Life After Wall Street Layoff: Different Job, Less Money

Limited effect at best.
Manhattan real estate is virtually bulletproof.
The city is internationally desirable.
Everyone wants to be here.
Gentrification, once achieved, cannot be reversed.
Buy the dip.
Im with you Steve, just not on the stock market. thats cooked for a long long time too.

What's going on with the stock market? I read Krugman and he says we are cooked,anecdotal and empirical evidence seems to be with Krugman. Bob Brinker a market timer who I have done quite well with(although he missed the last fall big time!) says S&P is going to go on a tear soon. Markets just went on a nice little run...what gives?

stock market will come back, once the financial sector stabilizes, valuations and earnings will re-accelerate and it will rip. but nyc real estate will lag...

Anyone who thinks the markets are going to go on a run has no clue what's going on with the economy or the markets. We're still a ways from the bottom - earnings and multiples have yet to trough. The cost of debt has increased 50-300% depending on the company - that's going to have a long-term impact on earnings, cash flow, growth, etc.

10013, you seriously going to lecture everyone on the economy and markets? it's one thing to say you disagree, but to say i have no idea what is going on is a little patronizing. maybe you weren't around in 2002 when comcast (BBB+) cds was trading at 1000 over with 3.5x ltm leverage and a very stable business model. that would have been a back the truck up opportunity to buy. today, risk aversion and overreaction is even worse. but as you see from my post, i said once the financial sector stabilizes... when that happens, for MOST companies that are not in distress, credit spreads will come in. even if systemwide leverage does not return to it's bubblicious 2007 levels, spreads will still come in A LOT. there will be a weak dollar/inflation cost to pay with the endless printing/borrowing that the gov't is doing now, but that will facilitate corporate borrowing at some point.

i think if the S&P hits 700 or so, i'm backing up the truck. if you're waiting for 500, you could be waiting all the way until you wind up buying in at 1200 in a couple years.

Special K
As a stock market guy the past twenty years, I couldnt disagree more.
I think that retail interest in the markets is going to be gone for many years to come, severely limiting the possibility of a broad and long-lasting market advance, counter-trend rallies notwithstanding.
No one "trusts" the markets anymore, once trust is gone it takes years and years to get it reestablished.
One of the reasons for the January effect (stock market's move for the year is predicted by what happens in the month of January) is that people actually make conscious decisions at the beginning of calendar years to get involved or not in the markets. This year, as last, people voted with both feet. Of course, this is not a fail safe indicator. Nothing is.
Demographically, the baby boomers are taking $ out of the markets to meet retirement needs, and the generation that followed is far less populous. Another reason arguing against a broad based advance.
Finally, while valuations look cheap on prior years earnings, do you know anyone with a crystal ball who has any sense of what earnings will be over the next few years? Jeff Immelt sure doesnt. Warren Buffett sure doesnt. Bill Gross sure doesnt. And neither do I. But what I do know is that they all seem to agree that we are in for a long period of subpar earnings. Jeff Immelt said this past week that "the service economy" in the US didnt work. Yet that is the economy we have had for 25 years. How about the consumer who has been amassing enormous debt over many years, how will they be able to spend in anywhere near approaching the levels of the past?
No I think we are in for a lost decade in the stock market just as I believe we are in for a lost decade in the NYC real estate market.

SpecialK - you sound like a trader - try thinking long-term. Have you taken a look at what companies that bust covenants are having to pay? 1% to lenders and 200-300 bps increase in spread at a minimum. Maybe 20% of LBOs are covenant lite. Of the 80% with covenants, probably 50-75% will bust covenants at some point during 2009-2010. The same math applies to public companies but only about 10% are cov lite. And that's assuming the lenders don't take the company. So I would say on avg half of public cos will see half of their earnings and cash flow disappear as they bust covenants. Many, many public cos will file 11 or 7. I haven't seen earnings estimates that factor any of this in other than for companies that are in covenant breach right now - so index consensus is way off in my mind. Yes, I was around well before 2002. I'll start buying around 700 and below.

Although I am bullish on stocks, I do agree that we have set ourselves up for at least a few years of anti-stock sentiment amongst the masses. The medium returns don't look good, the short term returns are obviously horrible, and no one has any sort of handle on earnings.

I am still bullish because some of the valuations are rediculously low. Even if we have a horrible few years of earnings, we're talking about 50 years ago prices on some companies that aren't in trouble.

So, I'm figuring we have some positive growth, but no rocketing anytime soon.

Of course, we have extremely short memories and we'll have another boom in 3-5 years.

I'm not so sure that we have another boom after this for a long while. Or, if we do, we are only going to be building on an already shoddy base and end up crashing down even harder.

Like bfgross says, the demographics just don't point to a strong market for the next 10+ years as Boomers stop spending, begin pulling retirements, and become a burden on the economy (through Ponzi...I mean, Social, Security payouts and Medicare obligations).

I don't mean to pull a page right out of Harry Dent's work, but he was pretty spot-on with his book written in the early 90s about the boom and bust from then until now. Personally, I think we're gonna be turning Japonesa for awhile...

However, for those not looking to retire in the next 15-20 years, this could end up being a financial windfall as your hard-earned dollars give you more bang for the buck with each 401k contribution and DCA you into some great positions prior to the next boom.

"Like bfgross says, the demographics just don't point to a strong market for the next 10+ years as Boomers stop spending, begin pulling retirements, and become a burden on the economy (through Ponzi...I mean, Social, Security payouts and Medicare obligations)."

Say its all true...

we're at 1999 prices.

I don't think you can discount the fact that even a return to an "ok" economy represents a big jump from what's built in to prices now.

Oh, I got off topic. Sorry about that. I agree that these positions are, likely, not to return for a very long time. But, I don't think we're done yet as we haven't reached the point where people "despise" stocks and real estate and avoid them like the plague.

There are still too many people trying to "catch the dips" and, unfortunately, it's very possible that they're only catching falling knives. I say that as a person with bloody hands on some stalwart blue chip stocks that I would never expect to tank to the levels they are at. The problem is, most have stopped looking at "historical" charts that go back for much longer time-periods. Using the last 10 or so years as a precedent has (obviously) turned out to not be such a good move.

The industry is going to be the proverbial door nail. With positions slashed and compensation pummeled into paltry (relative and, honestly, rational) levels, the desire to work in the industry will be gone. Couple it with the government regulating everything and the average person hating the market and, well, you might as well just consider it dead.

> But, I don't think we're done yet as we haven't reached the point where people "despise" stocks and
> real estate and avoid them like the plague.

Real Estate, sure. But what are you basing that on with stocks.

We have already had RECORD outflows in 2008.... And, psychologically, the country has been running from equity.

And, more importantly, equity wasn't hot to begin with.

Even before the crash, the 10 year returns were lousy. Coincidentally, I saw a broker pitch mid-2008. The numbers were actually pretty mediocre.

Folks were tired of stocks post dot-com, and the hysteria never built up again. Where we are now might not be a HUGE drop in sentiment, but thats mainly because there wasn't a lot of bullish sentiment before that. Don't forget, we had YEARS of folks saying "forget stocks, buy real estate".

and the inflow into hedge and mortgage backs came because people didn't want market returns! they thought the S&P returns stunk!

I agree with you about 10 year returns being terrible, but we still did have one hell of a run up from 02 lows until topping in 07. The S&P and Dow had nearly 100% increases from their lows. Based on what? People in a crazy, debt and HELOC fueled spending spree...

We have had big outflows, but I still know a ton of people with 401ks still fully in the market. They, like many others, are of the belief that it'll come back relatively soon and are not selling. I think another leg down could bring many of these people to the point of selling to avoid losing more of their retirement money.

Also, if the market makes new lows, it will signal a HUGE loss of confidence in the government and hit home with most that the "bailouts" are a sham.

> 02 lows until topping in 07.

Given you are picking an absolute trough after a boom and bust, and then an absolute peak, and all you get is like 9% return... I think you're making my case.

Compare us to the 2000 peaks... we are waaaaay below.

> Given you are picking an absolute trough after a boom and bust, and then an absolute peak, and all you get is like 9% return... I think you're making my case

Compare us to the 2000 peaks... we are waaaaay below.

-As are you being just as arbitrary in your date selection. We could run this game forever. Go back 5 years from 2000 to 1995 (oddly, the same year there is a marked take-off in the Dow), and we're roughly double what we were then.

Personally, I think most of the years after 1982 are a wash. Inflation, low interest rates, markedly increased government expansion/spending, the death of the pension in the private sector that brought about increased stock market investment through 401ks, etc., the consumerism explosion through credit cards becoming more readily available, Boomers reaching their peak spending, etc. are all things that, well, we just aren't gonna have at those levels anymore.

I mean, if you look at historical prices of companies like DOW, GE, CAT, BA, etc., you'll see a huge growth being in, roughly, the early-mid 90's. These stocks spent DECADES trading in much, much smaller ranges and at much lower values. Only in the last 15 years or so have these stocks had huge increases over their historical trading prices/ranges.

I understand globalization has played a big part, but it has been just as detrimental as foreign products and manufacturing have been allowed to compete (and, unfortunately, beat, in many cases) with American products. Couple that with the fact global trade has fallen off a cliff and that the rest of the world has caught our cold; it's validity of being a strong economic driver has come into question.

"-As are you being just as arbitrary in your date selection. We could run this game forever. Go back 5 years from 2000 to 1995 (oddly, the same year there is a marked take-off in the Dow), and we're roughly double what we were then."

Yes, yet another trough, and 13 years later, doubling is a lousy return.

You're just proving the point...

And I gave boom AND bust examples, you're the one cherry picking.

I agree about the relatively lousy returns and real estate being the vessel of choice. But, compared to some previous 15 year returns, (65-80 is one example) doubling is a godsend. Also, it is not including any dividends paid and reinvested.

As I see the chart, 1995 doesn't look like a trough compared to previous years to me. It looks like a take off point. Actually, Jan 4, 1982 (another trough, before you point that out), looks like a pivot point that beings a, relatively, unabated climb.

When the talking heads on TV stop talking about "money sitting on the sidelines," I'll believe people truly despise stocks. If the things we've discussed in the other threads come to fruition, we're gonna be in that 65-80 realm on stocks. After that many years of sour returns, I'm pretty sure many folks that have grown accustomed to high returns over the past 25 years will REALLY want nothing to do with the market.

beings = begins

"I agree about the relatively lousy returns and real estate being the vessel of choice. But, compared to some previous 15 year returns, (65-80 is one example) doubling is a godsend. Also, it is not including any dividends paid and reinvested. "

And now you're comparing it to a period of low return. So your logic is we just went through a high return period because it wasn't as low as the low period.

Sorry, thats illogical. Doubling in 13 years is, historically, a sub-par return for stocks.