Retail/consumer sales will probably remain quite dismal for the foreseeable future. Spending will most likely come from heavy capital spending spurred by government projects. It will keep people in jobs, while the economy tries to work out the housing deflation problem. This is the core issue. FDIC Chairman Bair believes that a nationwide FDIC program, similar to the one being used at INDYMAC can forestall 1 million foreclosures. This is key. Why the Bush administration is doing absolutely nothing in this regard, is beyond imagination. I can only guess that they are even more incompetent than anyone could ever dream of.
I think most of the redemptions are done. If anything, redemption money now has to be put to work since it is sitting on the sidelines. Institutions are not going to leave the cash in Treasures earning 0% for long. Hedge funds and mutuals are also sitting on lots of cash, in anticipation of some further redemptions, which will probably not happen if the market bottoms out here. The auto industry will be bailed out, if there is some sort of plan. It is against our national interest to have all autos (and auto profits) flow to Asian and European countries. The recession has been going on since Jan. of this year - though the government was doing everything it could to cover it up (for election purposes). They failed miserably. Unemployment will go up much more, but it always does at the bottom of the recession. It is not clear, what will happen 6 months from now, but if the government kick starts the economy with huge capital spending, it would forestall the unemployment issue. Earning predictions are already abysmal, but of course can get much worse. However, I think certain industries (non-consumer) will benefit greatly from government capital spending, so in certain sectors, earnings my be surprisingly good during the second half of next year, raising yearly earnings so that they look quite good compared to today's projections. Obama's administration will be very competent compared to the idiots who are running our government now, and we should see lots more confidence. The key is forestalling foreclosures. FDIC Bair is confident her plan can help tremendously. Time will tell, since Obama is certainly going to give her the assistance she needs. Something that the Bush administration refuses to do. Paulsen prefers bailing out his friends.
lol u r wrong all that stuff is already priced in or insignificant. Tax loss selling is a myth. Redemptions are canceled out by purchases. Big 3 will be bailout out. Earnings are expected to be soft. Uemployment is still low.
dsq - your posts spewing nothing but profanity and insults were removed. If you wish to make your point in a more intelligent manner, feel free to do so. Believe me, I would love nothing more than to insult RFT, but you have to do it in a less than vile manner. Thanks.
401k liquidations on reading year end statements and the big life insurance companies liquidating there investments to pay off policy holders can't be good for the stock market either. In a market with no liquidity we can have huge moves either way depending on currency fluctuations and a few large players moves but keep in mind we haven't had a significant up month in the market since april, one holiday week doesn't change that:eek:
I agree that all of the liquidation has caused the 50% drop, however, the money is now parked in Treasuries and Money Funds that are yielding next to nothing. This is the intended effect of monetary policy which seeks to induce (force) investments into other assets. I think to a large extent it will succeed. I, for example, am literally being forced out of cash in order to seek better returns, however slight they may end up being. What has changed over the last few weeks, is the Federal government is now backstopping every possible industry you can imagine. As a result, yield spreads have contracted substantially, and commercial paper is now growing again. Money, will eventually flow back from temporary parking in Treasuries to corporate bonds, equities and other assets. This will take time, but accumulation takes time, which is the nature of bottoms. Shorts will probably be creamed over the next few months, as institutional buyers enter into the market at appropriately low levels (higher lows). Longs may be disappointed, as shorts keep coming in on bad news. So we have a trading range with an upward bias through January and February, most likely. However, if money comes in Decemeber, causing a fairly big rally, we may see prices pop up very quickly. But gun shy insitutions, may just continue to slowly accumulate non-consumer equities, which means a slow market for a few months. That is my hypothesis. We shall see. Rich
The government can't force people to take risk with there investments, we are in a period of caution by the institutions who have obligations to raise cash. While high grade corporates improved in november as well as cp which is a plus, junk bonds continued to detoriate as people don't have faith in the government to stop default rates from reaching alarming levels. We are still making lower lows so until that is broken significantly with a close well over 9400 on the dow or 950 on the spx the trend is down. At some point we will have a longer tradable rally early next year but i think we continue to see the stock market under pressure until then
Stock, do you want to know why no one (and i mean NO ONE) even bothers to read your posts, except for the humor? How you can possibly say there is no credit crisis in one sentence, and then in the next, you say we need more ratecuts and bailouts, How contradictory and just plain idiotic is this? Which one is it? You post so much even you don't know I assume. Mental recession? You watch too much fox news. I won't even get into your uber bullish mentality, you assume everyone shorts at the bottom correct? I have not been short for the last 3 weeks, sure I left some on the table, but who needs to buy the bottom when you just could catch 3/4 of that waterfall? Bulls, bears, pigs, and buy and bagholder, guess which group you fit into?