In deregulated markets, one can shout "FIRE"

[lookout123]

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 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!".

[tw]

Originally Posted by lookout123

The press and analysts and joe six pack 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!".

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.

[TheMercenary]

Originally Posted by lookout123

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 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!".

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

[SamIam]

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?

[tw]

Originally Posted by SamIam

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?

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.

[SamIam]

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?

[tw]

Originally Posted by SamIam

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.

[HungLikeJesus]

Originally Posted by SamIam

.. I live on a limited income, ...

I don't know anyone who doesn't.