Is the liquidity tide finally rushing out of Wall Street?

[(former)FormerSanDiegan]

I agree with f_l_u. If you have been shorting the market for the past year or so, the problem is that the market has remained rational for too long. I don’t see anything close to the overvaluation in the market that we saw in 2000. The market is not significantly (more than 10%) overvalued IMO. It seems to me to be more like the 80’s era of Junk bond kings, leveraged buy outs, and an upcoming S&L crisis.

[(former)FormerSanDiegan]

I agree with f_l_u. If you have been shorting the market for the past year or so, the problem is that the market has remained rational for too long. I don’t see anything close to the overvaluation in the market that we saw in 2000. The market is not significantly (more than 10%) overvalued IMO. It seems to me to be more like the 80’s era of Junk bond kings, leveraged buy outs, and an upcoming S&L crisis.

[barnaby33]

It seems to me to be more like the 80’s era of Junk bond kings, leveraged buy outs, and an upcoming S&L crisis.

Which if I remember correctly, caused credit contraction, which either caused or exacerbated a recession in the early 90’s.

Josh

[barnaby33]

It seems to me to be more like the 80’s era of Junk bond kings, leveraged buy outs, and an upcoming S&L crisis.

Which if I remember correctly, caused credit contraction, which either caused or exacerbated a recession in the early 90’s.

Josh

[no_such_reality]

5132 Do you remember?

It is tough to bet on these monster crashes, because in reality only one has ever happened ( 1929 )

Do you know what 5132 is? I do. It’s the NASDAQ high from March 2000. Today, the NASDAQ is at 2700.

If in March 2000 you had or moved $1,000,000 into the NASDAQ and followed up with an additional $2000 a month to build your investments, today, you have $750,000.

That to me, is what SoCal home buyers in 2004, 2005, 2006 are likely facing for the next several years.

[no_such_reality]

5132 Do you remember?

It is tough to bet on these monster crashes, because in reality only one has ever happened ( 1929 )

Do you know what 5132 is? I do. It’s the NASDAQ high from March 2000. Today, the NASDAQ is at 2700.

If in March 2000 you had or moved $1,000,000 into the NASDAQ and followed up with an additional $2000 a month to build your investments, today, you have $750,000.

That to me, is what SoCal home buyers in 2004, 2005, 2006 are likely facing for the next several years.

[HereWeGo]

Don’t know where the thing is really headed. but to me, if you go against the grain by shorting the entire market, it seems like you have way to many forces going against you. Shorting individual stocks probably works if you know what your doing. But shorting the entire markets with these new reverse indexes, I’m not so sure.

Couldn’t agree more. While the S&P shorts have lost value, the SRS ETF that shorts real estate has appreciated considerably (even though it’s down a little today).

[HereWeGo]

Don’t know where the thing is really headed. but to me, if you go against the grain by shorting the entire market, it seems like you have way to many forces going against you. Shorting individual stocks probably works if you know what your doing. But shorting the entire markets with these new reverse indexes, I’m not so sure.

Couldn’t agree more. While the S&P shorts have lost value, the SRS ETF that shorts real estate has appreciated considerably (even though it’s down a little today).

[(former)FormerSanDiegan]

Which if I remember correctly, caused credit contraction, which either caused or exacerbated a recession in the early 90’s.

Exactly. And the stock market took a couple deep (but short-term) hits during the period. Worst drop during recession was about 18%, but recovered within about 6 months.

This was nothing like the over-exuberant market of 2000. When recession happens I’d expect a 6-18 month market correction of 15-20%. Not a repeat of the late 90’s overinflated stock bubble. Just my opinion.

[(former)FormerSanDiegan]

Which if I remember correctly, caused credit contraction, which either caused or exacerbated a recession in the early 90’s.

Exactly. And the stock market took a couple deep (but short-term) hits during the period. Worst drop during recession was about 18%, but recovered within about 6 months.

This was nothing like the over-exuberant market of 2000. When recession happens I’d expect a 6-18 month market correction of 15-20%. Not a repeat of the late 90’s overinflated stock bubble. Just my opinion.

[The-Shoveler]

“Not a repeat of the late 90’s overinflated stock bubble.”

So far the Small guy (Individual) has not been in the market (other than 401K’s etc…)

When the Samll investers go all in, then watch out.

NY Banks Win.

Enron had good earnings too (at least on paper for a while anyway).

[The-Shoveler]

“Not a repeat of the late 90’s overinflated stock bubble.”

So far the Small guy (Individual) has not been in the market (other than 401K’s etc…)

When the Samll investers go all in, then watch out.

NY Banks Win.

Enron had good earnings too (at least on paper for a while anyway).

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

It’s not like I am saying they (NY Bankers) are playing with a stacked deck or anything like that, if you know what I mean.

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

It’s not like I am saying they (NY Bankers) are playing with a stacked deck or anything like that, if you know what I mean.

[Chris Scoreboard Johnston]

Why wasn’t the market correct when it went to 5000? If you were long from 4000 or 4500 you made a good amount of money. I would argue that the market is always correct, if you were not flat or short when the drop started you were just out of sync with the market. I went flat in January of 2000 in every account that I have and can prove it.

My basic point of all of this is not to be a know it all becuase I have taken my fair share of drubbings over the years, believe me. However, the point is that too many people equate economic things that they think determine stock direction with stock prices, and most of those alleged relationships are invalid.

There is very little relationship between the dollar and S&P prices as an example. As a result, analyzing what the dollar will do as a reason to invest or not to invest in stocks is invalid. You can argue that there should be, but in all the studies I have done, I have found no correlation whatsoever, basically a coin flip.

The skit with inflated adjusted dollars strikes me as just people trying to sound smart. There is no way to perfectly hedge dollar risk in terms of currency valuation, and when I buy things, I do it with todays dollars, not today’s inflation adjusted dollars. Am I better of with the 20% gain in the stocks I bought at the beginning of April or if I had been a wise guy and over analyzed and discounted the absolute Dow value rise with the declining dollar, and parked the money in a foreign currency since April?

Gold was at 685.1 when I bought my stocks and it is at 678.1 as of todays close. By my math the small decline is less than the 20% average gain I have in my stocks during the same period.

I will drop this subject in this blog at this point, because of the different view on things that I have versus everyone else. I hope my manner in attempting to educate people did not come across poorly. Sometimes posts have tones that are not intended when they are written.

[Author]

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