How low can you (the Dow) go, and when is the time to buy?

[AirJordan]

Well it's almost a forgone conclusion now that the Dow will drop below 12k. I was just curious when you peeps are ready to back up the truck? Is there a magic number you're waiting for, or are you just going by feel, or do you just put in money at the the beginning of the year, and don't pay attention to momentum?

 

[brewer12345]

I have been buying bit by bit on the way down. I buy individual issues as they get to levels I feel represent little further downside risk. Been hoovering up OCFC, WHI, DSX and EGLE call options, CGI, etc. Every day stuff gets cheaper, I buy more.

I think DSX and EGLE are a steal at crrent levels, and both of them will pay out in excess of $2 a share in dividends over the next year.

 

[wabmester]

Didn't EGLE just do a secondary offering? Looks like a 15% dilution and perhaps open to an economic slowdown. You think a divvy of $2/share will still hold going forward?

 

[Peaceful_Warrior]

I don't think about the market. Just keep DCAing and live my life as though nothing happened.

 

[HFWR]

Don't "own" an index fund ( ) that tracks the Dow. I DCA every two weeks via paycheck, and will rebalance when things get too out of whack...

 

[dex]

You might begin to hear that this down leg is the resumption of the bear market of 2000.

After the 1929 crash there was a period of rising stock prices - then they fell again - take a look at the charts. Do they look like the NASDAQ?

 

[brewer12345]

Didn't EGLE just do a secondary offering? Looks like a 15% dilution and perhaps open to an economic slowdown. You think a divvy of $2/share will still hold going forward?

Easily. Day rates for ships continue to skyrocket and the money from the newly issued shares was used to buy ships in an accretive manner.

 

[dusk_to_dawn]

No one ever seems to like watching the markets go down, but if you know you will be a buyer (401ks and iras), it's a good thing if the market goes down and stays undervalued for a number of years. Where is the market going? I have no idea and I don't care.

 

[haha]

No one ever seems to like watching the markets go down, but if you know you will be a buyer (401ks and iras), it's a good thing if the market goes down and stays undervalued for a number of years. Where is the market going? I have no idea and I don't care.

I assume you are relatively young and still working. Otherwise, that is an uninformed statement.

No holder of a substantial equity allocation who is retired or who is close to retirement would say that, at least not if he had any sense.

Ha

 

[wabmester]

OK, I'll play this game.

Today, the S&P 500 is at 1387. Vanguard says the market P/E is 16.9, which implies earnings of 82 for the index.

This earnings cycle started in 2002 with earnings at 26.

So, let's assume that a P/E of 16 is fair. That's an earnings yield of 6% which seems reasonable given interest rates today.

If we're at the peak of the earnings cycle, and the bottom was 26, then the cycle mean is around 54.

So, a fair price for mean earnings on the S&P 500 is 864. A 37% drop from today's value.

 

[Cut-Throat]

You might begin to hear that this down leg is the resumption of the bear market of 2000.

After the 1929 crash there was a period of rising stock prices - then they fell again - take a look at the charts. Do they look like the NASDAQ?

This is just a resumption of the bear market of 1929. - The people in the 1940's were right and now the writing is on the wall!

We're doomed I say, We're doomed!

 

[Goonie]

I don't think about the market. Just keep DCAing and live my life as though nothing happened.

Agreed! I'm in for the long haul....so I'm not too concerned.

 

[dusk_to_dawn]

I assume you are relatively young and still working. Otherwise, that is an uninformed statement.

No holder of a substantial equity allocation who is retired or who is close to retirement would say that, at least not if he had any sense.

Ha

Yeah. Most people who are still contributing to their 401ks and Roth IRAs are still working. Folks who are still working and saving for retirement should be OK with the market dropping and staying undervalued for a number of years. Of course I would like to take full credit for that idea, but I know I have read that same sentiment in Warren Buffett's annual letters. But then, what the heck would he know about investing?

Come to think of it, Warren is a substantial equity holder who is close to retirement.

 

[haha]

Yeah. Most people who are still contributing to their 401ks and Roth IRAs are still working. Folks who are still working and saving for retirement should be OK with the market dropping and staying undervalued for a number of years. Of course I would like to take full credit for that idea, but I know I have read that same sentiment in Warren Buffett's annual letters. But then, what the heck would he know about investing?

Come to think of it, Warren is a substantial equity holder who is close to retirement.

Right; and we ERs on the board are exactly in his boat. Good point!

Ha

 

[dex]

This is just a resumption of the bear market of 1929. - The people in the 1940's were right and now the writing is on the wall!

We're doomed I say, We're doomed!

You know I didn't think about it until I read your post. You might just be right.

http://www.bullandbearwise.com/TopOverlayChart.asp

"History may not repeat but, it does rhyme." Mark Twain

 

[cute fuzzy bunny]

OK, I'll play this game.

Today, the S&P 500 is at 1387. Vanguard says the market P/E is 16.9, which implies earnings of 82 for the index.

This earnings cycle started in 2002 with earnings at 26.

So, let's assume that a P/E of 16 is fair. That's an earnings yield of 6% which seems reasonable given interest rates today.

If we're at the peak of the earnings cycle, and the bottom was 26, then the cycle mean is around 54.

So, a fair price for mean earnings on the S&P 500 is 864. A 37% drop from today's value.

I dont think its going to drop that far, but I fully expect to see something close to 1000 by years end, maybe a little bit into next year.

Still have 25% in equities but I think i'm going to be sticking there for the time being.

Since i'm not going to be selling anything, but will be in a position to buy in a couple of months when my old house sells, I'd be thrilled with a nice sharp drop.

 

[unclemick]

Ahem:

Linebackers - 'agile, mobile, and hostile.' - Bear Bryant.

Ancient old saw - the crash of 29 took out the rookies, but the 37 market caught the pros.

Wellington (one of the first and surviving balanced funds) and Dodge and Cox took a licking but kept on ticking.

So having stayed the course (60/40ish) with balanced index thru 2000 - 2003 with a moderate amount of involuntary pucker, am I ready for the next round tuned up with Target Retirement?

Talks cheap - but lets hope so. Stiff upper lip and never admit to pucker. Down 50% - ?? who knows?

heh heh heh

P.S. Dodge and Cox Balanced was only there for round 2 - started in 1931.

 

[ranch111]

I dollar cost average, so I don't really care what the market does. In twenty years when I look at what I've got, the current market correction will have been one of many. It's all about time and compounding.

 

[wildcat]

Right; and we ERs on the board are exactly in his boat. Good point!

Ha

 

[wildcat]

Brew -

I still check in on CGI. Still can't believe it receives little to no attention and I suppose that is a good thing. Payout is still moderate and it looks to have plenty of cash around. In your opinion, how high is the dividend hike going to be & when will one of the big players buy it out?

 

[brewer12345]

I just bought some CGI. Div will eep rising and the company will buy back stock and expand. Dunno about a buyout, but if they keep doing well who cares?

 

[dusk_to_dawn]

Right; and we ERs on the board are exactly in his boat. Good point!

Ha

You don't have to be in his boat or yacht to understand what he writes in his letter to the shareholders. I'm not in his boat by any means but I've learned a lot from his letters over the years, such as this:

"Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices."

I agree with you that retired people won't be embracing lower prices, but my original post stated that if you know you will be a buyrer (401k and iras) it's a good thing if the market goes down and stays down for a number of years. If you are still contributing, I doubt you are retired. Even if I was retired, I would tell anyone who is still contributing to 401ks and iras and has 5 or more years to go, to welcome the lower prices.

 

[RedHawk]

both of them will pay out in excess of $2 a share in dividends over the next year.

brewer, how can elge continue to pay 2.04/share when EPS was only 1.25?

 

[cute fuzzy bunny]

Hmm...its either leverage, 'plastics' or they're making it up on the volume.

 

[humandraydel]

brewer, how can elge continue to pay 2.04/share when EPS was only 1.25?

I was about to ask the same question - DSX also pays a dividend of $1.84 with $0.79 EPS.