S&P500 dropping to 600 by spring 07

[PD]

I’m sure there were people laughing at those who cashed out six months before the tech bust. Sure, they missed the last bit of the run-up but they also missed the much steeper fall. Like PS, I’m happy in my safe investment for now.

Just about everybody we knew thought we were crazy to sell our house. One neighbor laughed at me and told me that our houses would be worth double in five years. My mother thought we were fools. The tune is changing.

If the water suddenly recedes a half mile out to sea, should you rush out onto the revealed sea floor to pick up the pretty shells?

[qcomer]

Hi PD,

Sometimes generic analogies fit, sometimes they don’t. Your first premise is that a recession or more exactly a stock market melt down is imminent. Unlike the extreme bears around, most of economic community is right now widely divided onto this topic. This maybe the mid term rally folks have talked about here that has better hostroical record than any other historical market trend. Finally, stocks are much easier to dispose then homes so I don’t think it is fair comparison. With the current momentum in markets, it doesn’t make any sense to walk out of the market. If you have good trading practice and have your stop losses set, you can walk out before the market crashes. Just as when buying, you need confirmation whether bottom is in or not (though it means you pay more), similarly with selling one should get confirmation that market has topped.

[(former)FormerSanDiegan]

Only 85 Trading days ’til Spring arrives.
S&P at 1396 today.

Only 796 points to go to reach 600 !

[qcomer]

What made me chuckle seeing this post first time was that it mentioned a time frame as well as a bottom value for S&P500. I just hope not many people jumped on any predictions posted on a forum (many posts like this are posted every day on many forums). The only thing to trust and get a signal from is the market itself.

I learnt my lesson long back that you cannot time the market. You loose more money making opportunities sitting on the sides waiting for the melt down than what you make if you actually catch the bottom (once in blue moon). If you could time the market, it means you can beat the market. However, there is a reason that the best of fund managers with the best of tools available, fail to time the markets correctly and hence fail to beat it consistently.

[privatebanker]

I think the market dropping like that doesn’t seem to be in the cards. There is an astonishing amount of cash still on the sidelines. From what I see, the fundamentals are still in place.

[poorgradstudent]

qcomer wrote: “However, there is a reason that the best of fund managers with the best of tools available, fail to time the markets correctly and hence fail to beat it consistently.”

I actually agree with yoru overall sentiment that the market is nearly impossible to time. However, I disagree about it being “beatable”, or the best managers being able to beat the market reliably. Check out John Keeley of Keeley Small Cap Value (KSCVX), Robert Gardiner of Wasatch Micro Cap (WMICX), David Williams of Excelsior Value and Restructuring (UMBIX),
Ron Muhlenkamp of Muhlenkamp (MUHLX), Rich Fentin of Fidelity Value (FDVLX), John Montgomery of Bridgeway Funds (BRUSX), and Ron Baron of Baron Funds (BARAX). All have beaten the market over the past 10 years… not necessarily every single year, but overall, money put into them in 1996 would have done far better than an index fund.

Of course, many are small cap, which do tend to outperform large cap, as they have more risk.

I own UMBIX in my Roth IRA. It’s treated me well so far 🙂

[(former)FormerSanDiegan]

I think the market dropping like that doesn’t seem to be in the cards. There is an astonishing amount of cash still on the sidelines. From what I see, the fundamentals are still in place.

Bummer ! I guess taking out a second mortgage and shorting the market wasn’t the best way to hedge my overleveraged housing position.

(tongue firmly planted in cheek)

[lewman]

I still think market’s going to tank next year. When it’s going to begin is beyond me of course.

Quick update on my shorts:

Office Max shorts: stopped out on losses
GM shorts: stopped out on losses
Retail Hldrs Jan08 PUT: small loss, still going
DIA Jan08 PUT: small loss, still going

Will likely gradually put in more shorts as market continues to go up.

As Keynes said “market can stay irrational much longer than you can remain solvent”. Indeed.

[(former)FormerSanDiegan]

So true John Maynard Keynes, so true. I believe he also said “In the very long run, we are all dead”

[sdduuuude]

An interesting article related to this topic:

How skepticism can fuel a Rise

[nla]

S&P 500 closed at 1,406.09 today, 806.09 points more to go before it will reach 600.

[lewman]

Shorting is difficult as market could go on and on and on even if the bet’s correct. It’s clear to me that shorting is a speculation rather than an investment so the amount of money put in should be small.

How’s everybody else who shorted the market doing ? Have you all got stopped out or still holding on to your positions ?

[powayseller]

The market is likely to go up through the end of the year, according to Roubini.

[poorgradstudent]

Walmart’s weak weekend sales numbers scared the market today.

As a non-Walmart shopper and Target loyalist, I tend to look at weak Walmart numbers and say “huh, maybe people figured out that shopping online, at Target, anywhere but Walmart is more fun. I could shop at Walmart, but I’d rather hit my head against a wall for a couple of hours.”

I suppose you could argue it was partially profit taking, partially fueled by another dip in the dollar and raise in oil prices. I think the rest of this week may be very telling for where we’re headed in the very short term.

A weak overall holiday season is going to scare the market far more than the decrease in the housing market (justified or not).

[(former)FormerSanDiegan]

“The market is likely to go up through the end of the year, according to Roubini.”
Two sessions later the S&P500 is down 1.7%.

Only 785 points to go to S&P 600, though.

[Author]

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