Look back 5 years... You call it, just looking for opinions here.
I personally think 10,000 is not out of the question this year. 8,000 next year is a possibility.
I hear the talking heads talking about the bottom being here, and we should buy the discounted stocks, but I personally think the bad numbers have only started and there is much more to come as the year goes on. There are too many bad economic indicators out there and I'm not talking about GDP. I'm talking foreclosures, bankruptcies, currency devaluation, inflation, banking crisis, mortgage crisis, home building slump, etc etc etc...
Everything that has happened so far is nothing compared to what the lack of jobs could do. Watch the jobs report - this will be spinned by everyone including the media to ameliorate the effect but jobs can absolutely kill a/all markets.
8000 I think not, unless we go into a global recession lasting 2-3 years, then I see a possibility, but I think 11k is more certain now then 14k. Waiting for new lows on the DOW to add long positions...
I do think we are in for a Global Recession. China reported yesterday inflation is over 7%. The banks are having issues in Europe just as bad as here... Banks will tighten credit to reduce exposure, and inflation that's going on worldwide, except for in the US according to our government, which is total BS... And just about every commodity is at an all time high, that WILL turn into higher prices for consumers. There will be less money available due to the banks, and each dollar that is available will buy less. When the consumer is 80% of your GDP, that is not a good thing!! I hope something turns things around, I just don't see it and have not heard anything that resembles a real plan coming from the government. With the current economic problems, I don't see how lowering interst rates or dropping money from a helicopter will help any of these issues long term.
I think the slowdown will be mild this time around because it is affecting mainly financials and housing within our boundaries. The blue chips are now global export machines, with a cheap dollar. They actually faired well. They projected lower, or important players did, and we observed a market reaction most recently. If they continue to do good, I think the ship turns around
If you think china, india, brazil are slowing down because of subprime in the us, I think you would be mistaken. China slowdown was projected to be 11% GDP growth.
I don't see it happening, so dow components should do OK.
That is what my common sense tells me, however I am in a wait and see time period. The bond insurers are a big concern, although I am not sure what their role is exactly in all of this. Any ideas?
The last poster was not sure about bond insurers role.
According to my little understanding, the bond insurers like ABK and MBI insure the mortgages originated by banks.
So if a person cannot pay his mortgage, bond insurer will
pay the bank any deficit since the mortgage is insured.
Now if ABK/MBI go under then the mortgages are not insured
anymore. So if a person cannot pay anymore and ABK/MBI are
dead, then the Banks will have to take the loss.
So the banks will stop originating mortgages because there
is no one to insure the mortgage. Therefore people will not
be able to buy houses via mortgage. The vicious cycle will
be difficult to stop.
This is my understanding or ABK/MBI role. If I am wrong
and anyone has different story, please share.
Bought DXD today at 57.10.
I am feeling market will go up today, thus I will be
loosing money, same old story.
Good luck to all
I think it will bled off until the big boys see the light at the end of the tunnel. Housing is dead, retail is dead, financials are on life support. The perma bulls are going to assume this is the bottom and do some bargain buying, the bears, like us, are seeing a much bleaker future. I see dow moving down to 7500 before this is over.
Interesting quesiton. I recently looked at historical charts on both the Dow and S&P 500 since 1962 coninciding with recessions. What I found was, assuming we are in/have a recession is the minimum drop is about 33% off the peak market indexes (S&P) and the max. about 45-50% of the market indes peak.
Also, I observed once the S&P breaks at least 20% (in conujunction with a recession) of its peak, it "always" (i.e. since 1962) drops at least another 10%. So if we break 11,400 (Dow)and 1260 on the S&P I am betting we go to and 1,100 on the S&P. Bottom line is once we break/close below these levels I willl significantly increase my shorts in my portfolio,
Finally I noted duration for the S&P index peak to bottom for recessions has been a minimum of 11 months since 1962 and a max. of 30 months with an average of 18 months.
So, summarizing, if we are in a recession, I am betting we will not see a bottom until at least September and it will be a minimum of about 1,100/10,000 on the S&P/DOW (30% below 1560/14200 peak). If its an average recession, we probably will not see bottoms until early 2009 and a bottoms closer to 960/9,000.
Reminder maarket indexes (Dow and S&P) peaked last October.
I see DOW 11,000 this year, after that it moves higher.
The housing/mortgage situation will be worked out with the lower interest rates. Same as the last deal, money is cheap, people & companies borrow money. It is tougher to get loans, but the banks make money when they loan it, so it is a double edge sword and they will give in to the temptation, more carefully though...
I don't think the lower interest rates will fix these problems. In fact I think it will make it worse long term. Banks have lent out more than they have already, unless people suddenly start saving this will not change. The reason I think that isn't going to change is people are in too much debt and will likely pay debt than save. Also there is a lot of inflation globally, the US seems to be the only country on the planet in denial. Lowering interest rates will only spur this on. When they do finally do something, probably later this year, they will RAISE interest rates to slam on the brakes. This will CRATER what is left of the stock market because then Credit Card defaults will sky rocket as well as many other types of loans that are a certain percent over prime. Since consumers are upside down already with debt to disposable income ratio's this will push them over the edge. At this point, I see it as inevitable.
The Fed is stuck between a rock and a hard place....that is the only thing I am certain of at this point, but it's not looking good...