The Economy and Stock Market

[Big Country]

Just found this documentary on the life of the guy that invented the Elliott Wave Theory

[Big John]

Just found this documentary on the life of the guy that invented the Elliott Wave Theory

I was thinking of this one

[Brentastic]

Will the real Elliott please stand up, please stand up, please stand up?

[Brentastic]

Oh, and if anyone is paying attention to my EWT stuff - sentiment for gold registered a whopping 98% bulls this Wednesday. From a purely socionomic point of view with no technical analysis done, this should indicate that gold is nearing a top. Per EWT, once optimism or pessimism reaches it's extreme, the trend is usually ripe for a reversal. It will be interesting to see if gold tops in the coming days or weeks. Stay tuned...

[Jackass]

Oh, and if anyone is paying attention to my EWT stuff - sentiment for gold registered a whopping 98% bulls this Wednesday. From a purely socionomic point of view with no technical analysis done, this should indicate that gold is nearing a top. Per EWT, once optimism or pessimism reaches it's extreme, the trend is usually ripe for a reversal. It will be interesting to see if gold tops in the coming days or weeks. Stay tuned...

 

So to summarize, buy gold.

[Brentastic]

So to summarize, buy gold.

That actually made me laugh. Nice one.

[Avernus]

So to summarize, buy gold.

 

 

don't buy it for the upcoming push, buy it for the fact that it is what people think "holding on to cash" truly is....because you're holding onto purchasing power as currencies devalue over time, naturally..

[Brentastic]

don't buy it for the upcoming push, buy it for the fact that it is what people think "holding on to cash" truly is....because you're holding onto purchasing power as currencies devalue over time, naturally..

I truly think buying actual gold is a great idea for the long run. I just think it could be had cheaper in a few months.

[Avernus]

I truly think buying actual gold is a great idea for the long run. I just think it could be had cheaper in a few months.

 

definitely, I mentioned earlier that it would be around July-August where you should buy your gold or any commodity (even copper is making its rounds)...

 

I won't be buying any more gold/silver until then, but of course the low for gold could very well be just a little bit lower than it is now..

 

but I expect to see gold around $1125 spot price early-mid August....

[Brentastic]

definitely, I mentioned earlier that it would be around July-August where you should buy your gold or any commodity (even copper is making its rounds)...

 

I won't be buying any more gold/silver until then, but of course the low for gold could very well be just a little bit lower than it is now..

 

but I expect to see gold around $1125 spot price early-mid August....

Then again, with the Euro down big right now along with stock futures, gold might just keep climbing to la la land. It's a risky buy or sell right now, honestly.

[Avernus]

Then again, with the Euro down big right now along with stock futures, gold might just keep climbing to la la land. It's a risky buy or sell right now, honestly.

 

well, a rise in Gold is usually a reflection of the USD dropping...among other things like demand and scarcity...

 

I still say Silver is the stronger play between the two, but there has been rumors over the past 6 months or so about Gold being the next bubble....I sure hope not...

 

purchasing Gold through paper contracts or via ETF will be the reason behind the bubble as there is more gold being purchased this way than there is available physically....not to mention that someone can step in and buy the majority and then outright give whoever has the ETF a cashout regardless if they want it or not...

 

...because you are supposed to be able to exchange your paper contract for the real thing if you want, but who wants the real thing? ...

 

anyways, I'll stick to investing in my commodities and a few here and there...

[Brentastic]

well, a rise in Gold is usually a reflection of the USD dropping...among other things like demand and scarcity...

 

I still say Silver is the stronger play between the two, but there has been rumors over the past 6 months or so about Gold being the next bubble....I sure hope not...

 

purchasing Gold through paper contracts or via ETF will be the reason behind the bubble as there is more gold being purchased this way than there is available physically....not to mention that someone can step in and buy the majority and then outright give whoever has the ETF a cashout regardless if they want it or not...

 

...because you are supposed to be able to exchange your paper contract for the real thing if you want, but who wants the real thing? ...

 

anyways, I'll stick to investing in my commodities and a few here and there...

I'm majorly short the stock market right now. Aside from a handful of inverse ETFs, last week I also shorted the S&P futures at a pretty good price (1160). I told a trading buddy of mine that I'm looking to get out at 600. He doesn't think I can hold it that long, that I'll run out of patience but if the market drops 500+ points this week, that should give me a good cushion on it and will allow me to sit on it. We'll see.

[Avernus]

I'm majorly short the stock market right now. Aside from a handful of inverse ETFs, last week I also shorted the S&P futures at a pretty good price (1160). I told a trading buddy of mine that I'm looking to get out at 600. He doesn't think I can hold it that long, that I'll run out of patience but if the market drops 500+ points this week, that should give me a good cushion on it and will allow me to sit on it. We'll see.

 

even Peter Schiff, someone who is obviously bullish on gold/silver thinks we'll see a 1:1 ratio of gold to the DOW just as it was at one time in 1980....

 

now, I argue that these are different times, possible leading to worse times but that's not the point....my question is "what will gold and the DOW be if and when this does happen?" $5,000, $10,000? - hopefully we won't have to see that again...

[CaP'N GRuNGe]

http://finance.yahoo.com/news/Equities-are...995113.html?x=0

 

Thoughts?

 

Equities are overpriced; here's how the crash will unfold

History and the numbers say we're due for a giant correction; here's how it's going to unfold.

 

Shawn Tully, senior editor at large, On Monday May 17, 2010, 1:45 pm

 

In two tumultuous weeks in October 1987, the stock market shed nearly one-third of its value in perhaps the second most notorious crash in U.S. history. It could happen again. Don't be deceived by the rebounding economy, any more than the bulls should have been misled by the balmy climate during the late Reagan years. Right now, stocks are extremely vulnerable to the same scenario. The reason: The market is even more overpriced than when thunder struck on that distant Black Monday.

 

That doesn't mean that a giant correction is inevitable; far from it. But the quasi-bubble that followed the big selloff in late 2008 and early 2009 makes the probability of sudden downward swing far more likely. And today's high prices make it practically certain that investors can, at best, expect extremely low returns in the years ahead.

 

Let's gauge where the market stood just before the shock of October '87. For this analysis, we'll use the price-to-earnings multiples developed by Yale economist Robert Shiller, who smoothes the erratic swings in profits by calculating PEs based on a 10-year average S&P earnings, adjusted for inflation.

 

In the fall of 1987, stocks were on a tear. The Shiller PE had doubled to 18.3 in just four-and-a-half years. That's far above the historical average of less than 14 (though pales in comparison to recent giant PE numbers). The dividend yield was also an extremely narrow 2.6%, well below the norm of around 4.5%. That's important to remember, because over long periods, dividends are by far the biggest source of investor returns from equities. Then the bottom fell out of the stock market.

 

When the carnage ended, the PE had dropped to 13.3, around its 60-year average, and the dividend yield was approaching 4%. In other words, the fall hardly made stocks a bargain. But with brutal speed and efficiency, it chopped valuations to levels that made sense.

 

The slow crash of 2008-2009: a temporary return to sanity

 

From early 2008 until March of 2009, stocks suffered a steep decline that echoed the 1987 correction, though over many months versus a few days. During that period, PEs fell from the low 20s to 13.3, precisely their level following the '87 crash. Once again, dividend yields approached 4%. For a few brief weeks, it appeared that sanity had returned to the capital markets. Suddenly, equities--overpriced for 20 years-- looked like a good buy, just as they had in at the close of 1987.

 

But the rational interlude didn't last. By early May of this year, the PE had soared back to almost 22, shrinking the dividend yield to 1.8%. In recent days, stocks have dropped over 7% amid giant gyrations. That decline isn't nearly enough to restore equities to anything like their fair value. So what do the current, extremely price PEs tell us about the future of stock prices?

 

The best bet is always that equity values, like most investments, "revert to the mean." So following a bubble or bubblette, PEs and dividend yield will inevitably fall back to their historic averages. The big question is how long it will take. In 1987, it took a few days. In the 1990s and early 2000s, stocks remained overpriced for years.

 

The problem is that the returns investors can garner at today's lofty valuations are just too low. They're also too low to last. If PEs stay constant, the total return to investors is the dividend yield plus the growth in earnings per share, with an added bump for inflation.

 

Today, the yield is 1.8%. Earnings per share typically grow at a "real" rate of around 1.5%, way below the pace that Wall Street advertises. So the total gain from investing at today's prices is 3.3% or so, plus around 2.5% for inflation, for a total of between 5.5% and 6%.

 

That's not enough. Stocks are far too risky for investors to accept those puny rewards, as the wild swings of the last two years, and last two weeks, make abundantly obvious. The only way for future returns to rise is for PEs to fall.

 

How far must prices fall to get back to basics? For the S&P to return to a PE of around 14, the index would need to drop by around 33% to less than 800, its range in early 2009. That would substantially raise dividend yields, and raise future real returns into the high single digits, where they belong.

 

The drop is going to happen. Here's how:

 

Here's how I see the odds. The chances are about one in three that we suffer a huge, wrenching correction in the next year or two similar to the one in 1987. That possibility is so high because stocks are so startlingly expensive. Another high probability event is that markets go on a long sideways grind, with smaller drops along the way. What's extremely unlikely is that the market rises substantially from current levels and stays there for any extended period.

 

Whatever happens in the next couple of years, the odds are overwhelming that investors who buy stocks today will reap puny returns for 10 years. For example, if you'd purchased shares at today's PE of 22 in early 2003, you would have gotten a return of around 3% a year, barely enough to compensate for inflation, let alone buy the blood pressure medication you'd need to survive the scary ride of stock ownership.

 

Now let's look out a decade or two. The evidence is extremely strong that price matters, and matters a lot: except in rare cases, buying stocks when they are pricey -- when the Shiller PE exceeds 20 -- leads to puny returns ten years later.

 

Not that you'd ever know that from the happy talk from Wall Street. So screen the noise out, and follow the numbers. They'll eventually get better for investors. But to get back there, we may revisit October of 1987.

[Ursa Majoris]

http://finance.yahoo.com/news/Equities-are...995113.html?x=0

 

Thoughts?

Thoughts? Sure.

 

My thoughts are that none of these weasels has the vaguest clue - none at all.

[Brentastic]

Thoughts? Sure.

 

My thoughts are that none of these weasels has the vaguest clue - none at all.

Who are the weasels (serious question)?

[Ursa Majoris]

Who are the weasels (serious question)?

Wall Street. Brokers. Analysts. Bankers. Traders. Etc.

[Avernus]

Wall Street. Brokers. Analysts. Bankers. Traders. Etc.

 

JP Morgan, Goldman Sachs etc. etc. know exactly what they are doing...

[Jackass]

JP Morgan, Goldman Sachs etc. etc. know exactly what they are doing...

 

and they tell us the opposite.

[dmarc117]

http://www.businessinsider.com/dow-theoris...the-year-2010-5

 

those are pretty uncharateristic comments from him

Edited May 18, 2010 by dmarc117

[Avernus]

http://www.businessinsider.com/dow-theoris...the-year-2010-5

 

those are pretty uncharateristic comments from him

 

 

the most important part (to me anyways) is where he says to "get out of debt".....this has been my main goal for the past year or so and I'm almost there....

 

if things are going to be half as bad as I expect 12 months from now, then getting out of debt is the 1st step to freedom

[gbpfan1231]

the most important part (to me anyways) is where he says to "get out of debt".....this has been my main goal for the past year or so and I'm almost there....

 

if things are going to be half as bad as I expect 12 months from now, then getting out of debt is the 1st step to freedom

Why pay off your debt? If things tank won't we all just get a bailout like evrybody else seems to be getting? I am thinking now is the time to accumulate debt.

[i_am_the_swammi]

Why pay off your debt? If things tank won't we all just get a bailout like evrybody else seems to be getting? I am thinking now is the time to accumulate debt.

 

thats a very interesting thought...and one that is being banded about by many investors. I have a bunch of sub-4% non-securitized debt that I am in no hurry to pay off.

[cre8tiff]

if things are going to be half as bad as I expect 12 months from now

 

If things are going to be half as bad as you expect, then we will be playing "Road Warrior" for real.

 

Dibs on the GTO and shotgun pistol. :irishwink:

 

But to the getting out of debt part.

[Brentastic]

http://www.businessinsider.com/dow-theoris...the-year-2010-5

 

those are pretty uncharateristic comments from him

This is exactly what I've been recommending for the last several months. The sheep won't act until it's too late, though. You're either ahead of the curve or behind it.