By using this site, you agree to our Privacy Policy and our Terms of Use. Close

Forums - General Discussion - How far will the stock market plunge?

HappySqurriel on 23 February 2009
Jandre002 said:
This is absolutely horrible. Who in their right mind goes out and buys a new car with the DOW barely at 6000?

I don't think this downward spiral is done yet. I expect that tomorrow we'll probably see the dow drop enough to trigger the "circuit breaker". I just wish they would get this sell off over with already so we can see where we really stand.

Except that isn't how these things work ...

Every time there is a fairly large drop in the market you typically have a recovery as people try to time the market's bottom. Sometime in the very near future, optimisitic traders who have been spoonfed economic reports of how the economy will (some how) recover at the end of 2009 will buy in today because they believe that they will make a lot of money.

 



Around the Network
akuma587 on 23 February 2009
HappySqurriel said:

Its difficult to say ...

In spite of all the great advice our parents and grandparents gave us when we were growing up about living within our means and saving for a rainy day, we’re now at a time where two generations of adults have lived beyond their means and have no savings. Up until a couple of years ago, most of these people managed the unexpected expenses and setbacks in life by tapping into their home equity or taking on more debt.

When you combine the lack of savings with the lack of easy to access credit and the loss of equity in the housing market people don’t have many places to go to get more money. The most liquid asset many people still have access to is their stocks, bonds, etfs or mutual funds (inside or outside their 401k/RRSP).

What this means is the market will continue to fall as long as the economy continues to get worse, and the people who have cash to make investments at the bottom could potentially benefit by picking up stocks with a 2.5 p/e ratio and/or a 20% yeild.

Its not really consumer credit that caused this crisis, or even excessive government spending.  Those two things certainly didn't help though.

Frankly it was the people who were supposed to be "smart" who caused it, the "geniuses" on Wall Street who bought into the groupthink that you could run your assets and liabilities at a 30:1 margin and that the housing market was a never-ending buffet.  There was way too much emphasis on turning a short term profit rather than taking a step back and saying, "Hey, if something went wrong, we would be totally fucked!"  The government certainly hit the snooze button in terms of regulation, but that's like blaming the person who sold someone a gun for them committing suicide.

Ironically, this is reflected in a recent poll.  Who would have thought that Americans would trust politicians more than Wall Street on the economy!  Its a sign of the apocalypse if you ask me:

http://www.cnn.com/2009/POLITICS/02/23/poll.economy/index.html

Poll: Politicians trusted more than business leaders on economy

 



We had two bags of grass, seventy-five pellets of mescaline, five sheets of high-powered blotter acid, a salt shaker half full of cocaine, a whole galaxy of multi-colored uppers, downers, screamers, laughers…Also a quart of tequila, a quart of rum, a case of beer, a pint of raw ether and two dozen amyls.  The only thing that really worried me was the ether.  There is nothing in the world more helpless and irresponsible and depraved than a man in the depths of an ether binge. –Raoul Duke

It is hard to shed anything but crocodile tears over White House speechwriter Patrick Buchanan's tragic analysis of the Nixon debacle. "It's like Sisyphus," he said. "We rolled the rock all the way up the mountain...and it rolled right back down on us...."  Neither Sisyphus nor the commander of the Light Brigade nor Pat Buchanan had the time or any real inclination to question what they were doing...a martyr, to the bitter end, to a "flawed" cause and a narrow, atavistic concept of conservative politics that has done more damage to itself and the country in less than six years than its liberal enemies could have done in two or three decades. -Hunter S. Thompson

HappySqurriel on 24 February 2009
akuma587 said:
HappySqurriel said:

Its difficult to say ...

In spite of all the great advice our parents and grandparents gave us when we were growing up about living within our means and saving for a rainy day, we’re now at a time where two generations of adults have lived beyond their means and have no savings. Up until a couple of years ago, most of these people managed the unexpected expenses and setbacks in life by tapping into their home equity or taking on more debt.

When you combine the lack of savings with the lack of easy to access credit and the loss of equity in the housing market people don’t have many places to go to get more money. The most liquid asset many people still have access to is their stocks, bonds, etfs or mutual funds (inside or outside their 401k/RRSP).

What this means is the market will continue to fall as long as the economy continues to get worse, and the people who have cash to make investments at the bottom could potentially benefit by picking up stocks with a 2.5 p/e ratio and/or a 20% yeild.

Its not really consumer credit that caused this crisis, or even excessive government spending. Those two things certainly didn't help though.

Frankly it was the people who were supposed to be "smart" who caused it, the "geniuses" on Wall Street who bought into the groupthink that you could run your assets and liabilities at a 30:1 margin and that the housing market was a never-ending buffet. There was way too much emphasis on turning a short term profit rather than taking a step back and saying, "Hey, if something went wrong, we would be totally fucked!" The government certainly hit the snooze button in terms of regulation, but that's like blaming the person who sold someone a gun for them committing suicide.

Ironically, this is reflected in a recent poll. Who would have thought that Americans would trust politicians more than Wall Street on the economy! Its a sign of the apocalypse if you ask me:

http://www.cnn.com/2009/POLITICS/02/23/poll.economy/index.html

Poll: Politicians trusted more than business leaders on economy

 

First off, what does your post have anything to do with what I said?

Regardless of who "Caused" this problem people bought houses they couldn't afford at twice the historical average price with 0% down (quite often) using a very risk mortgage, have built up massive debt buying stuff they didn't need and haven't built up any emergency savings which leaves them very few options on where to go when they need money. Regardless of what the government does a lot of these people will need money, which means that a lot of these people will tap into longer-term investments which are often held as stocks, bonds, etfs and mutual funds which will put downward pressure on the markets.

With that said, if a drug dealer offers you crack are you absolved from your responsibilities when you become a crack-adict? Even though politicians will constantly say "Through no fault of their own" or "Were doing all the right things" when referring to a lot of the people who are in the worst financial position in this crisis doesn't make this true. On the whole, Americans were living beyond their means to an outrageous level and sooner or later a triggering event was going to cause a crisis ... Much like on an personal finance basis, if you have neighbors who are slowly building a mountain of consumer debt eventually something will happen (lose job, get sick, car break down, etc.) which will tumble the financial house of cards they built.