I'm not exactly a bull on stocks. I'm pretty bearish on the economy. But I have to ask - is there much more bearish news that can come out? AIG is down, 3/5ths of Wall Street is down, every man and his dog knows real estate is in a depression. What new news can come out in the next 2-3 months to make things worse? I'm actually struggling to think of it. Some possibilities: 1) US AAA rating goes on review. That'll hit bonds for a while, but stocks for 1-2 days. After that it won't mean shit to equity valuations 2) Some banks go bust. Already priced in. 3) Retail & consumer sector stocks get hammered due to spending slowdown. Partly but not fully priced in. But this is, what, 20% of the S&P? Who gives a fuck. 4) US recession. Lol, say hello to S&P 1300 if that happens. MORE than priced in. 5) Large Hadron Collider generates quantum black holes which hit a few stray protons, get heavy, sink into the core of the earth, and swallow up the world over a 6 month period, leading to the total destruction of earth and human life. Ok, I admit this would be pretty bearish for stocks. Seriously, what sectors are left to drop? Retail. Tech. Consumer finance. And...er...that's about it. This is a minority of the market. Every other sector has already been taken out and shot - real estate, check. Banks, check. Non-bank financials, check. Commodity producers, check. High P/E former glamour stocks, check. What's left? I feel a bit premature calling bottom, but I have to say, I am struggling to come up with solid reasons for significant lower lows. Of course a sentiment-induced crash is always possible. But there's virtually no doubt it would bounce back pretty quick. It's not like we will go to S&P 1000 and *stay there*. To be honest, the investment case for stocks looks pretty good here. I'd say long-term returns of 10% from current prices are decidedly possible. Any thoughts?
We haven't seen the lows yet. The coming spike in unemployment will get us there, and will finally reveal how weak the economy really is. We'll have a washout to 9000 on the DOW (if we're lucky), then a very slow slog back. So keep your powder dry, IMHO. You'll have plenty of opportunities to get long later.
what's been priced in?nothings been priced in. yes much bad news is known but the market so far has refused to price it in. endless gimmicks by our gov't has postponed the day of truth.based on the current news the s@p should be max 950
Not saying it will, but what isn't priced in yet is a larger than expected spike in the corporate default rate. That would kill the junk bond market which has held up reasonably well so far.
There are cosmic rays that have much more energy than what the LHC can put out. If colliding particles at that energy were enough to do us in, we probably wouldn't be here now. The thing about the LHC is that they collide in front of a "camera", not that they are of a spectacular energy, at least compared to mother nature.
The main problem for the next year or so is going to be a general economic slowdown as we're no longer able to inflate GDP by borrowing. New economic activities will need to be found to replace finance etc. and these realignments take time. I think we'll bottom somewhere north of 1000 on the S&P. My main concern for long-term investing is the prospect of a sideways market for the next decade or more, bouncing between say 1100 and 1400. Look at the pattern we saw in the Nikkei index. As always certain sectors and companies will outperform but we won't get a "rising tide lifts all boats" phenomenon as we have in the past. Economic performance won't be that spectacular and I think there will be much less "new money" entering the stock market than in prior years. Lots of entities will be reconsidering the balance of speculative (stocks) vs. fixed return investments in their portfolios and tilting towards the latter, especially if the market performs poorly even after the bottom has been established. All in all I think we're in for a survivable but rather boring future as traders and investors...
run on hedge funds http://www.independent.co.uk/news/business/news/hedge-funds-suffer-mass-redemptions-938959.html
You have some good points Cutten, but I don't think its a good idea to catch a knife thats tumbling down the stairs, it may bounce a few times and hit you in the eye. It is still kind of hard to call it at this point, although most stocks have been beaten down along with financials it doesn't seem that the credit crunch has trickled down to none financial companies. Then again we have some good bottom indicators and the stock market is usually 6 months ahead of economic data. 1. VIX reached above 40% 2. Buffet is buying Goldman. -Neo
how about Al Qaeda get their hands on a nuclear weapon or A giant asteroid is heading for Earth and could hit in 2014 (CNN HeadLine)