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Anyone think the market will rebound soon?
- Thread starter 1tim115
- Start date
zenzero
Its only a Label
Friend 1tim115,
From here on though the market may appear to be down index wise but slow accumulations are happening and this will take atleast a year for any bullish trend to emerge.
But by then the prices of well known stocks will be already high.
This is my personal understanding only.
Love & rgds
From here on though the market may appear to be down index wise but slow accumulations are happening and this will take atleast a year for any bullish trend to emerge.
But by then the prices of well known stocks will be already high.
This is my personal understanding only.
Love & rgds
Everyone is sitting on the side lines waiting for a rally. Too many people got stuck with the down turn and really need to cash in, but are waiting for the rally to begin, so sadly even when the rally does begin, it will be crushed almost immediately.
Lets think about this one, you need to have income to pay your bills and at least 6-12 months worth of cushion in liquidity before you have any investment capital. Most people who have any extra money are working real hard to get out of debt. While this is great for their personal finances it is a killer on stimulating any investment capital.
I have lived through several recessions in my life time but this one is very different. Usually during a recession, interest rates where high and people with money could make money. Not so right now.
People with money are sitting on it.
Like every other recession, it will pass with time. People who have at least 10 years till retirement or can wait 10 years to buy a home, will be just fine and should get into the market a little at a time and will enjoy the benefits of their investments. The problem is, most of the people with money are getting ready to retire and are not interested in long term growth.
Lets think about this one, you need to have income to pay your bills and at least 6-12 months worth of cushion in liquidity before you have any investment capital. Most people who have any extra money are working real hard to get out of debt. While this is great for their personal finances it is a killer on stimulating any investment capital.
I have lived through several recessions in my life time but this one is very different. Usually during a recession, interest rates where high and people with money could make money. Not so right now.
People with money are sitting on it.
Like every other recession, it will pass with time. People who have at least 10 years till retirement or can wait 10 years to buy a home, will be just fine and should get into the market a little at a time and will enjoy the benefits of their investments. The problem is, most of the people with money are getting ready to retire and are not interested in long term growth.
no_spoon
Member
Short answer: no, I don't know (and wish I did, I'm in the same boat as you...my only excuse for someone like me who works in the financial industry not seeing the handwriting on the wall and shifting to bonds was family problems happening during mid to late 2007).
Long answer: I think one or two things have to happen for Wall Street to recover (which, I agree with Sunstone is not the same as the recession ending).
#1 - The decline in consumer spending, which had been driving the economy, has to be offset by something of similar magnitude that produces true value. Things that do not produce value (in my opinion) would be wars, road and bridge upgrades, government studies and tax cuts. There may be good reasons for doing some of them, but they do not improve our situation, only tidy it up or protect against future loss. When too many people are trying to share a pie the sensible long term solution is to make the pie bigger. In my opinion examples of things that would produce value would be a mushrooming of scientific/technological efforts on the frontiers of space or energy or communication, which could be accomplished with a reduction (temporary if you wish) of the obstacles to such a new era, such as government red tape, labor unions, intellectual property laws, insurance burdens, etc. All that may sound very politically incorrect, but think about the things that you and I rely on every day (roads, bridges, dams, railroads, etc.) that were probably built in ways that would be impossible today because of the above obstacles, and because in the 21st Century the US is no longer the only or best bet for progress and skilled work force. However I believe that the crunch we are now in produces the same kind of drive for a frontier experience (regardless of risk) that has pushed us to accomplish great things in the past. I hope I'm right.
#2 - Wall Street has for too long (in my opinion) been one of the great examples of smoke and mirrors. It's hard to prove that statement, but if you dig deep into the accounting standards and rating/risk procedures and disclosure rules and corporate governance what you end up grasping at is smoke, and the government regulators clearly either don't understand or choose to look the other way. This is the 21st century and people are starting to wake up. I think a great deal of transparency and better regulation would help people feel more comfortable, and reduce the Catch-22 that Reverend Rick alludes to.
Long answer: I think one or two things have to happen for Wall Street to recover (which, I agree with Sunstone is not the same as the recession ending).
#1 - The decline in consumer spending, which had been driving the economy, has to be offset by something of similar magnitude that produces true value. Things that do not produce value (in my opinion) would be wars, road and bridge upgrades, government studies and tax cuts. There may be good reasons for doing some of them, but they do not improve our situation, only tidy it up or protect against future loss. When too many people are trying to share a pie the sensible long term solution is to make the pie bigger. In my opinion examples of things that would produce value would be a mushrooming of scientific/technological efforts on the frontiers of space or energy or communication, which could be accomplished with a reduction (temporary if you wish) of the obstacles to such a new era, such as government red tape, labor unions, intellectual property laws, insurance burdens, etc. All that may sound very politically incorrect, but think about the things that you and I rely on every day (roads, bridges, dams, railroads, etc.) that were probably built in ways that would be impossible today because of the above obstacles, and because in the 21st Century the US is no longer the only or best bet for progress and skilled work force. However I believe that the crunch we are now in produces the same kind of drive for a frontier experience (regardless of risk) that has pushed us to accomplish great things in the past. I hope I'm right.
#2 - Wall Street has for too long (in my opinion) been one of the great examples of smoke and mirrors. It's hard to prove that statement, but if you dig deep into the accounting standards and rating/risk procedures and disclosure rules and corporate governance what you end up grasping at is smoke, and the government regulators clearly either don't understand or choose to look the other way. This is the 21st century and people are starting to wake up. I think a great deal of transparency and better regulation would help people feel more comfortable, and reduce the Catch-22 that Reverend Rick alludes to.
Alceste
Vagabond
I'm going to bust out of the mold and say the market will not recover. This is because it has been allowed to fabricate tens of trillions of dollars worth of "wealth" that doesn't represent anything of actual value - it was all based on projected future profits - profits that will now never materialize. Not, at least, until the banks have finished with their orgy of foreclosures and house prices approach what the majority of people can comfortably afford. My totally unsubstantiated estimate is that this will be just over half their "value" at the peak of the unregulated mortgage investment feeding frenzy, and won't bottom out for about 2 years.
I think it will be at least a decade before we recover, but this recovery won't entail a return to a growth-based, bubble-friendly, globalised economic model unless a replacement for housing can be found - another industry to invest in that lends itself to the same gross overestimation of "value" that housing welcomed, and before that tech stocks. According to an article I read, the only plausible candidate for the next investment bubble is green energy, but all signs indicate there is no cheap and abundant energy source that can compete with oil, and oil supplies have peaked, so even if green energy is fully embraced by investors, there will be declining return on investment for the whole of the foreseeable future.
You want my advice, cash in your investments and buy enough land to grow food on. The growth-based economic model is almost certainly dead.
The Crisis of Credit Visualized
I think it will be at least a decade before we recover, but this recovery won't entail a return to a growth-based, bubble-friendly, globalised economic model unless a replacement for housing can be found - another industry to invest in that lends itself to the same gross overestimation of "value" that housing welcomed, and before that tech stocks. According to an article I read, the only plausible candidate for the next investment bubble is green energy, but all signs indicate there is no cheap and abundant energy source that can compete with oil, and oil supplies have peaked, so even if green energy is fully embraced by investors, there will be declining return on investment for the whole of the foreseeable future.
You want my advice, cash in your investments and buy enough land to grow food on. The growth-based economic model is almost certainly dead.
The Crisis of Credit Visualized
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Great post! I'm not sure all housing markets will be roughly half, although some area's that exploded will be very close to your expectations. But then again, Obama may just prop up these markets even further expanding the bubble. This viewpoint is expressed in my, Chicago Tea Party thread.
Alceste
Vagabond
I'm glad you liked it.
When I say "roughly half", I admit I'm not basing that on any research, but on my own contemplation of home ownership before the market imploded. I worked full time in a permanent post and was substantially better off than just about everybody I knew, but still closer to the bottom of the wage scale than the top. (I earned about double the minimum wage.) I was renting a very comfortable flat on my own with lots of money to spare for holidays, dentists, nights out and whatnot. I thought "renting is just money down the toilet. Why not buy?" So I looked around at flats similar to the one I was already living in. To my surprise, I found the mortgage on a similar dwelling was double what I was paying in rent. So I could either continue renting or buy a disgraceful hovel and not only mourn the plummet in my standard of living, but also be stuck with the cost of repairing my hovel if something costly went wrong. Needless to say, I went with the renting. Now I'm glad I did, since it has now been firmly established that the mysterious gap between what an employed, secure, reliable full-time white collar professional could afford and what shelter would actually cost was fake value. Just think, though, if I'd bought then, forsaking my holidays, nights out, glasses, dentists, etc to get on the "property ladder", I would have ended up with debt that was double the value of my home, and cost double what I could comfortably afford.Anyway, long story short, the "half" is a subjective estimate, but nonetheless realistic in my view. A very modest one-bedroom flat can not cost more than the type of person who would want to live in such a dwelling (i.e. me) can afford. And the cost of even the most basic shelter can not exceed what the lowest bracket of full time wage-earners can afford.
The housing slump is the supreme example of how irresponsible and short sighted it is to gamble on the price of basic necessities.
Next they'll go for water. Just wait and see.
Edit: Obama can't "prop up" failed housing sectors. All he can do is either continue bailing out the banks (an incredibly stupid idea, since their unrecoverable debts run into the tens of trillions of dollars) or intervene in foreclosures by insuring individual mortgages or forcing lenders to renegotiate the terms of bad mortgages instead of repossessing so that people can stay in their houses and pay what they can (the only possible way to restore any semblance of stability to the mortgage market).
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Scarlett Wampus
psychonaut
There is never going to be another long lasting general upward trend in the markets. At least, not in the world as we've come to know it.
My, are we the voice of doom and gloom. Everything will shake out, most likely when our next President takes office.
A year is a long time?I see no sign of any great improvement in this crisis for a long time to come. Maybe even a year or more....
no_spoon
Member
Don't forget the psychological component to the market. It's not all dollars and cents (or smoke and mirrors).
As has been pointed out up thread *part* of our current problems have to do with people being unable to take risk because of their valid perception that things might get very much worse than they are today. So everyone's waiting for everyone else to make the first brave move.
Which is why I have some hope that an opposite psychological movement of sufficient size and real value generation could help offset that. Personally I don't think "green energy" generates any real value (in an economic sense, survival of the planet is a different topic). I think space exploration or better communications would create true value plus opportunities for other as yet unrecognized industries (but I could be wrong, I'm just saying some "frontier" experience).
The very nature of the asset securitization process that got us into our current jam (and worked very nicely as an engine for the economy for decades until some VERY stupid relaxations were made in risk rating procedures and regulatory requirements) assumes that risk can be quantified and counterbalanced with reward. Asset pools, tranches and cash flow waterfalls really do both provide necessary funds for investments and return good rates of return for investors. As long as the entire process is properly audited and regulated, and people don't panic. I'm not saying people were wrong to panic, just that the basis of securitization is ruined by incompetent rating agencies, stupid or corrupt politicians and a loss of faith by investors. That's like 3 flat tires.
My point is that there always have been people overbuying into houses they can't afford or walking away from their mortgages, just like there are people who underbuy (like myself) and others who would work three jobs to pay their mortgage. Mathematical models take that into account and if they are not fed the wrong data by rating agencies or ignored by regulators they can work very nicely.
To put it the other way, there is (or was) a lot of money tied up in this country needing to be invested in good quality bonds with a decent rate of return. That used to be provided by asset securitization which was the golden egg laying goose that was killed. No matter what next "big" industry that may come along I'd like to see how it's going to be financed. Syndications of big banks (yep, they're interested in extending themselves right now...not)? Tax dollars (yeah, that'll work well). Foreign investors (do we want to sell our country wholesale?)
Just my 2 cents.
As has been pointed out up thread *part* of our current problems have to do with people being unable to take risk because of their valid perception that things might get very much worse than they are today. So everyone's waiting for everyone else to make the first brave move.
Which is why I have some hope that an opposite psychological movement of sufficient size and real value generation could help offset that. Personally I don't think "green energy" generates any real value (in an economic sense, survival of the planet is a different topic). I think space exploration or better communications would create true value plus opportunities for other as yet unrecognized industries (but I could be wrong, I'm just saying some "frontier" experience).
The very nature of the asset securitization process that got us into our current jam (and worked very nicely as an engine for the economy for decades until some VERY stupid relaxations were made in risk rating procedures and regulatory requirements) assumes that risk can be quantified and counterbalanced with reward. Asset pools, tranches and cash flow waterfalls really do both provide necessary funds for investments and return good rates of return for investors. As long as the entire process is properly audited and regulated, and people don't panic. I'm not saying people were wrong to panic, just that the basis of securitization is ruined by incompetent rating agencies, stupid or corrupt politicians and a loss of faith by investors. That's like 3 flat tires.
My point is that there always have been people overbuying into houses they can't afford or walking away from their mortgages, just like there are people who underbuy (like myself) and others who would work three jobs to pay their mortgage. Mathematical models take that into account and if they are not fed the wrong data by rating agencies or ignored by regulators they can work very nicely.
To put it the other way, there is (or was) a lot of money tied up in this country needing to be invested in good quality bonds with a decent rate of return. That used to be provided by asset securitization which was the golden egg laying goose that was killed. No matter what next "big" industry that may come along I'd like to see how it's going to be financed. Syndications of big banks (yep, they're interested in extending themselves right now...not)? Tax dollars (yeah, that'll work well). Foreign investors (do we want to sell our country wholesale?)
Just my 2 cents.
Scarlett Wampus
psychonaut
Heh, we'll see.
I am a self confessed doomer but like virtually all doomers I hope I'm wrong.
Very wise and insightful post! :yes:
DallasApple
Depends Upon My Mood..
I'm glad you liked it.
Anyway, long story short, the "half" is a subjective estimate, but nonetheless realistic in my view. A very modest one-bedroom flat can not cost more than the type of person who would want to live in such a dwelling (i.e. me) can afford. And the cost of even the most basic shelter can not exceed what the lowest bracket of full time wage-earners can afford.
The housing slump is the supreme example of how irresponsible and short sighted it is to gamble on the price of basic necessities.
Next they'll go for water. Just wait and see.
Edit: Obama can't "prop up" failed housing sectors. All he can do is either continue bailing out the banks (an incredibly stupid idea, since their unrecoverable debts run into the tens of trillions of dollars) or intervene in foreclosures by insuring individual mortgages or forcing lenders to renegotiate the terms of bad mortgages instead of repossessing so that people can stay in their houses and pay what they can (the only possible way to restore any semblance of stability to the mortgage market).
Im so glad we didnt sell this house we are in..and buy a "bigger" house in the past few years.Our standard of living would have been traded in for a higher mortgage.On a house that would be like you mentioned probably worth a lot less than what we paid for it.
Love
Dallas
Alceste
Vagabond
A wise move, I'd say. Best to keep your expenses to a minimum for the next few years - and put in a vegetable garden, if you haven't already!
Scarlett Wampus
psychonaut
Beginning Now: The Panic Phase of the Collapse
I think the investment adviser who wrote the above is rather honest the circumstances the markets are facing.
I think the investment adviser who wrote the above is rather honest the circumstances the markets are facing.