In deregulated markets, one can shout "FIRE"
 

It just does not stop. From MarketWatch.com of 10 Oct 2008:

This is the whole thing I don't respect about the stock market. The traders aren't making decisions based on facts any more. They are scared of their own shadows. That's no way to run a market. Are they stupid?

I keep trying to remind myself that I'm not retiring for a couple more decades, and I've got time to make this back, but Jesus, I've lost a lot of money in my 401k.

We need a strong reassuring figure to say, "Now, now. everything's going to be alright."

It's a feedback loop right now. "The market's going down. This is horrible. Gotta sell my stocks now!" I actually had a gut feeling that today was going to be a slight rebound day. It started off that way, but then it turned.

I wish I had a ton of money right now to buy stocks. Buy low. Sell high. That's how you make money. And it's lower now than it should be. Lots of bargains.

i've only got about 200 bucks to my name
but i'm going in with what i've got, as soon as i can get my dad to help me start an account (seeing as how i'm not 18 yet).

Hold your cash for a while yet - there is a lot of slide yet to come.

Just echoing what I have read and heard here, but I've read and heard that measured both by price-to-earnings ratios and GDP-to-total-stock-market-value ratios, stock prices are still WAY above the historical norms or averages. I've heard figures of a fall of 30% to 40% still to come, i.e. the Dow Jones (currently between 9,000 and 10,000) could stabilise at around 7,000 or even 6,000.

(And that's before we allow for the irrational "momentum" of markets. The nadir could well be lower.)

I don't think brokers are being irrational in selling now. The market is greatly over-valued, and it will fall. The rational thing to do now is sell before it gets worse, and buy again later. The irrational brokers were the ones who kept buying to drive it so high in the first place.

Ibram, by all means invest early, but be very careful with buying shares for a couple more years. Only buy if there is a clear reason why the company you are looking at is recession-proof. Buying a basket of more-or-less random shares on the grounds that "the market usually goes up" would, right now, be a very bad move.

FIRE














somebody had to do it.

From history, we know that when a Republican gets elected president, then the market drops that year. If McCain gets elected, how much lower could it go?

We also know that everytime George Jr give a speech to encourage confidence, the stock market immediately drops. Shit. George Jr will give another speech this morning. Just another example of a problem solver who would throw gasoline into the room.

bullshit bullshit. Over the course of republican vs democrat ownership of the white house there is less than a 1% difference in market performance historically. To stand up and say republicans get elected and the market drops is just adding more bullshit to the fire.

Zengum - the markets aren't overvalued compared with historical averages. In fact, using P/E ratios and the like it is easy to see that the market is undervalued in comparison to history. I'm not telling you to run out and buy, but just understand this isn't like the late 90's when the values were out of wack and begging for a collapse. This time around the recession isn't market driven - it's economy driven. The market is following the sentiment rather than leading it.

As far as the traders driving this - keep in mind the largest blocks of money invested are in mutual funds. As people see drops in the market they panic and sell their funds. Fund managers have to give them cash three days later so they have to liquidate holdings. When they liquidate it drives prices down which causes people to see drops and sell their funds. Fund managers have to... See a pattern here?

When you add program selling (buy/sell strictly based on share price rather than fundamentals) to the mix it becomes a pretty big snowball.

Hold on to your hats and enjoy the ride, it isn't over yet. The only good thing I can say is that I hear a lot of people panicking and declaring their is no end in sight. Historically, as long as you have experts saying, "the bottom is here today/next month/..." then you've still got plenty of room to drop. When people start tearing their hair out and the experts start announcing we're going to return to a 777 DJIA then we're just about to the bottom and the selling stops. That is followed by a period of herky jerky gains and losses as the money gets back in.

(It works the other way too. When you hear people talking about expected new high after new high, you might want to think about going more conservative) Not that a shiny shoe salesman would ever give you honest information, though.;)

I was waiting for lookout to get here. Jeez~Must be busy right now.
:)
Thanks Lookout.

A little busy these days. The good news is that business is great right now as people start pissing down their leg and actually start asking professionals for help. Unfortunately, this side of the work is very stressful.

Well the proof is in the pudding, in this fun little game: Bush spoke, the markets went from -100 to -300. Now McCain is done speaking. -450.

They weren't the ones I had in mind. Not sure who would fit that role. Iacocca, Cronkite, Buffet?

The really smart guys sit back and watch. Even if Buffett himself set down his margarita and guitar the markets would still drop after he spoke. Speeches and press conferences are necessary or people will say the leaders aren't doing anything, but they really can't do anything good. I remember in '02 sitting around bringing shot glasses to work in the morning and we had a drinking game for how the market reacted while Bush was speaking at his press conferences. we got good and drunk.

Even if we had someone that everyone looked up to as the voice of wisdom, which we don't, his press conferences would still be followed by market drops. Fear drives the market. The press and analysts and joe six pack :rolleyes: will listen to a speech and only hear one or two things from the whole speech - those one or two things just happen to be the only points that support their particular fear. So they jump online and put their sell orders in and then say, "See! the market is dropping, I was right!".

fixed her up fer ya...


The price we have to pay for oil < $80.:sniff:

Those people will explain why a market drops below its real value. The market is stumbling because facts remain unknown. Those George Jr speeches to make us feel better do nothing. Until we know who was stable, who was lying, who is really in trouble, and how many 'Enron' spread sheets are out there, then fear will exist - as it should.

Eventually the market will find a bottom. There is no reason to believe that bottom has been found because too many entities still have not admitted their losses and mismanagement. For example, GM is burning through $1billion per month. GM can keep doing this until their first hybrid arrives in 2010? Hardly. Entities such as GM and hedge funds may still need transparency and fixing.

GM is a typical example of no transparency. It’s been long known that GM products are that inferior due to bad management. GM still has not solved their only problem and is reported to be burning through $1billion per month. How long will this continue before markets finally concede and force a fix on GM? When these kinds of problems are all fixed, then the market will have already found a correct net worth for America.

That last sentence defines when a savvy investor returns to the market.

I am seriously thinking about dropping 5 - 10k into my SEP and buying as much as I can.

The "good news" around our house yesterday was that our plummeting 401k has lost less percentage than the Dow has. "See? We are way outperforming the market!"

I try to think of this like a discount, that's all--look honey, Wall Street is having a huge sale, let's go stock up for the winter! Not that we have any extra money to buy in with, but our regular contributions from the paycheck are continuing like clockwork.

What concerns me is that this is happening world wide. Are the forces that are causing the drop in US markets the same as the ones causing the drops in other countries? Or are the world markets playing follow my leader with the US?

That's globalization for ya. We are all connected. Hi UN. Many countries were doing the same things our banks were doing they are paying the same price. I think we were just the first to show the fractures.

Some countries invested heavily in US equities. For example, if I remember, Iceland has a $14 billion economy. But its banks were holding something like $210billion in assets. Those three banks needed a government takeover do to (in part or full) so many losses in their American investments.

Australia, according to what others have posted, has little invested in US equities. However, we know this American mess will create an American recession of unknown dimensions. Therefore China will need less coal. IOW China will use more domestic coal and less Australian coal. So how badly will the Australian coal industry (that had based future market predictions on full coal production) suffer?

Whereas uncertainty causes American equities to drop excessively, the same unknowns for Australian coal (and other Aussy commodities) create uncertainty in Australian export industries. These examples duplicated by the millions all over the world.

Eventually all markets will discover new valuations and how much damage exists in their markets. Previous financial market failures (according to history) take about four years for that economy to recover from.

This is not a time to worry. This is a time to learn so as to prosper from your losses AND to learn about this when it happens again typically every 30 years.

Thanks for the explanations, guys. I guess I'm sort of a nervous type. I live on a limited income, and I worry what this meltdown could mean for folks like me. For example, if we go into an inflaionary trend off all this, it could make my life difficult. Is inflation a possibility?

Inflation is inevitable. When government throws so much money into an economy, inflation occurs. But then we have already been seeing some inflation for many years now. Government numbers have not reported it when politicians (George Jr) only talk about core inflation. They ignore all energy and grocery store price increased.

Worse is the probability of stagflation. However you have time to adjust accordingly. For example, symptoms of this housing crisis and meltdown were noted in The Cellar back in Nov 2006. Economic changes take time. You have time to prepare for what may be only mild or may be severe.

I don't know anyone who doesn't.