When will the downward spiral in the stockmarket end?

My point wasn't that Livermore was always right, rather, I meant that he tended to bet in the direction of the prevailing trend. The bear market that followed the dotcom bubble would have been tailor made for a trader like him.

As for his suicide, the guy did have a lifelong battle with clinical depression. The wikipedia entry points out that "untouchable trusts and cash assets at his death totalled over $5 million" so he didn't die broke. However, I'd be the first to say that Livermore was not, as so many have claimed, the greatest trader ever. He blew up too many times for such an accolade. Trading is hardly an ideal profession for anyone suffering from major depression.

Regarding the book, it does provide that 1920's flavour but it's also quite a timeless work and is still very widely read today. I doubt you'll find a trader on Wall Street who hasn't read it.
 
i totally agree that he made loads of mistakes. but i felt that his mistakes were the same mistakes that most traders make today. i.e. taking tips from friends etc, one of this quotes " my best money was made from my sitting not from my thinking"
 
from wikipedia
"He proceeded to lose 90% of that 1907 fortune on a blown cotton trade. He violated many of his key rules; he listened to another person's advice (he preferred working alone) and added to a losing position."

lots of people add to a position as it goes down in value beliving that its a real bargain as it gets cheaper. this is a big mistake
 
coola said:
"He proceeded to lose 90% of that 1907 fortune on a blown cotton trade. He violated many of his key rules; he listened to another person's advice (he preferred working alone) and added to a losing position." Lots of people add to a position as it goes down in value beliving that its a real bargain as it gets cheaper. this is a big mistake
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What’s the cotton trade got to do with the credit derivatives markets in a state of collapse? I would tend to look over my shoulder at what Buffett is doing and thinking, from Globes Online 29.01.2008


Buffett explained to anyone interested in listening that the derivatives market was a ticking bomb and that it was just a matter of time before it all blew up in our faces. When I looked up Berkshire Hathaway's reports I found out that Buffett said the very same thing in a letter, black-on-white, to investors in 2003, when the company unveiled its results for 2002. "Charlie (Munger) and I are of one mind in how we feel about derivatives and the trading activities that go with them. We view them as time bombs, both for the parties that deal in them and the economic system," he wrote.


What's no nonsense Buffett at today
http://news.google.ie/news?hl=en&tab=wn&ned=en_ie&q=warren+buffett
Warren Buffett's Berkshire Hathaway Inc. agreed to expand its new bond insurer nationwide in exchange for faster licensing, a group of U.S. state regulators said today. Berkshire has committed,'' Holeman said in an interview...Berkshire's bond insurer may help stabilize debt markets, which have been roiled by the prospect that MBIA Inc. and Ambac Financial Group Inc., the industry's biggest guarantors, may lose their top credit rankings. A downgrade may affect $2.4 trillion in assets industrywide, and Fitch has already stripped its AAA rating from Ambac after losses tied to subprime loans.

One of Buffetts rivals on Wall Street is John Paulson who made $15bn in the last six months shorting subprime by exploiting the mis-pricing between CDO's and CDS's. I suspect this is where the action is, in arbitrage. If these people are busy making money shorting or exploiting panic, then IMO there is no horizon for any updrafts short term within the markets.


Again where are the markets in the last day or so/....

http://uk.reuters.com/article/bankingFinan...29?rpc=401&
BofA CEO: Bond Insurer Meltdown a Systemic Risk --Tue Jan 29, 2008 6:02pm GMT

NEW YORK (Reuters) -- Any meltdown of a large bond insurer would pose a systemic risk, Bank of America Corp Chief Executive Ken Lewis said at a conference on Tuesday. The bond insurers, which guarantee more then $2 trillion of securities and are expected to make big payouts on bonds linked to subprime mortgages, are struggling to raise capital and keep their top credit ratings.

http://www.bloomberg.com/apps/news?pid=206...&refer=home
UBS Reports Record Loss After $14 Billion Writedown

Jan. 30 (Bloomberg) -- UBS AG, Europe's largest bank by assets, reported a record loss after about $14 billion of writedowns on assets infected by subprime mortgages in the U.S. The fourth-quarter net loss of 12.5 billion Swiss francs ($11.4 billion) was almost double what analysts surveyed by Bloomberg were estimating, and brings the total decline for the year to about 4.4 billion francs, the Zurich-based bank said today in a statement. UBS publishes its official results on Feb. 14.`The damage is enormous,'' said Dominique Biedermann, director of Ethos Foundation in Geneva that holds UBS shares worth about 80 million francs. ``It wipes out profit and shows that an inquiry is needed to make sure it doesn't happen again

How much will corporate America and corporate Europe lose out or suffer as a result of bank consolidations and lack of leverage lost for M&A's, natural expansions etc. Deals everywhere are falling through left, right and centre. Until this washes its way out of the system, there is IMO little growth to be achieved.

Bloomberg's poll reckons there is an 74% chance of a 50 bps Fed cut today, at 7.15GMT. As the dollar devalues, when will its creditors including OPEC, start to tell them to shove the greenback where the sun doesn't shine?

 
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coola said:
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.
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Hardly. When I read posts here I have to take into account I don't know the posters level of experience, qualifications etc or where they get their information from.

As soon as you start typing in txt talk I'll assume you're actually a teenager or just lazy and my opinion of your argument becomes weaker.

I think it's a valid point.
 
ixus said:
Hardly. When I read posts here I have to take into account I don't know the posters level of experience, qualifications etc or where they get their information from.

As soon as you start typing in txt talk I'll assume you're actually a teenager or just lazy and my opinion of your argument becomes weaker.

I think it's a valid point.
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That's a ridiculous point.

Nobody knows anyone on this forum - but after reading a few posts by someone then it should be pretty obvious to most as to what kind of a punter they're dealing with.

I quite often use bits of 'txt talk' as you call it urself ixus - (Should that not be 'text talk' ? - looks like we're all guilty of it from time to time eh ixus ?)
SO which one are you then ? A teenager ? Or just lazy ?
 
Fed cut 50bps, as expected. Anybody for more Gold??
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Dollar continuing its tanking trend [broken link removed] ! whilst the Dow is spiking initially! Gold $930, but ten year bond rate not reacting.
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\/...Sooner or later the Chinnese are going to ditch the greenback and admit enough is enough.
 
MichaelDes said:
Fed cut 50bps, as expected. Anybody for more Gold??
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Dollar tanking [broken link removed] OMG!!
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Well - im in gold.Won't go for anymore.

Is there a shakeout ahead though ?

A few analysts are murmuring on about it.
 
If nobody else slashes their central bank rates and many currencies appreciate against the dollar, then any inflation fallout will be confined to countries using the dollar or which peg against the dollar. Assets priced in dollars are likely to rise in price as they will retain a relative weighting against other currencies. Therefore what the US is doing is a de-facto devaluation of the dollar. As there isn't global inflation, gold is not required as a hedge and a basket of currencies would do the same job.

Where have I gone wrong in the above schoolboy analysis?
 
I've had a read through this very interesting thread. I have to admit, I'm torn between basing my investment decisions on the optomistic scenario of this being a sharp correction in markets that will recover towards the latter part of this year or the more pessimistic scenario of this being the beginning of a potentially long and painful bear market.

My guess is that stock markets will continue to decline until at least the Autumn but that recovery should set in then. The extent of the writedowns at investment banks has been simply breathtaking but I can't help but think that these are overdone and that the current market prices of securitised products like RMBS, CDOs etc are out of kilter with their true fair value. Is it really credible that the rates of default on the underlying obligations are going to rise to such an extent that those write-downs will be justified? For example, in the US subprime market, mortgage defaults will surely not be as bad as previously feared given the fiscal stimulus package and the Fed rate cuts. I think this leaves open the possibility of massive write-ups at the investment banks later in 2008 or in early 2009. A re-pricing of risk was long overdue but what is happening now looks too extreme and would not appear to be justified by the economic fundamentals.

I moved a large portion of my portfolio to cash during the market rally in October 2007 as I could see nothing but negative newsflow in the immediate future. I have been averaging back into the market since then on a modest basis. Later this year, when the true extent of the losses linked to structured credit securities becomes clear and provided the economic downturn does not look irreversible, I plan to move agressively back into equities. I think the upswing could be enormous and as has been pointed out by a previous poster, financials could well lead the way back up.
 
My guess is that stock markets will continue to decline until at least the Autumn but that recovery should set in then. The extent of the writedowns at investment banks has been simply breathtaking but I can't help but think that these are overdone and that the current market prices of securitised products like RMBS, CDOs etc are out of kilter with their true fair value. Is it really credible that the rates of default on the underlying obligations are going to rise to such an extent that those write-downs will be justified? For example, in the US subprime market, mortgage defaults will surely not be as bad as previously feared given the fiscal stimulus package and the Fed rate cuts. I think this leaves open the possibility of massive write-ups at the investment banks later in 2008 or in early 2009. A re-pricing of risk was long overdue but what is happening now looks too extreme and would not appear to be justified by the economic fundamentals.

I moved a large portion of my portfolio to cash during the market rally in October 2007 as I could see nothing but negative newsflow in the immediate future. I have been averaging back into the market since then on a modest basis. Later this year, when the true extent of the losses linked to structured credit securities becomes clear and provided the economic downturn does not look irreversible, I plan to move agressively back into equities. I think the upswing could be enormous and as has been pointed out by a previous poster, financials could well lead the way back up.
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Be aware you are attempting to market time which rarely if ever beats buy and hold long term.
 
I agree that trying to time the market can be foolish but I also think that there's a fair argument to be made for increased buying when fear abounds and valuations look attractive. Look at Warren Buffet - Berkshire Hathaway has been sitting on a $40billion cashpile and is only in recent months putting that cash to work to take advantage of the market sell-off (which has been relatively indiscriminate in the search for safety and liquidity) to buy value.

The big question is where to find that value. If the Fed's rate cutting (which may be followed by the other big central banks over the course of this year) results in another bubble inflating, the next few months are a great opportunity to position yourself to benefit from the upswing. I think some of the emerging markets may be a fair bet, but I also wouldn't be surprised if some of the European large caps benefit too. If confidence comes back into the market and provided the economic outlook here in Ireland doesn't become too grim, the ISEQ may well have a rebound too. What do you think?
 
Croesus said:
The big question is where to find that value. If the Fed's rate cutting...
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The Fed will rate cut again by 50bps in March as a result of unexpected weakness in the labour market. Many analysts believe this rate cut may led to the Chinese and OPEC countries to dump the greenback and switch their weighting of dollar [China has over $1.8trn]. If this happens it will affect the dollars value, dramatically.

Monoline markets are looking bleak too. Again the Fed is trying to fix it with liquidity. But the America dollar can not stand much more printing before it breaks completely. The national debt has risen 66% since Bush came to power and every other lackey apart from Ron Paul has no real plan to control the countries public spending. The Iraq dinar has risen in value against the dollar and in South America it is known as Bernanke peso because of its reputation of being a banana republic monetary policy.

The American monetary system IMO is on the brink, it could go either way. It is like a Ninja continuously trying to borrow its way out of trouble with little or no income. Consumer appetite required to help the economy is non existent. So if America sneezes, Europe and the Far East gets a cold [China, Russia and India are not big enough to decouple].

But what if the US has the flu??
 
Hi MichaelDes,

Is a weak dollar really that bad for the U.S.? Will it not allow U.S. products to appear discounted globally, maybe narrowing their trade deficit? And is it really likely that China would dump the dollar? - would this not cause the renminbi to appreciate against the dollar? Since China depends on exports to the States would they not want to keep the dollar strong vs. the renminbi? If China dumped the greenback would they be shooting themselves in the foot?
I really don't know anything about economics so please point out where I'm going wrong with my train of thought.
 
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