations, and in most cases getting an attractive dividend, that makes sense . I have no doubt that five years out or more these companies will be doing very well and I will have made money by starting to build positions over the past three weeks. I will be in acquisition mode over the next 12 months, adding to my positions and companies as the market continues to fluctuate wildly. In my mind, this month has been the beginning of a great entry point for value investors.

"So Steve, a smart guy like you supports Nobama?"

Actually, no, I supported Hillary & wasn't going to vote for Obama. Until this, the icing on the cake of the most incompetent administration ever in the history of the world.

JoeThePlumber, are you the same one who rails against taxes yet makes $40,000 a year, works illegally as a plumber with no license or journeyman's license, and owes back taxes to Ohio?

Gold is very dangerous now - central banks will be selling it to pay for the bank bailout. I agree with mh23 that now is a good time to buy stocks, just maybe not today. Personally, after being burned by volatility, I'm going to hold out till I see some direction.

"So Steve, a smart guy like you supports McPain?"

mh23, right on. buffett is the man and too much attention to daily moves will only lead to bad investment decisions. i've been a buyer for last couple of weeks and will continue to buy if market moves down 5% from here and buy more if it moves another 5%. i still think there is just way too much leverage out there and we haven't seen any stability in the credit markets. until that happens, i'm not moving all in.

I agree. On a day like today I am going to do some research on companies that I don't yet own, but might like to consider. If the market drops, I will add some more to nwl, mhp and maybe v if it tests 47 or lower.

I still like the SSOs. Invest in all of America, just faster...

;-)

stevejhx: Personally, after being burned by volatility, I'm going to hold out till I see some direction.

Buffett pushes in bigtime a week ago on GE and GS and then starts soapboxing about how everyone else should push in too. Hmmm. Good thinking Warren.

Not quite.... BH went in on GE and GS... Buffett's soapbox stand was about his own personal account...

I believe all his BH holdings are going to charity.