When will the downward spiral in the stockmarket end?

MichaelDes said:
Rubbish - ofcourse it's relevant. How else is afforability in its purest form to be measured?
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Ok - I know i'm going off topic but i have to respond to teh above.

The point I am making is some people look at the average incomes of a country and compare it to the price of a property they are considering to buy.
They then conclude the multiple is too high.

WHat I am saying is if you were to buy a house worth 500k and compare that to the average income of 35k a person may well decide to back out of the purchase.

However you will not be selling that house onto the guy who is on teh average wage - you will be selling that onto a guy who is in teh higher earning bracket.

So my point is - I wouldn't let the average earnings put me me off buying a property.
 
qwertyuiop said:
The point I am making is some people look at the average incomes of a country and compare it to the price of a property they are considering to buy. So my point is - I wouldn't let the average earnings put me me off buying a property.
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I hate this going off thread but when average income to average house price goes over 6+ times - alarm bells sound in my head of "bubble alert". Propensity to afford is fundamental, look at repossessions in the States?
 
qwertyuiop said:
Ok - I know i'm going off topic but i have to respond to teh above.

The point I am making is some people look at the average incomes of a country and compare it to the price of a property they are considering to buy.
They then conclude the multiple is too high.

WHat I am saying is if you were to buy a house worth 500k and compare that to the average income of 35k a person may well decide to back out of the purchase.

However you will not be selling that house onto the guy who is on teh average wage - you will be selling that onto a guy who is in teh higher earning bracket.

So my point is - I wouldn't let the average earnings put me me off buying a property.
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this has no relevance in determining what position of affordability the housing market is at
 
MichaelDes said:
The worst thing that could happen is the whole financial system could be in serious jeopardy? What will a 2.3Trillion USD bond market default cause? What affect will that have on markets? Also as mentioned, American banks are sitting on 120Trillion USD of credit derivatives, if any of these default - Can the Fed just keeping printing its way out of trouble, and rollover and rollover on loans? No, it can’t!

Markets have low p/e valuations, that's the only upside. But until these credit derivative issues have washed themselves thoroughly - I'm sticking to safe haven plays of Gold. It keeps rising as America keeps going down the toilet and is a defensive play/position. The downside is utterly compelling, as credit and recession problems are going hand in hand. Study the facts and face reality, long term things aren't going to be pretty.
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ok,but what is the most likely outcome in say..12 months
 
barryl said:
ok,but what is the most likely outcome in say..12 months
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Welcome back to the 2003/2004 FTSE lows etc! I made the mistake some posts back by saying shares, sectors or markets are relatively cheap by comparison of P/E. But is an Irish bank likely to make the same profits in 2008, compared to 2007 and 2006? No and definately no, it will not. Therefore P/E must be judged against future profitability, not past profitability. So on that basis bank shares etc may not look so cheap, and dividend yields in the financials according to Credit Suisse will be cut by 38%. The same is true of all cyclical sectors facing downturns in corporate profitability.

Also,if Bernanke made an unprecedented cut of 75bps in an emergency session, the first time in 23 years then something really bad is coming down the tracks. The cut may save the markets short term but it won't save recession. Consumers have no appetite for debt and companies have no appetite to leverage for expansion. In the last week the Vix Index of all bourses is at an all time high, but irrational market exuberance of the last day or so, could be IMO the biggest sucker’s rally, dead cat bounce ever witnessed.

One of the few markets that should be off the hook is Japan. Banks and its wider economy have little to no exposure in subprime. It may be worth a look. It can't get any worse, after ten years of harsh treatment, especially by market traders. But its index still dropped 18% Ytd eventhough it has no culpability to America's problems. A school boy blamed for someone elses misdoing's, but nonetheless it's a market still worth watching.

Finally how sublime for the bankers to be awarded recently, the largest bonus allocations ever. Which is ironic because if governments hadn't infused all that cash there would be no money to pay them!! So basically we the tax payers are paying the risks and paying the bonuses too. Worthy of Ricky Gervais sketch on the Office. Need I say more on why to hold, hold, hold.


 
Maybe I'm pessimistic but one of two things that I failed to mention.

Now that (i) Fed interest rates have fallen below RPI, is this going to cause other asset priced bubbles or more inventive banking models? Aren't the credit markets in enough of a state presently without compounding the problem further. Is this fuel to the fire?

Point two may have an affect on stock markets after the credit crisis has abated and American recession ends. In about 2 years time, but maybe worthy of another thread

(ii) Peak oil is now occurring.

This is the point when global consumption is greater than new reserves can be brought on stream. Therefore known stocks start to decline irreversibly. If extraction is not enough to meet demand then prices must increase. That is until demand is destroyed to meet supply constraints.


It's a global power grab for the last of the resources between the Americans and the hard working Chinese. With Peak oil, all governments should to be trying to facilitate a transition towards an energy constrained future. But too much taxation is involved and politicians and world leaders don’t see it that way, only towards the next election post. Some of the short terms issues

-India has currently four cars for every 1000 adults opposed to say the US which has 1000 cars for every 1000 adults. The Indian govt is actively promoting car ownership and have launched the super cheap Tato Nano Indian sedan at US $ 2500 on the road. It looks like Indian targets will be well and truly exceeded.

-Mexico one of the US biggest suppliers is plagued with bad news. Production fell 8.2% last year and will keep falling at 10% a year.

-In 2008 the world is going to start using oil at a rate of more than 1,000 barrels per second or according to the International Energy Agency (IEA) 87.8 million barrels per day (bpd)


A significant American recession may led to sub $70 IMO maybe but long term is upwards
  • Lack of sufficient exploration discovery for the last 30 years.
  • Significant depletion in many major fields.
  • Increased demand from growing global economy.
  • Further political instability (i.e. ME wars).
Alternatives are growing at such a miniscule rate as to have almost no effect on the downward curve and all governments know this, and are keeping quiet about it as they don’t want it to happen on their watch. So if Oil is on an upward tend to above $200pb then, there will be no more driving ridiculous SUVs, buying asparagus originating from Venezula and going off to the other side of the world for next to nothing. And the risks to business will be even greater, look at the 1970’s. This time it looks like the real deal and will have a lasting affect. Every business relies on oil whether it’s in plastic production, logistics, or any goods in any shop, 95% involve Oil somehow. See here.
 
ok. time for a post here . people are getting ahead of themselves.

bernanke cut by .75 as he is new to the job and does not want to **** anyone off especially the bush family. he is much safer to slash rates now and deal with inflation later as if he didnt cut and economy tanked then he would be regarded as a total failure.

why is everyone so obsessed with p/e's . most stocks that do well have huge p/e ratios i.e. google, baidu etc. the stocks that do well in an uptrend are growth stocks, p/e does not come into it

with regard to peak oil, dont even start this conversation. i have had numerous contacts with various petroleum geologists in the US and every one of them say that peak oil is not here and if and when it does arrive, market forces and new technology will get us thru. just the same as it has over the past
 
In case you hadn't noticed, Google has lost $150 in the last few weeks. That's 20%.

Really, coola, your posts crack me up. You almost had me started arguing with you there for a minute, you joker. :)
 
yes google has fallen from over 700 dollars to 550. its still at very high p/e ratios. whats so funny about that??? do u not remember the dot com boom and the p/e ratios that existed there for a long period of time????
 
coola said:
yes google has fallen from over 700 dollars to 550. its still at very high p/e ratios. whats so funny about that??? do u not remember the dot com boom and the p/e ratios that existed there for a long period of time????
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:D
 
ur prob one of these guys that spends their time trying to find a giant of tomorrow . instead of trading on strong stocks during market uptrends
 
u should read some stock market books. winning on wall street, how to make money in stocks, the book about jesse livermore. they all say the same thing!! stocks that do best have very high p/e ratios
 
coola said:
u should read some stock market books. winning on wall street, how to make money in stocks, the book about jesse livermore. they all say the same thing!! stocks that do best have very high p/e ratios
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I think any book titled winning on wall street and how to make to make money in stocks or any other book that promises to reveal the market secrets should be put in a big pile and set on fire....

p.s. I am going to show my ignorance now and ask who Jesse Livermore is
 
he is a legendary trader that made and lost fortunes serveral times on the markets. its a great read that basically re-enforces the same comments that all the winners make

1. cut your losses quick
2. let your winners run

as far as im concerned the market runs on psychology i.e. the herd mentality. so if investors think that a stock has great growth prospects then they will buy it regardless of p/e ratio. it will continue going up until an earnings report beings them back to the real world i.e. vmware. a lot of money made on this stock while it went thru the roof (on ver high p/e ratio) , then they missed earnings and everyone sold out
 
coola said:
u should read some stock market books. winning on wall street, how to make money in stocks, the book about jesse livermore. they all say the same thing!! stocks that do best have very high p/e ratios
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Back it up with some facts. Otherwise you are just blowing hot air.

[broken link removed]
The above chart shows what happens to an index filled with high p/e stocks.

Jesse Livermore
http://en.wikipedia.org/wiki/Jesse_Lauriston_Livermore
A contrary view of Livermore's life is provided by Paul Sarnoff. Sarnoff says that Livermore was a hype merchant and that many of his brilliant successes were gross exaggerations. He states that Livermore did not in fact make much money during the 1929 crash as he was heavily hedged. He accuses Livermore, at the end of his career as being little better than a tout.
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No doubt Livermore would also have been telling us about the new paradigm in new tech stocks, where you don't actually have to make any money for the stock to be worth anything.

As for the other books you mention, timing, momentum and technical analysis have, as a reviewer on Amazon pointed out, elevated the use of chart patterns to astrological significance. I'm not saying they're no use, just that they work well in a market with a direction; I don't believe the market has yet decided what direction it is going in. Volatility and abrupt movements of sentiment can crucify short-term bets.
 
coola said:
he is a legendary trader that made and lost fortunes serveral times on the markets. its a great read that basically re-enforces the same comments that all the winners make

1. cut your losses quick
2. let your winners run

as far as im concerned the market runs on psychology i.e. the herd mentality. so if investors think that a stock has great growth prospects then they will buy it regardless of p/e ratio. it will continue going up until an earnings report beings them back to the real world i.e. vmware. a lot of money made on this stock while it went thru the roof (on ver high p/e ratio) , then they missed earnings and everyone sold out
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If you let your winners run, is it not inevitable that you will only sell them at a loss?
 
coola said:
ur prob one of these guys that spends their time trying to find a giant of tomorrow . instead of trading on strong stocks during market uptrends
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wat age r u? plz dnt tlk n txt

it weakens ur argumnt....

gud man
 
No doubt Livermore would also have been telling us about the new paradigm in new tech stocks, where you don't actually have to make any money for the stock to be worth anything.

That's a bit silly and you'd realise that if you read the book. Livermore was a trader, not a cheerleader. There's little doubt that, were he around at the turn of the century, he'd have been long during the bull market before shorting the life out of the collapsing dotcoms on the way down.

His book has been extremely influential and is widely regarded as being a classic. It can be freely (and legally) downloaded nowadays. See

http://bigpicture.typepad.com/comments/2007/01/reminiscences_o.html
 
charttrader said:
No doubt Livermore would also have been telling us about the new paradigm in new tech stocks, where you don't actually have to make any money for the stock to be worth anything.

That's a bit silly and you'd realise that if you read the book. Livermore was a trader, not a cheerleader. There's little doubt that, were he around at the turn of the century, he'd have been long during the bull market before shorting the life out of the collapsing dotcoms on the way down.
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On page 2:
"Another lesson I learned early is that there is nothing new
in Wall Street. There can't be because speculation is as old as
the hills. Whatever happens in the stock market today has
happened before and will happen again."
So fair enough, I concede your first point entirely. It was a silly thing to say.

Your second point, however, is as silly as mine. Livermore made AND lost fortunes on the stock market. He ended up broke and shooting himself dead. Not a strategy I'm keen to follow myself.

PS thanks for the link to the book - I shall enjoy it for the flavour of the twenties/thirties.
 
ixus

"wat age r u? plz dnt tlk n txt

it weakens ur argumnt...."

that is a patethic comment to make. im at work and its faster to type in short sometimes. grow up and dont waste time making such stupid comments.

"As for the other books you mention, timing, momentum and technical analysis have, as a reviewer on Amazon pointed out, elevated the use of chart patterns to astrological significance. "

oh wow, a reviewer on amazon pointed this out!!!! must be right then

"If you let your winners run, is it not inevitable that you will only sell them at a loss?"

no, not neccessarily. you wont sell them at the top but you will catch the trend in the middle. thats the big gain.
 
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