Dow drops below 9,000, S&P nearing 900

[GoldenBoy812]

I knew it was going to follow the bailout, but actually seeing it is truly something...

As fears of recession run about, credit freezing, and job outlook seems uncertain, money is trailing out of unsecured investment and headed into guaranteed forms of investment. As this happens, stocks will continue to fall. It is very likely we will see the Dow in the 7,000's and maybe even somewhere around 6,000. The last time the Dow was @ that level, it was 1996...

There are rumors that the Fed will now be backing the commercial paper market, which will hopefully free up the players in the market. One thing is for sure, they have to act fast and hard...

GoldenBoy812 Reviewed by GoldenBoy812 on 10-09-2008. Dow drops below 9,000, S&P nearing 900 I knew it was going to follow the bailout, but actually seeing it is truly something... As fears of recession run about, credit freezing, and job outlook seems uncertain, money is trailing out of unsecured investment and headed into guaranteed forms of investment. As this happens, stocks will continue to fall. It is very likely we will see the Dow in the 7,000's and maybe even somewhere around 6,000. The last time the Dow was @ that level, it was 1996... There are rumors that the Fed Rating: 5

[killerweed420]

Just like the first 850 billion bailout its going to take atleast 45 days for the money to be released. More money ain't going to help. People need to prepare for a depression. Convert some easy assets to cash so you can ride it out. People that got sucked into the big buyers market of the last year and have taken all there cash and put it into ther 401k are going to be in deep shit.
I'm still sitting on my cash. I cashed out in 2000 when it became evident Bush was going to win. Republicans are good at sucking the economy dry.

The good thing in all this is there is talk oil may drop to $30 a barrel. $2 gas would be nice again

[Markass]

Gas is $2.57 here in oklahoma for 10% ethanol b/s...pure gas is still like $2.79 but I never ever thought it would go under $3 a gallon again...

I'm just glad that the problem can be solved by printing off $800 billion dollars that we don't have...oh wait..damnit..


And why do the taxpayers only deserve a $150 billion package...why don't they flip the bailout for the corporations and the bailout for the hardworking americans??? I'd like to have a couple thousand dollars rather than a measly 300 bucks..

[Breukelen advocaat]

Before assuming we're entering Mad Max territory, let's give the economy some time.
A lot of what is dragging down the markets may be hedge fund investors dumping their holdings, among other factors. The 700 billion plan has not even been implemented yet.

A few people will invest now, and make a killing when recovery happens.

[SnSstealth]

There are rumors that the Fed will now be backing the commercial paper market, which will hopefully free up the players in the market. One thing is for sure, they have to act fast and hard...

gooooooo socialism:yippee:..............:wtf:

this is country destroying bad. the worldwide markets crashed as soon as we passed this because weve proven that free-market dosent work. IMO

When are these power/money hungry assholes that are holding back our entire civilization back just so they can have that much more wealth? it reminds me of these banyan trees in my area. these trees grow amazing tops, very colorful and very heavy. to support the weight it grows hearty supporting "legs" growing down from the top. but when rich people want a nice pretty lawn, they cut all of this side branching off. this works fine and the tops thrive and look glorious. then one day a hurricane blows by and with no supprort structure the top falls crushing anything in its way. well all of our supporting "legs" are being chopped out and here comes the hurricane.

BTW I got out of my 401k in december, best move i ever made. my investments far exceed the national avg.

db:smokin:

[GoldenBoy812]

A couple of points.

What is going on as of now is considered a massive correction. After 911, the stock market sunk to a low of 7,300 points due to investor/ consumer confidence being rattled. Generally when this happens, prices begin to fall in an effort to regain sales figures, or at least move inventories out of lock due to the psychological effects of economic fear. This is referred to as market deflation, as prices were too high given the specific economic circumstances. Most of the time, deflation is bad for middle class Americans because as prices generally fall, so do wages. For example, if a farmer was making $100,000 a year off his crop, and a period of deflation occurs the following year, say raising the buying power of a dollar by 10%, that would equate to the farmer only getting $90,000 for his crop the following year. Of course, when he buys anything such as fuel, machinery, or whatever, he needs less dollars to purchase the same goods only one year ago. Many people might see this as a good thing, as the cost of gas is down. On the flip side, as many of you can attest, there are many fixed costs associated in life as well as business. If the farmer were to have a mortgage payment on the property, it will not fluctuate in accordance to deflation. Same goes for any big ticket purchases bought on credit. The value of the items the farmer has financed will also drop in accordance, even though he is still on the original nominal value associated with that good. Governmental solution is to provide easy credit to speed up the economy, because inflation is less of a concern than negative GDP growth.

What this shows us is that even if your buying power increases, your wealth is actually decreasing. This is exactly what happened in the housing market. Easy credit made it easier for loans to be issued. One of the main reasons for the demand for new money was in fact rising fuel prices. If the cost of fuel is increasing by 50 %, the money supply will have to fluctuate in accordance to the increased dollar demand of fuel. Instead of the money being used to spurn actual growth, people were buying houses, and the home builders industry was growing at an artificial rate. To top it off, lenders were leveraging collateral accounts in the range of 40:1; mortgage brokers also work on a volume commission, where they get bonuses for an increase of transactions. Therefore way to much money was flowing into the housing market creating a bubble that would eventually pop.

As sub prime home owners teaser rates stopped, and interest rates went back up as inflation fears became a target, mortgage payments on the whole increased. Foreclosures soon followed, which in turn lower the property value of the surrounding areas. Deflation roars its ugly head again as housing values dropped as much as 70% in some areas, even in non sub prime homes. What you had essentially were people making payments on a note valued at lets say $500,000, but the current value of their property was only $150,000. Then add the increased cost of fuel, and the increased costs of transportation of goods due to the rise in fuel prices and you have a situation where peoples overall wealth was diminishing.

As the defaults increased, the leveraged securities had to pay the piper, and the firms that were now responsible, for the remaining leveredge that would eventually cripple the ability to finance. No financing equals a drastic cut in sales (see GM), and forces firms to downsize by way of layoffs (cyclical unemployment).

Stock prices then tumble downward, as people cash out in hordes due to fear of loss.
------------------------------------------------------------------------

This has the potential to be very bad, but those who are calling this a depression need to use history as a tool.

When the Dow finished falling following the '29 panic, it dropped from the 330's to 41 points. The current equivilant would be the Dow around 1,500 points.

[Breukelen advocaat]

Thank you once again, GoldenBoy, for contributing your well-informed voice of reason into the discussion.

[daihashi]

gooooooo socialism:yippee:..............:wtf:

this is country destroying bad. the worldwide markets crashed as soon as we passed this because weve proven that free-market dosent work. IMO

When are these power/money hungry assholes that are holding back our entire civilization back just so they can have that much more wealth? it reminds me of these banyan trees in my area. these trees grow amazing tops, very colorful and very heavy. to support the weight it grows hearty supporting "legs" growing down from the top. but when rich people want a nice pretty lawn, they cut all of this side branching off. this works fine and the tops thrive and look glorious. then one day a hurricane blows by and with no supprort structure the top falls crushing anything in its way. well all of our supporting "legs" are being chopped out and here comes the hurricane.

BTW I got out of my 401k in december, best move i ever made. my investments far exceed the national avg.

db:smokin:

Good analogy.

I pulled all my investments about 3 months ago and have them sitting across 4 interest accounts at the moment. I'm waiting for signs for the market to stabilize; currently I'm at about 12% total YTD, far better than most people I know. I'm curious to see what will happen between Wachovia, Wells Fargo and Citibank. I may want to hop on that early depending on the terms and outcome of the situation.

For people who have no investments; this is a GREAT time for you to prepare to dump some serious money into the market. You will probably be seeing 100% returns or more over the next couple of years (assuming the market stabilizes soon/before end of 4th quarter.).

edit: I should add an addendum, I don't want people blaming me for bad investment decisions so I'll add this. If you are able to determine that a company is more profitable than what it's trading at and you diversify your investments... then it will be a good time to invest.

There are many things to look at when trying to determine if a company is profitable or not. I won't go into details but I'll say these two things....

There is a formula out there to do this

AND

Although it's a bit outdated... pick up The intelligent Investor and Security Analysis. It will teach fairly good basics for stock market investing.

Investing is long term. Look at any one who's been successful in the market.. they ride out the rough times. For instance Warren buffet just dumped 3 billion into GE because he determined it was worth more than it was trading at; however he did it safely... 3 billion dollars is about 1.4% of Buffets net worth. He didn't go crazy and dump all his money into it.

So figure out what's profitable.. and only dump a fragment of your net worth into it.

[SnSstealth]

sorry for the doom and gloom, i had just watched the 60min. bit on how the top companies created this whole mess by offering securities on bad investments that they had no money to cover. but since its not called insurance its not regulated. 4 times the national debt 60-80 trillion dollars floating on mathematics and the govt(including the guy who asked for the 700 mill) didnt see this coming? all the while guys being paid 50 mill a year are gonna get bonus checks from us for letting, no making, this happen. disgusts me to where i cant even pay attn. normally.

db

[DaBudhaStank]

I have the ultimate solution to this whole problem. People need to stop caring so much about money and stop being so FUCKING greedy. Thats all anyone cares about anymore, money. Why do people invest? Because they want more money. Why do people go to college for years and years to learn business? So they can make more money. I frankly don't even give a shit anymore. I blame everyone who decided it'd be a good idea to make as much money as they possibly could, investors and business execs alike. Money does not make you happy and is not the solution to the world's problems. It's a shame that most people don't understand such a simple concept. I could give two shits if I had a million dollars or a thousand, as long as I'm happy. And if anyone thinks that only money will make them happy, they really dont deserve life.