Stocks

[Stewie]

Originally Posted by alnorth

Another common misconception is the thought that after we do go into a recession (or merely a period of weak growth), many people think that stocks will then go down because of that.

Thats not really true, because the market does not wait for long-expected events to happen, they anticipate future events. It's already been priced in, the stock market got hammered this year already because the market thinks we will go into a recession. If that happens, it wont be news. What would be news is that the assumption was wrong and we didnt go into a recession (huge rally), or after the recession is "official", whether it will continue for a full year or end after only a couple quarters. That would be news.

If you are selling or staying out, you arent betting on us going into a recession, because its too late for that, thats already been priced into the market. If you wanted to bet on a recession, you needed to sell about 4-6 months ago. By selling/staying out now, you would be betting that we stay in a huge recession for a year or longer. If we get the news in 3 months that a recession did in fact occur but the analysts decide its going to be a short recession, the market would price that expectation in for a big jump in spite of the fact that the good news hasnt officially happened yet.

All of that is only relevant to market timers, of course. If your going to be a long-term buy and hold investor with more than 10-15 years remaining till retirement, you shouldnt really care about this minute-by-minute short-term stuff unless you think the US will be in the toilet in 15 years.

I agree that the market anticipates the economy down the road, but we're in an unprecedented mess that is really negative. Here's what I'm hearing by respected financial advisers. That eliminates anyone on CNBC or any "financial planner" that's been drinking the Wall St. Kool-Aid.

1) The dollar is going to .52 and Goldman Sachs just said $175 oil within two years. Those two go hand in hand.

2) The FED has started to monetize bankruptcy (see Bear Stearns). This could get really ugly, really fast and is VERY inflationary.

3) The credit market is much worse than the FED wants the general public to know to avoid a panic.

4) Today John Lipsky of the IMF told States to prepare for the worst due to the credit crunch.

5) On Tuesday the FED took worthless paper (subprime garbage) as collateral for $200 Billion. That was historic.

There's more but I'm out of time.

For the novice, think of the credit crunch as this. You have stock certificates of several companies in hand. When you bought the stocks they were worth $1000 total. Later you find out that the stocks weren't what you (or the market) thought they were. Now, no one has any idea what you own and it's probably worth alot less. You go to sell the stocks and there are no buyers (or they're offering $50) BUT YOU NEED CASH TO PAY YOUR BILLS and $50 doesn't come close to your needs. That's why all these banks need CASH from the FED. They're holding worthless paper and will go bankrupt without free money from the FED (paid by you with the hidden tax called inflation).

That's simplistic but hopefully it's helpful.

Edit: I said the FED took garbage collateral in exchange for $200 million. That should be $200 BILLION.

[xbarretx]

Originally Posted by Stewie

I agree that the market anticipates the economy down the road, but we're in an unprecedented mess that is really negative. Here's what I'm hearing by respected financial advisers. That eliminates anyone on CNBC or any "financial planner" that's been drinking the Wall St. Kool-Aid.

1) The dollar is going to .52 and Goldman Sachs just said $175 oil within two years. Those two go hand in hand.

2) The FED has started to monetize bankruptcy (see Bear Stearns). This could get really ugly, really fast and is VERY inflationary.

3) The credit market is much worse than the FED wants the general public to know to avoid a panic.

4) Today John Lipsky of the IMF told CBs to prepare for the worst due to the credit crunch.

5) On Tuesday the FED took worthless paper (subprime garbage) as collateral for $200 million. That was historic.

There's more but I'm out of time.

For the novice, think of the credit crunch as this. You have stock certificates of several companies in hand. When you bought the stocks they were worth $1000 total. Later you find out that the stocks weren't what you (or the market) thought they were. Now, no one has any idea what you own and it's probably worth alot less. You go to sell the stocks and there are no buyers (or they're offering $50) BUT YOU NEED CASH TO PAY YOUR BILLS and $50 doesn't come close to your needs. That's why all these banks need CASH from the FED. They're holding worthless paper and will go bankrupt without free money from the FED (paid by you with the hidden tax called inflation).

That's simplistic but hopefully it's helpful.

so make a run on the banks and invest in GE NOW?

if oil goes to 175 and prices get above 4.35 oil will get closer to rendering its self useless. Trust me if I lose my job (knock on wood) i wont buy gas...and as the rest of the world his recession neither will they. the oil is a bubble.. it will burst...not this year (depending on whom gets elected maybe mid 09)

times wont get that bad b/c the FED cannot simply stand around and put on magic sunglasses that makes inflation invisible to them. What WILL happen will be either be a correction sooner than later thus everything can begin to finally work itself out. or the FED will have no choice but to begin raising rates which initially will hurt the economy and help it at the same time as inflation will begin to fall and the oil bubble will burst.

the only reason for high prices would be a SEVERE lacking of oil...along the lines of PEAK OIL which IMHO already happened. When supplies are then "truly" constrained by means other than political jargon and conjecture then prices will be high. However, as OPEC continues to preach an over abundance of oil the fact remains that what goes up must come down. The speculators will loose BILLIONS and then the sun will rise and life will continue.

i like you reply, but that runs a fine line of worse case scenario (however likely it may be) if the general public builds concensus that what you stated was going to happen then it would be dire straits indeed

Rep for good response Stewie!

[Stewie]

Originally Posted by xbarretx

so make a run on the banks and invest in GE NOW?

p.s. if oil goes to 175 and prices get above 4.35 oil will get closer to rendering its self useless. trust me if i lose my job (knock on wood) i wont buy gas...and as the rest of the world his recession neither will they..the oil is a bubble.. it will burst...not this year (depending on whom gets ellected maybe mid 09)

times wont get that bad b/c the FED cannot simply stand around and put on magic sunglasses that makes inflation invisible to them. what WILL happen will either be a correction sooner than later thus everything can begin to finially work itself out. or the FED will have no choice but to begin raising rates which initialy will hurt the economy and help it at the same time as inflation will begin to fall and the oil bubble will burst.

Why would $175/bbl matter? $111 oil hasn't stopped anyone from buying.

The FED isn't standing around. The problem is they have no control over the credit crisis and can do nothing but bail out banks. That doesn't solve the problem. Yes, the markets will eventually work themselves out, but that could be a LONG way down the road. There are periods in history when the markets didn't make a penny for years and years.

[xbarretx]

[QUOTE=Stewie;4631346]Why would $175/bbl matter? $111 oil hasn't stopped anyone from buying.

QUOTE]

it hasn't?

http://money.cnn.com/2008/03/12/mark..._eia/index.htm

quote "Since September, gasoline stockpiles have increased from a 16 million barrel deficit to a 22 million barrel surplus, which Schork believes is due primarily to the continuing low demand for gasoline. "



i agree with everything but that initial statement. The only thing blowing this bubble up is spec-u-lay-tors global demand and forecasts are on the decline my friend. OPEC and or the speculators need to reexamine a supply and demand graph. they are no where near equilibrium.

[xbarretx]

[QUOTE=Stewie;4631379]

Originally Posted by xbarretx

You're confusing gasoline with crude. Gasoline stockpiles have to do with refinery capacity and can fluctuate wildly. I would question Mr. Schork's opinion that it's due to low demand.

tis true but form the consumers stand point Gas is what we really care about. i could do with less plastic and petroleum refined products providing i can afford to get to and from work.

make no mistake stew, i agree with you however i dont buy that oil is this high for a reason. thats all bro too much discussion regarding oil anyways it makes my hair turn white and im only 28.....

we can at least agree that were continuing to float up sh%t creek without a paddle. ... uh i mean

[Fairplay]

I think that the market will reach 11,000 or 10,500 before if stalls around and the economy starts perking up. I also hope that my job won't in jeopardy as it gets worse.

Seems like there are no guarantee when it comes to keeping a job these days.

[Stewie]

[quote=xbarretx;4631360]

Originally Posted by Stewie

Why would $175/bbl matter? $111 oil hasn't stopped anyone from buying.

QUOTE]

it hasn't?

http://money.cnn.com/2008/03/12/mark..._eia/index.htm

quote "Since September, gasoline stockpiles have increased from a 16 million barrel deficit to a 22 million barrel surplus, which Schork believes is due primarily to the continuing low demand for gasoline. "



i agree with everything but that initial statement. The only thing blowing this bubble up is spec-u-lay-tors global demand and forecasts are on the decline my friend. OPEC and or the speculators need to reexamine a supply and demand graph. they are no where near equilibrium.

You're confusing gasoline with crude. Gasoline stockpiles have to do with refinery capacity and can fluctuate wildly. I would question Mr. Schork's opinion that it's due to low demand. And the real reason oil is at $111/bbl is because the dollar has dropped like a stone. Crude is much cheaper if you're buying in Euros or other currencies.