Is the sky falling? Dow is way down any hope

[Brat]

The hidden economy

For all those who go ballistic with the number of undocumented from Mexico, in the west a large percentage work home construction. When home construction tanks they don't file for unemployment so they don't show up in the statistics. Remittances to Mexico have fallen significantly.

Consider the possibility that these undocumented workers live largely a subsistence life in the US because they are supporting families in Mexico, their situation has little impact on non-food retail sales. The larger economic impact is in Mexico.

I think the level of unemployment is higher than reported, but so long as the economic adjustment is largely limited to home construction it will have little impact.

 

[LOL!]

I read the title to this thread, so I have to go check for myself to see if the "Dow is way down" ....

Nope, the Dow is about where it was in April and in August. I conclude that the sky is not falling.

 

[Robert the Red]

There is a line of tax increases in the works. History says that will create an economic slowdown.

As in 1994?

 

[W2R]

I read the title to this thread, so I have to go check for myself to see if the "Dow is way down" ....

Nope, the Dow is about where it was in April and in August. I conclude that the sky is not falling.

Good point!!

Like many others here who are in the accumulation phase, I have more in my accounts than I did last summer. So, that confirms it. The bright blue sky is still pasted up there where it belongs. For now, anyway....

 

[unclemick]

Well - at the start of the season - I was wildly optimistic about the Saints and pesimistic about the stock market.

Anything between 100% to 50% wrong will be ok.

heh heh heh - although I would like the Saints to win a few more games.

 

[Ed_The_Gypsy]

Doom! Doom! (OK, I'm right only about half the time.)

 

[Brat]

I am no market Maven but the gyrations of the stock market right now are disconcerting. Way up one day, way down the next gives me the feeling that this is a trader, not a fundamental, market. Manic depressive is my diagnosis and the 'secured' debt situation has not unwound.

Anyone else feeling like things are not quite right?

 

[eridanus]

As in 1994?

Right. Those 1994 tax increases created the longest recession the US has ever seen. It was tough, I tell ya, tough. No jobs, stagflation, no innovation.....

 

[ERD50]

Doom! Doom! (OK, I'm right only about half the time.)

Which half? - ERD50

 

[LOL!]

I am no market Maven but the gyrations of the stock market right now are disconcerting. Way up one day, way down the next gives me the feeling that this is a trader, not a fundamental, market. Manic depressive is my diagnosis and the 'secured' debt situation has not unwound.

Anyone else feeling like things are not quite right?

You are suffering from recency bias. In the past, I believe the market was routinely more volatile than it is nowadays. This year we have had (so far) a couple of 8-10% drops (over the course of a few days or weeks).

Let me ask you this: What do you think happened in 1998? In 1997?

 

[chinaco]

Don't know about the sky... but my portfolio has given back a few point.

 

[novaman]

So what's the best portfolio mix to be in during these times?

 

[ERD50]

So what's the best portfolio mix to be in during these times?

Cash on the down days, highly volatile stocks on the up days.

But, since you are unlikely to know which is which ahead of time*, you've got to pick an asset allocation, and stick with it. That's what it's for.

'These times' will only be apparent in the rear-view mirror. As soon as you adjust your portfolio for 'these times' you may find yourself in 'some other times'. And then you may be wondering why your portfolio is doing so poorly, you seem to always be in the wrong mix. What went wrong?

-ERD50

* If you do figure out how to do this, PM me please.

 

[retire@40]

So what's the best portfolio mix to be in during these times?

The same as the other times.

 

[Nords]

I am no market Maven but the gyrations of the stock market right now are disconcerting. Way up one day, way down the next gives me the feeling that this is a trader, not a fundamental, market. Manic depressive is my diagnosis and the 'secured' debt situation has not unwound.

Geez, Brat, now they have you doing it too?!?

Maybe the best response to these types of threads is to simply say "Yes, Virginia, you're absolutely right, the sky really is falling, get thee to a bomb shelter!" and to just get on with our lives.

But stock-market volatility (measured by the VIX) has been at an all-time low over the last couple years, and the last few months doesn't even approach the late 1990s-- let alone 2000-2003. It's worth noting that the difference between the Dow dropping from 14,000 to 13,000 is 1000 points. That may be nearly twice the points of the Oct 1987 drop but today it's a measly 7%-- less than one-third of the Black Monday percentage drop. Just a blip on the investing radar.

Traders look for "true selling" and "true buying" days of at least 1%... that's over 130 points now. So 250 points should be making the traders happy, and 500 points should be making them ecstatic. Instead hordes of "investors" race to the nearest discussion board, drop to the ground, and start writhing in agony & foaming at the mouth.

As for the magnitude of the volatility in one's personal portfolio, it could be measured in scary "years of salary" numbers or it could be assessed in percentages. Despite all these walls of worry being pelted by falling skies, our portfolio value has only oscillated by a couple percent. We're up 8.7% YTD (ooh, but Berkshire Hathaway is up today!) and I bet the year-end number is between 6-10%. Truly terrifying.

BTW if the price of gold at its 1980 peak of $850/oz was adjusted for inflation, today it'd be over $2075/oz. So I wouldn't worry until gold at least doubles from its current price...

 

[Andy R]

Brat, I know what you mean. It is definately disconcerting for people who watch the market on a daily basis (even though we all know it's a long term game). To me the scariest factors are macroeconomic issues. Although I don't loose sleep thinking about "the perfect storm" needed to knock the market way down, we have to plan for the worst and hope for the best. Diversification and time are our allies.

 

[Brat]

Oh I have my handy-dandy bucket 1 so this chop is not a major concern, actually.

I have been watching the dry shipper that Cramer fell in love with and the stock went way up. Then after interviewing the CEO who communicated that there is no heaven on earth Cramer let it know that he wasn't so confident and the stock came down big time Monday. Then up a large % yesterday (kicking myself for not buying the day before). That volatility presents the opportunity for bargain shopping, and what woman doesn't appreciate a bargain. Frankly I would love it if some of the hot money got cold feet for that stock.

The heavy seas in financials is bothersome. I lived through the banking mess of the 70s and it wasn't pretty. I need to go out and spread some money around today.

 

[Andy R]

I think the term bargain shopping is dangerous. I recently was working on some planning research and read an article in a financial planning magazine that had advice from many greats including Warren Buffet. Here is a summary of important things I wrote down:

• Do not touch stocks on a regular basis. (those who trade least earn on average 7% more per year).
• Asset allocation is the way to increase returns. Re-allocate once a year.
• Only invest in Index Funds (low cost funds)
• Emergency Fund = 6-12 months expenses in interest bearing savings (or money market)
• Make sure to have sufficient International
• Financial Planning - Set Goals, Commit to reach goals by date or suffer penalty
• American Academy of Estate Planning Attorney's - Good resource for wills ($1,500)
• How to divide emotional-laden personal belongings check out yellowpieplate.umn.edu
• More money does not equal more happiness. People who say they value money highly report that they are less happy in life then those who care more about love and friends. After covering the basics being much richer does not make you much happier.

I will post the credits to the articles when I return home. I wonder where they got the "those who trade least earn on average 7% more per year"? I would like to see that study. I have always bought my own stocks but from now on I am going to be disciplined and follow the above guidelines. I might keep a small percentage of my assets (under 5%) to bet with by buying individual stocks but even then I know I might as well go on a random walk down Wall Street.

 

[FinallyRetired]

Just checked with the 2012 people and they say the Dow is moving right along one of their predictions, but they didn't say which one.

 

[Brat]

The heavy seas in financials is bothersome. I lived through the banking mess of the 70s and it wasn't pretty. I need to go out and spread some money around today.

By spreading my money around I meant that I want to spread money in a savings account around several lenders so that none are over $100T. It is an estate, not my money. Not an investment.

 

[jazz4cash]

Well this is pretty easy since OP did not specify Christmas 2007 so the answer is absolutely positively YES!!