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Old 10-13-2008, 04:13 PM   #41
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Sure, you go first. Lack of oversight allowed this situation to develop. What would you recommend instead of bailing out? How would you get banks to lend money? What would you do to restructure mortgages?

-- Rita
Banks lending money was the cause of the mess in the first place. So how will getting them to lend more money solve anything? I just believe government bailouts are not the answer and will create bigger problems down the road. The future for our children looks bleak.
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Old 10-13-2008, 04:24 PM   #42
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Banks lending money was the cause of the mess in the first place. So how will getting them to lend more money solve anything? I just believe government bailouts are not the answer and will create bigger problems down the road. The future for our children looks bleak.
Banks lent money that they could borrow from Freddie Mac and Fanny Mae, or from each other. Generally, for every $1 in bank assets, they lent $.96, so that meant if they weren't careful in underwriting the loans and they defaulted, they had no reserves to back up their assets on deposit. When you don't have assets, depositors panic and want their money. When money has no value, then a society based on exchanges of credit (that's not easy credit, just exchanges of credit) cannot function.

So, what alternative do you propose to "the future for our children looks bleak"?
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Old 10-13-2008, 06:39 PM   #43
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WW is my vote

Meaning this see-saw went down a second time and we have two more to go.

I predict 7 years to recover to 2007 levels, which were similar to 2000 levels.
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Old 10-13-2008, 06:49 PM   #44
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I think the recovery will be faster than most are predicting. In the Great Depression, folks in the stock market lost everything they owned. It was not the case of holding on or selling to come in again at a later time. Most were in on margin and were way over their heads. I believe the average person could buy on as little as 10%. When the market dropped their margins were called and positions sold. They were sold out broke no money to reinvest. In fact many lost everything they owned.

As this is not the case now, it would appear that market recovery is more dependent on greed overcoming fear. As the market begins to go up, democrats elected, so the press can begin to tout the economy, rather than slam it, the market will rise.
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Old 10-13-2008, 07:39 PM   #45
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Whatever secular bear market we find ourselves in right now, remember, we are already 9 years in.

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Old 10-13-2008, 08:20 PM   #46
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I think the recovery will be faster than most are predicting. In the Great Depression, folks in the stock market lost everything they owned. It was not the case of holding on or selling to come in again at a later time. Most were in on margin and were way over their heads. I believe the average person could buy on as little as 10%. When the market dropped their margins were called and positions sold. They were sold out broke no money to reinvest. In fact many lost everything they owned.

As this is not the case now, it would appear that market recovery is more dependent on greed overcoming fear. As the market begins to go up, democrats elected, so the press can begin to tout the economy, rather than slam it, the market will rise.
I am with you Rustic, I think it will be quicker than most people predict. Heck at today's rate we should be back to 14,000 by next Monday

Despite the massive wealth destruction, there is is still a lot of cash and government bonds sitting on the side lines. It seems to me that sticking your money in Money Market, CD or Treasury Bill for 2-3% is a bad idea long-term, eventually either the stock market or real estate will look increasingly attractive. Either of which is good thing.
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Old 10-13-2008, 09:56 PM   #47
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I'd like to be optimistic, but in surfing, I found this (a blog by someone who is admittedly quite a bear):

Fred's Intelligent Bear Site - Inflation Adjusted DJIA

The major part of his argument against stocks is:

The long term chart of the stock market looks great. It shows a trend line that gains a healthy 5.1% per year. There is one problem. This is the wrong chart! The Dow is expressed in Dollars, and Dollars lose value over time. You must look at the inflation adjusted chart to expose the true nature of the Dow.

On the chart, the long term trend line in green shows an average return of 1.9% per year. If you factor in the long term 15% capital gains tax, the return is even worse. Since capital gains tax is not adjusted for inflation, the average tax must be based on the 5.4% trend of the non inflation adjusted chart, so 15% of 5.4% is 0.8% tax. Therefore, your 1.9% return is reduced to 1.1% after taxes. The Wall Street shills do not want you to know that this meager amount of capital gains is all you should logically expect from a long term general stock market investment.

The Dow has historically moved within well defined channel. The boundaries of the channel have been touched only 4 times since 1910. The top of the channel was last touched in 2000.

They say "the market always goes up in the long term," but at an average return of 1.9% per year, it can take many years to recover from a large decline. The peak in 1929 was not ultimately exceeded until 1992. When the market touched the bottom of the channel in 1982, its value was about equal to the value at the beginning of the chart in 1910.

Most bubbles eventually correct back to where they began. The bubble that began in 1922 gave back all its gains by 1933, and the bull market that started in 1949 gave back almost everything by 1982. The bubble that ended in 2000 could easily correct back to its 1988 level of 4000. If you are optimistic, you might decide that the bubble began in 1995, and the Dow will only correct back to 7500. If you are pessimistic, the Dow could eventually hit the bottom of the channel at about 4000.

Fred's Intelligent Bear Site - FIBS

His investment advice is:

Fred's Intelligent Bear Site - Financial Survival

Can anyone comment on this? The guy is making sense to me, even though he is quite the bearish contrarian. But it goes against everyone I've read and against most of what people on here think....
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Old 10-13-2008, 11:57 PM   #48
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Can anyone comment on this? The guy is making sense to me, even though he is quite the bearish contrarian. But it goes against everyone I've read and against most of what people on here think....
Saying the taxes are capital gains rates means they are less than normal rates. Also if you die owning stock it passes tax free. Other choices like CDs and real estate are taxable also and you can't defer the taxes as easily.
You can find stocks that pay dividends like utilities, some were priced at PEs or around 10 this week and paid 4-6% dividend so owning them 10 years you double your money approximately.
Other stocks you can pick winners or losers but if you owned 1% of a company 20 years ago and it didn't die you now own 1% of a bigger company probably.
Look at a company like MO and what you would have gotten in gains and dividends if you bought 10K worth 20 years ago. What will it be worth in 20 years? I don't know but if it is around it probably will be worth more and it pays a little dividend.
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Old 10-14-2008, 03:19 AM   #49
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It's worth checking with your financial advisor for handy information on your retirement investing and future. Why only last week we stopped in and had a conversation with ours - was encouraged to speak about my view of retirement while the gal was scribbling something or other. Video attached as an example:
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Old 10-14-2008, 07:19 AM   #50
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Originally Posted by tangomonster View Post
I'd like to be optimistic, but in surfing, I found this (a blog by someone who is admittedly quite a bear):

Fred's Intelligent Bear Site - Inflation Adjusted DJIA

The major part of his argument against stocks is:

The long term chart of the stock market looks great. It shows a trend line that gains a healthy 5.1% per year. There is one problem. This is the wrong chart! The Dow is expressed in Dollars, and Dollars lose value over time. You must look at the inflation adjusted chart to expose the true nature of the Dow.

On the chart, the long term trend line in green shows an average return of 1.9% per year. If you factor in the long term 15% capital gains tax, the return is even worse. Since capital gains tax is not adjusted for inflation, the average tax must be based on the 5.4% trend of the non inflation adjusted chart, so 15% of 5.4% is 0.8% tax. Therefore, your 1.9% return is reduced to 1.1% after taxes. The Wall Street shills do not want you to know that this meager amount of capital gains is all you should logically expect from a long term general stock market investment.

The Dow has historically moved within well defined channel. The boundaries of the channel have been touched only 4 times since 1910. The top of the channel was last touched in 2000.

They say "the market always goes up in the long term," but at an average return of 1.9% per year, it can take many years to recover from a large decline. The peak in 1929 was not ultimately exceeded until 1992. When the market touched the bottom of the channel in 1982, its value was about equal to the value at the beginning of the chart in 1910.

Most bubbles eventually correct back to where they began. The bubble that began in 1922 gave back all its gains by 1933, and the bull market that started in 1949 gave back almost everything by 1982. The bubble that ended in 2000 could easily correct back to its 1988 level of 4000. If you are optimistic, you might decide that the bubble began in 1995, and the Dow will only correct back to 7500. If you are pessimistic, the Dow could eventually hit the bottom of the channel at about 4000.

Fred's Intelligent Bear Site - FIBS

His investment advice is:

Fred's Intelligent Bear Site - Financial Survival

Can anyone comment on this? The guy is making sense to me, even though he is quite the bearish contrarian. But it goes against everyone I've read and against most of what people on here think....
i don't pay any attention to charts like this or the Dow against gold or silver or adamantium. with the amount of data available today you can make a chart that says anything you want.

only thing that is true is that we get secular bear markets on a regular schedule that wipe out most gains of the previous bull run and when the bear ends we get a bull market that exceeds those gains.
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Old 10-14-2008, 07:47 AM   #51
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Hey Calmloki - here's wishing you a long and enjoyable retirement!

(I'm going to keep my partner away from your FA.)
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Old 10-14-2008, 08:04 AM   #52
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I am with you Rustic, I think it will be quicker than most people predict. Heck at today's rate we should be back to 14,000 by next Monday
Glad you are with me on my 5 day plan.
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Old 10-14-2008, 09:27 AM   #53
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Some of the people with financial backgrounds probably can guesstimate this one, but I understand that, during the Great Depression starting in 1929, those who left their money in stocks took alllll the way to 1954 to recoup the losses. Please correct me if I am wrong on that statement.
Anyway, is it going to take another 25 years to recoup all the losses many of us are taking right now, too? I am assuming so, but would love to hear what the finance professionals here think.

Interesting post. I averaged down through the selling, bleeding red ink all the way. Sold off all my bonds as I was getting equal or better returns on stocks and ETF's during this sell off.

After one big 1500 point day on the TSX I am back in the black.

So for me 1 day, although I am not certain the market will stick but it proved my averaging was worthwhile because I am positive the market will go up by 1500 point over the next few years. Greed will get the better of all those people sitting on the sidelines with cash.
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Old 10-14-2008, 03:01 PM   #54
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What do you think the upcoming resession/depression will have on the stock market?
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Old 10-14-2008, 03:39 PM   #55
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I think the recovery will be faster than most are predicting. In the Great Depression, folks in the stock market lost everything they owned. It was not the case of holding on or selling to come in again at a later time. Most were in on margin and were way over their heads. I believe the average person could buy on as little as 10%. When the market dropped their margins were called and positions sold. They were sold out broke no money to reinvest. In fact many lost everything they owned.

As this is not the case now, it would appear that market recovery is more dependent on greed overcoming fear. As the market begins to go up, democrats elected, so the press can begin to tout the economy, rather than slam it, the market will rise.
Ding! Ding! Ding! We have a winner.

We've been subjected to 18 months of bad-mouthing by the media who want a Democrat in office. If Someone keeps telling you you're sick, you will be sick. Try that at your office sometime. Get everyone to ask ole Joe why he looks so bad, is something the matter? By lunch he'll be headed for home.

Once what's-his-name gets into office, the media will reverse estimations and tell us we're cured. There will be very little difference, but we will believe, confidence will be restored, and I can go back to checking Vanguard every other day. I guess we're gonna have a recession, so getting above 12000 will be slow. But my initial allocation saved most of my pile anyway. Paper losses don't exist until you sell. I can wait.

This mess has taught me one thing. Rebalance once a year without exception. Lock in whatever gains you have.
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Old 10-14-2008, 05:07 PM   #56
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Ding! Ding! Ding! We have a winner.

We've been subjected to 18 months of bad-mouthing by the media who want a Democrat in office. If Someone keeps telling you you're sick, you will be sick. Try that at your office sometime. Get everyone to ask ole Joe why he looks so bad, is something the matter? By lunch he'll be headed for home.

Once what's-his-name gets into office, the media will reverse estimations and tell us we're cured. There will be very little difference, but we will believe, confidence will be restored, and I can go back to checking Vanguard every other day. I guess we're gonna have a recession, so getting above 12000 will be slow. But my initial allocation saved most of my pile anyway. Paper losses don't exist until you sell. I can wait.

This mess has taught me one thing. Rebalance once a year without exception. Lock in whatever gains you have.
Wasn't it Bush and his crew that said we are facing the worst financial crisis since the great depression? It wasn't the media.
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Old 10-14-2008, 05:32 PM   #57
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Yes Bush said it, after many years of the press saying it!

As an instructor pilot, one of my students had a doctorate in economics. He went on to head the Air Force Academy's Economics Department. I ask him if the constant news in the press about the sorry state of the Economy could in itself bring on a sorry economy. He said it was actually an economy theory known as the "Anticipation theory". By the way that was in 1979!
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Old 10-14-2008, 05:56 PM   #58
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Yes Bush said it, after many years of the press saying it!
!
So the media was dead on. It's funny how some folks blame bad news on those that bring it to us. Could you explain to me me how the media caused the world credit crisis?
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Old 10-14-2008, 06:25 PM   #59
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Most people who click on this link are interested in the original thread topic.

Me? I have no clue how long the pain will last, but I'd also like to sign up for the "5 day plan," please. O.k., so Tuesday needs remedial action. Let's see that Wednesday makes up for it. Good? Good!

Cheers.
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Old 10-14-2008, 06:41 PM   #60
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Sounds good to me! Tomorrow I'd love to regain a little more of what my portfolio lost on paper last week.
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