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powayseller
ParticipantAlan Gin issued his San Diego leading economic indicators. They are *down* for the 5th consecutive month.
“Stocks are trading at very high multiples of earnings but at a time when earnings are also at record levels. How much higher could they go? And if you did buy at this level, could the reward really be worth the risk? Ultimately, don’t stocks depend on the economy?
Dear reader, we give you the short answer: Stocks are not a good investment. Not at these prices. That doesn’t mean they won’t go up any more. It just means that it is unwise for you to follow them. There’s more downside to worry about than upside to hope for. Take this little boost as a gift from the gods; sell on rallies.
How long can US housing and stocks go in different directions, following different rules as though they breathed different air and ate different bread? Not long, we suspect. If houses are already beginning to climb down from the clouds…stocks, cannot be far behind.
“- Daily ReckoningEvery single housing market collapse has led to a recession, except the 2 housing market collapses that were bailed out by the Vietnam and Korean Wars. The slowdown has already hit San Diego.
ParticipantSteve,let’s start from last March, and go through March 08. We need to let it run for 2 years, because it involves dumping stocks before the recession, getting back in at the earliest sign of a turnarund right in the middle of the recession, and then riding it up. If you want to just run through March 07, that’s okay too. Let’s just compare CD return vs. whatever funds you’ve got.
Participantprivatebanker, why don’t you answer the question, instead of playing word games?
What is the return you earned for your clients the last 10 years? What is the portfolio and investment allocation you are recommending for a typical American, earning $60K/year, with $120K in their IRA? Where should they put that money? (Assume that all insurance and disability and trusts are in place). Teach me, Oh Wise One.
ParticipantThe Dow index is not representative of the market. It is the oldest index, but “the Dow counts every stock equally. Many people on Wall Street say this makes the Dow less valuable as a market barometer.” It only represents the 30 most safe stocks, so the fact it is hitting records is not necessarily a sign of strength.
“the Dow rallied 20 percent during the first third of 2001 — at a time when the U.S. economy was falling into a recession.” ; – NPR
I stand by my recession call. We’re heading into a recession, led by the housing market decline. Anybody remember the housing bubble? Or did you all get swept off your feet by a few weeks of a sucker’s rally?
This is precisely why investors lose money in investing; they forget to look at the long-term picture. They get swept up in the emotion of the highs, and then they sell when it’s low.
Do you all remember why we are on piggington? We realize there’s a housing bubble, that housing drove the economy, and that the housing collapse will lead to a recession? This is a bubble economy, and the bubble is popping.
Don’t be fooled by this rally. The stock market loses an average of 28% heading into a recession, starting the decline by 1 – 2 quarters before the recession starts. That should make it Q3 06 – Q1 07 for the decline to start, so any day now…
ParticipantI have no idea what will cause these market participants to “wake up”. Maybe the first GDP report at 2%? Maybe higher unemployment claims? Maybe rising gas prices? Another year of lower national median housing prices? I was moved much earlier than the market in general, so what moves me is not enough to move them.
ParticipantJobs: Housing Steady, Watch out Retailretail employment during the past year has consistently lost ground in the government’s monthly reports. Retailers have shaved more than 100,000 jobs off their payrolls
CEOs Take Dim View of US EconomyThe findings suggest that volatile energy prices, rising interest rates and cooling U.S. housing market of the past year are beginning to take a toll on business.
Bernanke: US to shave off 1% from GDP
Bernanke says housing in ‘Substantial Correction’ “There is currently a substantial correction going on in the housing market,” Bernanke said. The decline in residential housing construction is one of the “major drags that is causing the economy to slow.”
Sevices in US Grow at Slowest Pace in 3 Years The report suggests the economy is losing momentum as the fourth quarter begins. A weakening housing market that has left Americans feeling less wealthy is limiting consumer spending at retailers such as Wal-Mart Stores Inc. and dragging on growth
Factory Orders Unchanged in August Oct. 4 (Bloomberg) — Orders placed with U.S. manufacturers were unchanged in August, the second month without an increase, suggesting a slowdown in production as the economy cools.
US Chain Store Sales Fell for 4th week Sales at U.S. retailers in September were flat when compared with the same period in August.
ParticipantThe Federal Reserve has been on a publicity mission to quell this disconnect between reality and the stock market. They’re letting investors know that inflation is still a danger (Bernanke and Hoehnig spoke earlier this week), because the market is expecting a Fed cut, causing the market to go up.
CNN:
“U.S. interest rates may not be high enough to quell a recent bout of inflation, Philadelphia Federal Reserve President Charles Plosser said Thursday….The bond market reacted negatively to Plosser’s comments, since many investors had been betting an economic slowdown could force the Fed to start cutting rates by early next year.”no_such_reality, your screen name is fitting, because your list is a complete disconnet from reality. Oil is still up vs. 2 years ago (you’ve got to overlook the temporary summer spike – so what if we’re down from April, we are still up over January), corporate profits are shrinking, worker unemployment is level BUT their hours have been CUT so their wages are down esp. in construction and retail, retail employment is way down, inflation is still a problem according to the 3 Fed Reserve speeches this week, and housing continues falling. We’ve had the first national fall in median prices since the early 1990’s. What tame housing? The list you provided has no link to the reality.
ParticipantSteve, I’ve been advising people to get out of the stock market since March, I think. I missed this last run-up, but I will also miss the 28% or greater fall. Meanwhile, I’m earning over 5% in my CDs. Let’s check back in with each other in the spring of 07, and compare notes, and compare your mutual funds to my CD performance. If you take this challenge, then we’d need to know the names of your mutual funds?
Participantprivatebanker, what is the annual return of the average CFP, or the one that you recommend? Their track records are no better than the average Joe.
I believe Chris was talking about a stock market rally off a low, begining in October/November, and lasting for one year or two years. What we have here is not the mid-year election cycle rally at all. First, only a few Dow stocks are making the highs, while the rest of the market is flat. Second, it is highly likely that this rally will die in the next month or so, because it is going counter to business profits.
This is not a true all-stock rally scenario, and it cannot last. Bernanke is warning about a slowdown, profits are down, sales are slowing, the economy is definitely slowing by all accounts, and a few Dow stocks rally: that is not a stock market rally! It’s a delusion by those who think that the Fed is going to lower interest rates and save this economy. As Roubini said, any lowering the do will be too late, and the stock market will go down down down….
Buying stocks now is like buying a condo in July 2005. It seemed like such a good idea at the time…. Getting in at the end, holding at the end, is where you lose your money.
ParticipantSteve, Roubini says that the bond market is predicting a recession, and the equity market is having a sucker’s rally, just as in March 01, because they bulls believe the Fed will come to the rescue, but they won’t. As soon as the recession started in 2001, the market fell 18% quickly. Roubini says the market will fall sharply as soon as the recession starts. After a recession ends, it can take 1-2 years for the job market to recover, so this recession can have a big negative effect on the 2008 elections.
Steve, you are like my friend in 2000: she thought she was so smart to be in the stock market. Then she lost half her money.
Participantqcomer, you make very good points, and I don’t own any gold, because both investment services to which I subscribe are saying it is too high priced. Chris Johnston is also confirming this for us.
iTulip.com, one of the premier blogs on the asset bubbles, is bullish on gold long-term. The founder is a rich venture capitalist, who went public with the tech bubble in late 1990’s. Read his KaPoom Theory, about the hyperinflation and deflation, and reasons for holding gold. It’s compelling, and convincing to me.
I’m also getting an options account, so I can buy QQQQ puts, and I want to get an inverse fund. Do you know anything about Rydex funds? I know that Profunds Inverse funds are a scam, as they track the index that they are supposed to “un-track”. How they get away with that, is beyond me!
So while you think inflation will fall, I think it will rise. The Fed controls inflation via interest rates AND money supply. Money supply is growing, both because Fed is printing lots of it to pay off interest on the debt, entitlements, war, and second because foreigners are investing lots of dollars back into our economy.
The Fed will lower interest rates, but they will keep printing money, just as they are doing now. As long as they print money, inflation will rise. I can’t prove they are printing money, because they stopped publishing money supply this spring. How convenient for them!
ParticipantI think that investors take the economic slowdown as a sign that the Fed will lower interest rates. The masses, even professional investors, believe still in a soft landing.
Lower interest rates are favorable to business, so the stock market rises when interest rates fall. We saw many “Fed-is-done” rallies in late spring and summer, as investors bid up the stock market upon hoping or finding out that the interest rate rises were done.
Today was a wake-up call, but delusional investors did not heed. Kansas City Fed Chief and Bernanke issued economic slowdown warnings, and Walmart’s earnings report was lower than expected due to less consumer spending. How many more warnings do these dreamy investors need, before they wake up? They own shares of companies whose profits are falling, so they are losing value in their shares by the minute. The E part of P/E is falling, making the P/E much higher by the week. By the time the market falls, it’s gonna be fast…
ParticipantCDs, yes. Stocks, no: how will you know when to get out?
ParticipantRegardless of hard or soft, you can’t go wrong in cash right now: FDIC insured CD’s, US Treasuries, eurozone government bonds (esp. Germany and Switzerland), euros and swiss francs. When gold comes down more, get some of that (buillon or GLD or gold miners), some PM.
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