Is this rally for real?

[REWahoo]

I'm still too lazy to post a new graph but the results of the second prediction by TheSweetLife of a market decline over the four weeks ending July 16 was no more accurate than the first prediction of same.

First four weeks the S&P was flat, going from 910 to 912.
The second four weeks saw the S&P move up slightly from 912 to 933.

TSL, perhaps you should see if W2R will make you a deal on her spiffy new crystal ball. Yours is apparently defective.

[TheSweetLife]

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Originally Posted by REWahoo I'm still too lazy to post a new graph but the results of the second prediction by TheSweetLife of a market decline over the four weeks ending July 16 was no more accurate than the first prediction of same. First four weeks the S&P was flat, going from 910 to 912. The second four weeks saw the S&P move up slightly from 912 to 933. TSL, perhaps you should see if W2R will make you a deal on her spiffy new crystal ball. Yours is apparently defective.

Well, unfortunately, you hold me to "exact" days...the 16th to the 16th. I don't think too many people would predict that correctly. I believe it dropped to 880 around the 10th. So, there was a 3.5% drop during that time. I'll stick with my plan...it worked for me last year. Still holding onto my inverse ETF and plan to make a bundle on it. Not holding me to exact dates....I see the S&P dropping at least 20% by October. Ahhhh, the power of the crystal ball

[REWahoo]

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Originally Posted by TheSweetLife Well, unfortunately, you hold me to "exact" days...the 16th to the 16th.

Details, details, the devil is in the details....

[MichaelB]

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Well, unfortunately, you hold me to "exact" days...the 16th to the 16th

This is a problem for forecasting – it would be so much easier if it weren’t for that totally unreasonable demand for exactness – otherwise known as accuracy.

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I see the S&P dropping at least 20% by October

So, does that mean sometime between now and october the S&P reaches 752, or does that mean that the S&P hits 752 during october?

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I knew my crystal ball would come in handy. Let me see... looking deep into the swirling depths within my crystal ball,

Hands, balls, swirling depths ... I can think of so many inappropriate responses to this post, but not one that would be moderator-safe ...

[FUEGO]

Quote:

Originally Posted by TheSweetLife I see the S&P dropping at least 20% by October.

Well, third time is the charm. Maybe 1 out of 3 predictions ain't so bad (if this third one comes true). But caution that if you are wrong again, you may just establish yourself as an excellent contrary indicator.

[F4mandolin]

And to be even more precise....October 2009?

[Running_Man]

The cumulative job losses over the past six months have been greater than for any 6 month period since World War II. Job losses are now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all employment growth from the previous business cycle.

This is not the foundation of which a short severe bear market with a quick sharp recovery is based on. This rally certainly feels like a bear market rally to me, quick to the upside and rapid so that investors feel they are missing the recovery.

With so many workers losing jobs and those that are working benefits and hours reduced the debt burden remaining is continuing to be too large to service in many areas. The cannon shot of the US government's defict spending has been fired and the direction of the market will be determined by what is sighted once the smoke has cleared. But the fundamental cash flow for the average worker to service their debt load is becoming more onerous.

Dividends of companies are being cut so rapidly that the prices that the yields of stocks can justify with the reduced future growth prospects Quoting Helicopter Ben from today:

Quote:

The pace of recovery is critical to a sustained expansion, economists said. One risk is that the economy grows several quarters below a rate needed to absorb a growing labor force. That would result in even higher unemployment and possibly weaker income growth, stalling demand and cutting the inventory cycle short. “Job insecurity, together with declines in home values and tight credit, is likely to limit gains in consumer spending,” Bernanke said. “The possibility that the recent stabilization in household spending will prove transient is an important downside risk to the outlook.”

I do not see how there can be much growth in dividend prospects for stocks and therefore for prices in such an enviroment and a slow growth enviroment for dividends does not portend well for an S&P500 with a dividend yield of 2.33 percent.

Near term indeed the market can move up as the expectation of recovery continues to be sold by Wall Street and business in general, but actual conditions are deteriorating with every passing month. The cutting of 401K matching contributions is every bit a cut in salary that goes unreported - a study by Grant Thorton indicates 29% of all companies are planning on cutting or have cut that benefit this year.

Report: Employers cut 401(k) match - The Business Journal of Milwaukee:

I find the odds much more favorable that there will be a second very major leg down in both the stock market prices and the economic times as well. The federal government can only buy so many hams for it's citizens.

[TheSweetLife]

As of now, there is approximately 15,000,000 Americans unemployed, the market has declined considerably since 2007, and home prices have plummetted. All 3 of these factors affect the average person's net worth. We are a consumer-driven economy. The consumers are saving more and spending less. I agree with Running Man that the conditions are continuing to deteriorate month by month.

To clarify my previous prediction....I see the S&P declining at least 20% sometime between now and October 31, 2009.

[W2R]

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Originally Posted by TheSweetLife To clarify my previous prediction....I see the S&P declining at least 20% sometime between now and October 31, 2009.

"Sometime"? Well, now. ("Sometime"?) And declining 20% from what?

After consulting my crystal ball, I can do better than that. I can definitively predict that the S&P500 will double from today's value of 954.58 "sometime" in the next 40 years....

[FUEGO]

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Originally Posted by Want2retire After consulting my crystal ball, I can do better than that. I can definitively predict that the S&P500 will double from today's value of 954.58 "sometime" in the next 40 years....

I'll go further and reiterate that prediction, plus suggest that somewhere along that path there will be corrections from time to time.

[W2R]

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Originally Posted by FUEGO I'll go further and reiterate that prediction, plus suggest that somewhere along that path there will be corrections from time to time.

What? Both ups AND downs? Now that's bold.

[TheSweetLife]

"Sometime", meaning I'm not predicting an exact day, just a date range. Okay, S& P at 750 on one of the days between today and October 31, 2009. Isn't this board supposed to be fun, too

[haha]

I get nervous when we start ragging on someone who makes a bearish prediction. Looking back on Q3 2008 in this forum is not an edifying experience.

We rarely razz someone who predicts an up market. I grant that it may be hard to predict markets with anything close to pinpoint accuracy. Still, I am not convinced that we cannot benefit from ballpark guesses. One thing sure, although now may be a good time to be heavily into stocks, I was a lot happier with exposure back in March or Dec 08.

The roughly 6 months Q4 08 well into Q1 09 were not a happy time for me, and I don't want to repeat. I am still meaningfully down from fall 2007, but a lot of my portfolio damage has been repaired. The same disaster is not going to happen to me again.

Ha

[W2R]

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Originally Posted by haha I get nervous when we start ragging on someone who makes a bearish prediction.

Ha, I don't think anybody is ragging on her for making a bearish prediction (at least, I know I'm not).

I would have responded in exactly the same way if she had predicted that the S&P would have increased 20% (from some unknown value) some (unknown) day or other between now and October 31st (of some unknown year, as one poster above pointed out).

To me that is no more a prediction than could be had from a Magic 8 ball. I think that TSL knows that and doesn't mind a little friendly chiding.

[haha]

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Originally Posted by Want2retire Ha, I don't think anybody is ragging on him for making a bearish prediction (at least, I know I'm not). I would have responded in exactly the same way if he had predicted that the S&P would have increased 20% (from some unknown value) some (unknown) day or other between now and October 31st (of some unknown year, as one poster above pointed out). To me that is no more a prediction than could be had from a Magic 8 ball. I think that TSL knows that and doesn't mind a little friendly chiding.

Sorry for the misunderstanding WTR- I knew it was friendly. I feel sure that what s/he means is that some time between now and 10/31/2009 the market will be 20% lower than today's value. To me, if he happens to be correct, that is plenty specific enough to be helpful. Better to be approximately right than precisely wrong.

Ha

[Zathras]

For me, when people are certain something is going to happen in a short time frame in the market, it sets off the red flags.
Sure, something like 'I predict the market will fluctuate' is always going to be right.
But the whole 'the market will be down 10% in 30 days' is speculation at best. And is never something I would base any investments on. I would say the same of someone saying 'the market will be UP 10% in 30 days'
Be diversified and capable of working through the dips (and peaks). Know your own risk tolerance, and research the stocks or funds you choose to invest in.

[clifp]

I am thinking that TSL predictions are similar to Louis Rukeyser Elves index which according to Wikipedia was "the worst predictive records of any public index".

As for me I am stuck with the Dow 12,200 by the end of the year. Although, I think my other prediction of Paula Abdul leaving Idol after this season has a good chance of being right and was a fairly bold prediction.

As for me I fall back into the generally safe prediction of us being in a trading range around between 7500-9500

[W2R]

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Originally Posted by clifp As for me I am stuck with the Dow 12,200 by the end of the year.

Oh clifp!! You say such sweet things. Now if you stated any basis for your predictions, I'd appreciate them even more!

(also, end of WHAT year?)

[NW-Bound]

I never try to predict the percentage of gains and losses of the market. I have only tried to guess if it is going up or down and that is tough enough.

So, I don't know about Dow 12,200 by the end of 2009 (clifp), or S&P500 at 750 before the year end (TSL). The question to myself is "Is it more likely to go up or down?". And my answer to myself is "more likely to go UP". Note the word "likely", because if I were 100% sure, I would mortgage my 2 houses, then go on margin on top of that to make a hell of a killing.

Why do I think so? What I have seen is that so far in this earnings reporting season, many compamies have beaten their earnings estimates. Freeport-McMoran, a mining company, reported $1.38/share earning for last quarter, compared to the consensus estimate of $0.69.

Yesterday, Goldman Sachs strategists updated the aggregate 2009 earnings of S&P500 to $52, vs. their earlier estimate of $40. Hence, they called for S&P to be at 1060 at 2009 year end. Back early in the year, their estimate was 940 to go with the $40 estimated earnings. The S&P is already at 954.6 at today (7/21/09) close.

Details are here: S&P 500 to Rally Most Since 1982, Goldman Sachs Says (Update4) - Bloomberg.com. A few other investment firms have made similar upward revisions to their prediction.

It is interesting that Gary Shilling also used the S&P $40 earning estimate in this video:

YouTube - Market Outlook: S&P Will Decline This Year

In the above January 2009 video, he said that market would go down in 2009. He was proven right up until recently, as the market tanked badly in March. He was reported to be still bearish in another thread.

About the peril of making predictions, I wonder if anyone else remembers Ed Hyman of the ISI group. I knew of him from his TV appearances back in the Rukeyser days. Hyman was voted the #1 economist by institutional investors for many years, so I was interested in what he had to say. Alas, last year, he maintained that the US economy would still be growing at 1%, hence would not be technically in a recession. Of course, he was wrong. Oh well! A pundit is only as good as his most recent prediction.

One more thing about the US economy in gloom-and-doom. There are signs that other countries may stage a healthier recovery than we do. So, US companies that have a lot of international exposure may not do that bad. Companies such as Caterpillar, 3M, and Cummins have a lot overseas business. I recently learned that the last 2 have more than 60% of their sales abroad.

About politics, I may not agree with the gummint policies, but that does not mean US companies cannot prosper despite the "help".

Still 20% below my personal high watermark on Oct 31, 2007. Equities at 62% AA. I am still looking for a few more good companies to bring my stock AA higher, perhaps to 70%. Got to be careful, you know, with all the talk about the W-shaped recovery out there. I like the bears, even if I may not agree with them. If the whole world turned bullish, I would be selling.

[HFWR]

More useful info than where the S&P 500 might be is "what to do about it". Cash and equivalents, preferred stock, corporate/gumment/muni bonds, real estate, beever cheese...?

The financial markets consist of more than the S&P 500...

I'm not particularly optimistic, and I still see problems, especially too much debt: gumment, corporate, and consumer. Lots of excess inventory, but mostly in real estate. I think most corporations are lean and mean in that regard. "Structural" unemployment is probably 4-6% (swag), so everything above that is "real"... heh, heh

Edited to add: There's a lot of cash out there looking for yield...

I've been expecting rising inflation for several years, and, by golly, I'm still expecting it. Deflation wasn't even on my radar screen. Fooled me...

So, I've upped my allocation to cash and bonds, though in the longer term, say 3-5 years, I expect bonds and bond funds to take a hit as interest rates rise, so maybe cash is a better answer for that portion of the portfolio. I've reduced my allocations to what I considered more risky assets under the current environs, i.e. REITs and emerging markets.

To add an extra dimension, I've been wanting to gradually up the bond portion anyway, since I'm not getting any younger, and I'd rather end up with too little that none...

Crystal ball is obviously cloudy, so, I'm about 40% stock index funds, 37% bond index funds, 7% REIT, 5% CCF (PCRIX), and 10% cash and equivalents. Let the games continue...