Funny that with all the cheerleading on CNBC and market blind buying this was hardly mentioned:
"Here is a note that economists at Credit Suisse distributed on the Chicago PMI. In their opinion it is worse than scary.
CHICAGO PMI 37.8 Oct vs 48.0 consensus, 56.7 Sep
New Orders 32.5 Oct vs 53.9 Sep
Production 30.9 Oct vs 71.4 Sep
Employment 41.5 Oct vs 49.1 Sep
Inventories 56.5 Oct vs 37.7 Sep
Prices Paid 53.7 Oct vs 80.7 Sep
Scary doesn’t do this report justice. This abysmal report follows all other pre-ISM regional reports which carried the same tone - an abrupt change occurred in Oct. The plunge in the headline index left it at the lowest level since the 2001 recession. Demand side indicators collapsed.
The 21.4 point drop in New Orders was the worst since the series began in 1968; the 40.5 drop in Production was the worst since its inception in 1946! The excess supply signal has never been worse - the New Orders-Inventories spread was -24.0. Price pressures eased rapidly - the 27.0 point drop in the Prices paid index was a record since 1946!"
And to think morons are buying this market right now?? It's criminal that analysts are on all day saying Buy, Buy, Buy! What we're heading for is nothing short of catastrophic!
dow 5000-6000 is not off the table. extremely unlikely imho, 1 out of 25 chance. however, if it reaches that i will borrow and rob to buy buy buy buy buy!!! if you look at the 1929 depression i believe the overall market went down 66% over 3-4 years. that would put the dow at 4700. if you aren't highly leveraged every major sell off is a buying opportunity. just don't put yourself in a position where you are forced to sell at the lows. and if it goes to zero, who cares, that would mean the world is near an end or the USA is no more. face it, everybody would be in the same boat: poor. i think dow 10,000 is a great selling opportunity. the volititlity is what will make the trader rich through these uncertain times. you don't even need to be that skilled. just find ranges. buy near the bottom, and wait to sell near the top.
DO NOT USE STOP LOSS ORDERS. KEEP THE FAITH. WAIT TO SELL HIGHER, EVEN IF YOUR'RE DOWN SIGNIFICANTLY FROM WHERE YOU BOUGHT. LET ONLY BANKRUPTCIES SETTLE THE SCORE. DO NOT WILLINGLY GIVE AWAY YOUR SHARES FOR A HUGE LOSS. THE ART OF THIS MARKET IS THE WAITING. PUKE IF YOU MUST, BUT DON'T CLICK SELL!!!
the story i keep hearing is how people cashed out their entire 401k's at 8000. not that things have stabalized they want back in at 9500. wow, you simply couldn't teach stupid this efficiently. 1500 point loss and a major tax penalty!!! i fear if it were to go back down they would get out again at 7500. you got to love free markets.
Based on the last batch of GAAP earnings I saw for 2009, the S&P 500 was supposed to earn around $50 (this is GAAP numbers, not the fantasy numbers tossed around by overpaid Wall Street stock pushers).
So its easy to say $50 x 15 PE Ratio = 750 on the S&P.
And it may well eventually hit that. However, its important to remember that in the final 2 months of the year, you have performance chasing by mutual funds going on. If the Dow/S&P rises a little more, you may well have mutual fund managers jumping on in desparation. I could easily see 1100 S&P / 10,600 on the Dow by year end due to performance chasing.
Of course if that happens, 2009 will probably start off abysmally as values then have to adjust downward to more historic valuation levels.
And one last note on the Chicago PMI from the Chicago Tribune:
"Economists had been expecting the Chicago Purchasing Managers Index would fall in October to 48.0 from September's unsustainably strong 56.7 reading.
But instead, the Chicago PMI nosedived from 56.7 to 37.8, to hit the lowest reading since May of 2001, when the nation was mired in the last recession.
The PMI data, particularly the declining employment trends and the huge falls in production output and order backlogs, are "deep recession readings," said High Frequency Economics' Ian Shepherdson. The "horrific" results, he said, make it clear that the Chicago PMI has been pole-axed by the meltdown in the financial system."
Yep, keep hiding your head in the sand and Buy, Buy, Buy!