Tomorrows market?

[CitricAcid]

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Originally Posted by ziggy29 The interesting thing, though, is that once the pain is mostly behind the big financials, they'll be screaming buys. They may be selling for prices that would lead to a P/E in the mid single-digits under periods of typical profitability. The question, of course, is: when does the falling knife finally get stopped by the block of wood so it's safe to pick up?

I was thinking the same exact thing... when Citigroup fell from $50 to $28 with a $2.10 a year dividend (it recently dropped to $1.28 ) I was salivating. Then, it went down to $22... and I got a little aroused. Now it is bouncing around $16-18, when will the writing be on the wall. Some of the other financial industries (I am looking at you, bond insurers and homebuilders) may take a lot longer to clear, and it is tough (dare I say impossible for me) to predict when the turnaround in the pricing and the future of these financials are. (btw, I like STD long term... the bank not the... never mind)

[retire@40]

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Originally Posted by CitricAcid I was thinking the same exact thing... when Citigroup fell from $50 to $28 with a $2.10 a year dividend (it recently dropped to $1.28 ) I was salivating. Then, it went down to $22... and I got a little aroused. Now it is bouncing around $16-18, when will the writing be on the wall...

Funny you should mention Citigroup. For what it's worth, I have been looking at Citigroup for a while too. I finally bought in earlier this morning. I think it has more upward potential than downward potential right now. The dividend of 7.8% is just about the rate of return I am looking for in dividend-paying stocks, so it's the perfect fit for me right now.

[Nords]

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Originally Posted by RockOn We are either near a low and ready for a big rally or ready to fall off the cliff and go into the first serious recession in a long time.

Well, I'd say that pretty much covers the entire spectrum of market forecasts. I hope you can get a refund on the time & life effort you expended on that analysis.

Maybe it's better to use this time (and your feelings & reactions to the current market environment) to pick an asset allocation that will let you be less concerned and able to spend less time fretting over where the market's headed.

And then we can all get back to the business of getting a real life.

[ziggy29]

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Originally Posted by retire@40 Funny you should mention Citigroup. For what it's worth, I have been looking at Citigroup for a while too. I finally bought in earlier this morning. I think it has more upward potential than downward potential right now. The dividend of 7.8% is just about the rate of return I am looking for in dividend-paying stocks, so it's the perfect fit for me right now.

Of course, almost any time the market prices a stock with a yield like that -- especially in a low interest rate environment -- the market is telling you that it doesn't expect the current dividend to be sustained much longer.

[newporttony]

Quote:

Originally Posted by retire@40 Funny you should mention Citigroup. For what it's worth, I have been looking at Citigroup for a while too. I finally bought in earlier this morning. I think it has more upward potential than downward potential right now. The dividend of 7.8% is just about the rate of return I am looking for in dividend-paying stocks, so it's the perfect fit for me right now.

Speaking of high yields, BAC is paying almost 11%. Ken Lewis reaffirmed today that the bank doesn't plan to cut the dividend, but Wall Street doesn't see it that way.

I don't buy individual equities, but I think some people are going to make a lot of money over the long haul on some of these financials.

[al_bundy]

if i had a nickel for every time a CEO has promised something

[CitricAcid]

The thing with Citigroup is that they ALREADY cut their dividend, as I noted from $2.10 to $1.28 a year, which is already factored into the yield, Wall Street expects a loss (by most estimates) of -$0.57 a share next quarter from what I've heard, but speculating anything even farther in advance will be tough to do. Taking big risks on the dividends are not fun to do as a one-day decision of cutting it to 0 or 10 cents pretty much completely mitigates one of the big reasons you bought them 8)

[ziggy29]

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Originally Posted by newporttony Speaking of high yields, BAC is paying almost 11%. Ken Lewis reaffirmed today that the bank doesn't plan to cut the dividend, but Wall Street doesn't see it that way.

Companies generally don't "plan" to cut dividends, but sometimes things don't go according to plan and cutting them is necessary to remain solvent.

[newporttony]

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Originally Posted by ziggy29 Companies generally don't "plan" to cut dividends, but sometimes things don't go according to plan and cutting them is necessary to remain solvent.

Sure, but I will reiterate--someone's going to make a lot of money on the financials.

[ziggy29]

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Originally Posted by newporttony Sure, but I will reiterate--someone's going to make a lot of money on the financials.

Agreed, and I said as much earlier in the thread. I don't know how far down the financials will continue to fall, but when they hit bottom the leading names in the sector are going to be almost once-in-a-lifetime buying opportunities.

But my crystal ball isn't working, so I don't know when that will be!

[al_bundy]

back in 1987 to 1992 or so, the general market recovered very fast but financials were the last ones to do so

[CitricAcid]

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Originally Posted by ziggy29 Agreed, and I said as much earlier in the thread. I don't know how far down the financials will continue to fall, but when they hit bottom the leading names in the sector are going to be almost once-in-a-lifetime buying opportunities. But my crystal ball isn't working, so I don't know when that will be!

It is almost a defeatist/self-deprecating attitude to take, but the way I look at it, compared to 12 months ago the financials are certainly a bargain. What they will do in 6 months or even 2 years will be hard to see, but the price we are getting at now compared to 12 months ago is already a bargain. Over time, if you have a broad index of them, the survivors will be incredible bargains, and they've already gone through the blue light special. So looking back in time 3 years from now, July 10th, 2008 may not be the BEST time to buy, but it will be better than buying on July 10th, 2011.

[newporttony]

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Originally Posted by CitricAcid It is almost a defeatist/self-deprecating attitude to take, but the way I look at it, compared to 12 months ago the financials are certainly a bargain. What they will do in 6 months or even 2 years will be hard to see, but the price we are getting at now compared to 12 months ago is already a bargain. Over time, if you have a broad index of them, the survivors will be incredible bargains, and they've already gone through the blue light special. So looking back in time 3 years from now, July 10th, 2008 may not be the BEST time to buy, but it will be better than buying on July 10th, 2011.

I think you are exactly right. The sector is off 55%+ and many comapnies are trading well below book value. I believe Benjamin Graham would be a buyer at these levels.

[al_bundy]

Quote:

Originally Posted by CitricAcid It is almost a defeatist/self-deprecating attitude to take, but the way I look at it, compared to 12 months ago the financials are certainly a bargain. What they will do in 6 months or even 2 years will be hard to see, but the price we are getting at now compared to 12 months ago is already a bargain. Over time, if you have a broad index of them, the survivors will be incredible bargains, and they've already gone through the blue light special. So looking back in time 3 years from now, July 10th, 2008 may not be the BEST time to buy, but it will be better than buying on July 10th, 2011.

can you look in your crystal ball and tell us the companies that will still be in business and those that will be bought up at $1 a share or less the way Bernanke is talking about?

[CitricAcid]

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Originally Posted by al_bundy can you look in your crystal ball and tell us the companies that will still be in business and those that will be bought up at $1 a share or less the way Bernanke is talking about?

Oh, I have absolutely no idea and that is why a more indexed approach would be best, and I certainly do not know which will recover the best. In other words, what I am saying is that the only thing I know is that I don't know. More that, over a longer time frame, the broad financials will recover, and quite well considering their current prices.

[al_bundy]

why are current prices such a bargain? i can think of a lot of big firms that were around in the mid 1980's that aren't around today due to bankruptcy or getting bought out at firesale prices

[RockOn]

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Originally Posted by Nords Well, I'd say that pretty much covers the entire spectrum of market forecasts. I hope you can get a refund on the time & life effort you expended on that analysis. Maybe it's better to use this time (and your feelings & reactions to the current market environment) to pick an asset allocation that will let you be less concerned and able to spend less time fretting over where the market's headed. And then we can all get back to the business of getting a real life.

My point is really that I think we are at a major inflection point in this country, which way it turn out will affect us for a long time. No matter what the asset allocation is. If we only knew what the outcome of all these serious problems will be in 3 to 5 years, we would could easily invest to be much better off. Are major banks actually insolvent and pending bankruptcy? That is a really good question.

I'd rather be concerned about that type of question than whether I am 40/60 or 60/40 or have enough small caps. Asset allocation is a minor concern compared to the prospect of a depression, hyper-inflation, the next boom, or such.

[ziggy29]

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Originally Posted by RockOn I'd rather be concerned about that type of question than whether I am 40/60 or 60/40 or have enough small caps. Asset allocation is a minor concern compared to the prospect of a depression, hyper-inflation, the next boom, or such.

Actually, IMO that makes asset allocation more important than ever.

You can either choose to place your bets on one of these scenarios and be ruined if you are wrong, or place bets that will allow at least some of your investments to prosper in any of these environments. The latter won't make you rich because the performers will merely offset the losers, but you're much less likely to be ruined.

[RockOn]

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Originally Posted by ziggy29 Actually, IMO that makes asset allocation more important than ever. You can either choose to place your bets on one of these scenarios and be ruined if you are wrong, or place bets that will allow at least some of your investments to prosper in any of these environments. The latter won't make you rich because the performers will merely offset the losers, but you're much less likely to be ruined.

IMO, trying to avoid ruin by balancing everything so well that there is little upside is about the same as being in cash. I would much rather know whether the current crisis is going to go away, or get worse, and act on that basis. When I look at prices in the last few weeks for BofA, Wachovia, Fannie Mae, and GE for that matter, I am getting worried that things might actually be different this time. Can this country prosper without readily available cheap credit? Call that a buy signal if you wish but if the financial blowup doesn't stop soon, a better buy signal may be at a lot lower price than right now. Of course, I waiting for someone with the crystal ball, or the MBA degree, to tell me how bad things really are with the financials.

[Nords]

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Originally Posted by RockOn My point is really that I think we are at a major inflection point in this country, which way it turn out will affect us for a long time. No matter what the asset allocation is. If we only knew what the outcome of all these serious problems will be in 3 to 5 years, we would could easily invest to be much better off. Are major banks actually insolvent and pending bankruptcy? That is a really good question. I'd rather be concerned about that type of question than whether I am 40/60 or 60/40 or have enough small caps. Asset allocation is a minor concern compared to the prospect of a depression, hyper-inflation, the next boom, or such.

Quote:

Originally Posted by RockOn IMO, trying to avoid ruin by balancing everything so well that there is little upside is about the same as being in cash. I would much rather know whether the current crisis is going to go away, or get worse, and act on that basis. When I look at prices in the last few weeks for BofA, Wachovia, Fannie Mae, and GE for that matter, I am getting worried that things might actually be different this time. Can this country prosper without readily available cheap credit? Call that a buy signal if you wish but if the financial blowup doesn't stop soon, a better buy signal may be at a lot lower price than right now. Of course, I waiting for someone with the crystal ball, or the MBA degree, to tell me how bad things really are with the financials.

I feel like I've read this somewhere before:
Winning Financial Freedom to Do the Work You Love