ThatDamnedPanda
Posts: 6060
Joined: 1/26/2009 Status: offline
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quote:
ORIGINAL: DedicatedDom40 quote:
ORIGINAL: ThatDamnedPanda I don't give a shit what color his hair is, all I care about right now is what color the Dow average is displayed in at the top of my MSNBC homepage - and it's been red almost every damned day since he took office, largely because he is not keeping his eye on the damned ball. This pop of the stock bubble was long in coming, and I can't lay that at his feet. We gutted the manufacturing sector, focusing instead on a financial sector that had come to monoplize our economy. After all, why make money making physical things when we can make money inventing goods on paper. And now, all the elaborate financial engineering is coming down with a crash. There is no way what remains of our economy could ever justify a 12,000 dow. It should be in the 3,000 to 4,000 range. The math doesnt add up otherwise. I think most of the people who tie the Dow's performance since January to Obama's actions alone are angry for buying in at 10,000 and who are running away at 6,000. Of the two main points, that last is an astute one indeed. And I think it's true there's a lot of that in what we're seeing. I'll confess I got caught with my own pants down more than I like to admit over the last few weeks, but the way I look at it I'm still up over the last year, and even if I were down a lot, I'd still be better off than a lot of people who've been hit much harder. So even though I'm quite concerned about the market, I'm not angry, because I had a chance a month ago to get farther out than I did. I'm disappointed at the losses, but still a happy man. I took a gamble, knew the risks, and lost. Sometimes it works out that way; you just put it behind you and move on with a lesson learned. However, at the same time, I do understand the anger and the frustration that other investors feel as they watch their already-ravaged portfolios become even further depleted. Not saying I validate their anger, because they took the same calculated risk that i did and have to live with their decision the same way I do. I'm just saying i understand their emotional reaction. As for the first point, about the proper valuation of the market, I can't argue with you. I don't know if you're right, but I certainly can't say you're wrong. It's a very good argument. I'm no expert analyst - I'm just an average investor - but more and more the last few months, I've become more convinced that the proper valuation for the Dow may be a lot closer to 6000 than 7000 or 8000. And the longer this goes on, the more 4000 seems like a realistic possibility, because the nature of such a catastrophic economic collapse is that it becomes a self-perpetuating cycle. You have to blend individual human psychology into theoretical mathematical models, and it's like trying to factor a Shakespeare sonnet as a fixed value into a calculus equation. Whatever you come up with is not going to be anything you can call an absolute, verifiable answer. The worse the economy gets, or the worse it is perceived to be, the more people change their spending and savings habits. As they save more, consumer spending (the real engine that drives a recovery) drops further, which cuts corporate profits. Which lowers stock values. And causes companies to let go of more workers, which further reduces consumer spending and frightens people into saving even more money because they're worried they may lose their jobs too, which - what do you know - reduces corporate profits and lowers stock values. So I dunno. 3000? Christ, I hope you're wrong. 4000? Well I still hope you're wrong, of course, but with the direction this thing is going, 3 or 4 months from now we may very well have been driven down into the range where that's the proper valuation for the Dow. A year ago, i would never have believed it. Now? I would be gravely concerned, but not exactly shocked by the impossibility of it all. I won't say I'm expecting it, but I will say that if it does get to that point, I won't have lost much more money. I will have cleaned out my positions long before that. But, having said all that, I still go back to my main point - none of this is going to be fixed until the financial sector is fixed. Until that fundamental weakness is addressed, and positive steps are being taken toward fixing that problem, everything else we do is just delaying the inevitable and throwing good money after bad. No matter how this all turns out - no matter where the Dow finally bottoms and finds its realistic valuation - we can't get there until we get out of where we are now. And I have yet to see any substantive plan from Obama on how he plans to do that.
< Message edited by ThatDamnedPanda -- 3/6/2009 9:07:43 AM >
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Panda, panda, burning bright In the forest of the night What immortal hand or eye Made you all black and white and roly-poly like that?
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