The War on Savers….is there any doubt anymore?

[HLS]

FLU,
I could discuss this with you for a long time.
(My opinions are not necessarily those of anyone else)

The mentality of “the market” continues to amaze me.
It’s not a STOCK MARKET, it’s a market of stocks.

Who cares what the DOW is doing, unless that is all you are invested in. It’s a basket of 30 stocks. THIRTY.
I see comments that refer to “THE MARKET” as nothing more than ignorant or foolish, possibly both.

Unless you daytrade, who cares about daily moves.
The larger and well known a company is, the more potential there is for manipulation and worrying about short squeezes etc.

One of the greatest stock market investors is BUFFET.
He recognizes VALUE and businesses that he understands.
He didn’t lose any fortune in the dot com boom, cuz he never bought into the myth, that many “average Joes/Janes” bought into and lost their azz.

There are trillions of dollars “invested” by people that know less about stocks than they do about their mortgage. It’s what they believe is the right thing to do, based on popularity and salespeople.

Everybody CAN’T make money in any market forever. The greater fool theory can only go on so long before it busts.
It’s a legalized pyramid scheme that many people profit from, but it’s not security in my opinion any more than the equity in a house.

Most people may have heard of P/E but cannot explain it. They don’t know what market cap, P/S ratio, enterprise value, PEG ratio, ROE or many other stats that are available FREE.

The fact is that average people that truly know very little CAN make vast amounts of money. It’s called LUCK.
People who bought houses in San Diego before 2003 got lucky. They didn’t KNOW they would double.

Many people gladly sold into that bubble, with huge gains and little remorse. There always has to be a seller for someone else to buy anything.

Happens in stocks, it happens in houses. It’s different when you can explain WHY you are invested or why you are not.

Most people are invested for the long run. You hear all the time that it’s not timing, it’s time in the market. BLAH BLAH BLAH, selling you on what the average returns have been over the past 75 years. BLAH blah BLAH.

Following the herd will reward you when times are good and punish you when times are bad.

Nobody is right 100% of the time. Figure out what works for you.

Quick examples today:
GTF is up 122% RTWI is up 47%
HAR is down 19% TMTA is down 15%

If you own any of the above 4 stocks, do you care what
“the market” is doing today ?

The headlines are beyond idiotic. REAL money is made buying when things are out of favor, at or near bottoms, and selling at a profit. You can make 100%-500% when patient.

Most people jump on a moving train right before it stops moving, chasing gains and performance, hoping for a 10% or 20% gain. Buying yesterdays news about the last quarter that ended several months ago, is simply not logical, but that’s how it works.

When you understand that it’s idiotic, but that’s how it is, you can possibly profit from it.

Lots more can be said….

[LA_Renter]

I am thoroughly confused as everyone else. Does anybody think rather than focusing on inflation which the markets are currently screaming at us, the FED is actually concerned about deflation starting in 2008 into 2009. The credit bubble that just popped was to say the least gargantuan, the largest bubble in history, global in scope. The housing bubbles are now popping in the 30 to 40 countries where they existed, the run on Northern Rock in the UK was a defining moment in their housing bubble which is actually bigger than the USA’s. Greenspan recently went across the pond and told their central banks that they are basically f*&ked and should rethink further tightening. Once those economies begin to feel the negative impact of the housing bust the global economy will slow muting inflation and easing pressure on the dollar. The 50 bps cut won’t be felt in the economy until next year, right when the full effects of the popping global credit bubble will be felt around the globe. A large global credit contraction precedes a large consumer spending contraction. Thus the FED decision to lower the hammer in the Fed Funds rate. They know the front end will be volatile with the dollar getting hammered and oil and commodities going higher but they see the magnitude of the slowdown coming our way and are gambling that will mute inflation. Ben indicated the Great Depression could have been avoided if more liquidity had been available in the system. I am not saying this is right or wrong and there are plenty of holes here. I am just trying to make sense of the move our FED made that on the surface seems idiotic.

[JWM in SD]

Nice post LA Renter. I think there may be some merit to your theory about the delayed effect of the cut so as to get in front of the curve on Deflation. I’ve considered this myself, but like you said, it’s confusing and frigtening that we got to this point at all.

I think there are really two camps of thought on this:

One => Increase rates and tighten immediately and then let the cards fall where they may.

Two => Decrease rate and provide liquidity risking the USD until the deflate effects are more obvious.

This is Bernanke’s Box as best as I can describe it. Mish Shedlock predicted this about 18 mos ago. I should have been better prepared 🙁

[(former)FormerSanDiegan]

They know the front end will be volatile with the dollar getting hammered and oil and commodities going higher but they see the magnitude of the slowdown coming our way and are gambling that will mute inflation. Ben indicated the Great Depression could have been avoided if more liquidity had been available in the system. I am not saying this is right or wrong and there are plenty of holes here. I am just trying to make sense of the move our FED made that on the surface seems idiotic.

Regarding the FED’s move … In my opinion, it’s actually quite simple and obvious. When the economy starts sucking, the FED lowers rates. This is what they do. The dollar declines if our cycle is ahead of the rest of the world.

When the rest of the world’s economies start sucking, their central banks will cut rates, too.

When the US recovers the dollar will recover. It’s happened before.

Regarding the dollar … It sank in the late 80’s to early 90’s as well. Starting from a dollar index of 124 in 1986 and declining to 80 in September 1992, as the US started recovering from recession.

The dollar went through a couple smaller cycles and peaked again around 120 in early 2002, dropping to 81 at the end of 2004 and is about 79 today.

So the dollar declined to about 65% of it’s 1986 value by 1992, only to return to within ~5% it’s previous peak by 2002. Currently in a drop to about 66% of its recent peak.

I know things are different this time, but they were different last time, too.

Extrapolating the current trend of the dollar and coming to the conclusion that it’s a one-way trip is the same mentality that led some to conclude that real estate prices go up forever.

[surveyor]

FWIW

CNN had a story on how some small business and corporations are selling more product overseas because of the weak dollar, narrowing the trade gap. So it’s not all bad.

[HereWeGo]

I can’t possibly go long at this time (except maybe energy and commodities), but I don’t have enough confidence to go short.

That said, I can’t shake the feeling that current market entrants are buying into the maw of a serious slowdown, perhaps even a recession.

It’s true that exports are up, obviously imports will fall with the weaker dollar, but it’s also true that domestic profits are really starting to sag.

[lniles]

If homebuyers default on their loans in great numbers, banks will collapse in great numbers. If banks collapse in great numbers, we are in another great depression and that’s what the fed is scared of. This bailout is of the banks, not of the homebuyers. I think it’s simple and obvious.

[JWM in SD]

“I can’t possibly go long at this time (except maybe energy and commodities), but I don’t have enough confidence to go short.

That said, I can’t shake the feeling that current market entrants are buying into the maw of a serious slowdown, perhaps even a recession.

It’s true that exports are up, obviously imports will fall with the weaker dollar, but it’s also true that domestic profits are really starting to sag.”

Agreed.

[Author]

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