legion
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Why is the long term outlook down?
Dow Jones 11,000 preemptive thread
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Why is the long term outlook down?
dannno
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Because the government made the same mistakes trying to prop up the phony bubble economy we had from 2000-2007 that was a result of propping up the phony dotcom bubble.. each bubble bigger than the next, each government intervention bigger than the next.
Sure, Wall St. firms are looking great because our government stole the wealth from the taxpayers to prop up the economy, but there are no fundamentals. Interest rates are too low to save, so capital creation ultimately creates mal-investment.
It may be profitable to do a project that has a RoR of 3%, but it is still a dishonest monetary policy because keeping interest rates low increases debt and dilutes the money supply which is stealing. So for the project that has a 3% RoR to get funding, all of the projects that have a RoR of 4% have to get funding first. All of this new money creation creates inflation.
The projects with an expected 3% RoR are more risky because there is a greater chance of the actual RoR being less than 0%. That is where the malinvestment comes in.
Explain? if you pointing to the forecasts. Typically forecasts are conservative and below the actual earnings.
I know its fun to predict doom and hope others lose money but at least back such predictions with facts.
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tmosley
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Good lord, are you 12?
Melt-ups on no volume==fake rally. You might be "making a lot of money", but you can lose it all in a day if the money spigots feeding the market are turned off, and they will be, in order to feed treasuries. Until you realize your gains, you have made NOTHING. Anyone who has spent any amount of time in the markets knows this.
jclay2
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Legion, I do agree with you. Putting your eggs in one basket and hoarding silver or pm's is never a wise move. People should be investing in a wide array of assets. However, this market particularly the US is being propped up by all kinds of forces. Defecit spending is equal to 12% of GDP for goodness sakes. We would be in a full blown depression if the were forced to have a balance budget. The fed just finished overpaying for 1.2 trillion garbage mbs. Nearly all the major banks were at the point of insolvency before the FED's came to bail them out. Total Debt (corporate, personal, and government) are at all time highs and at least in the private sector have begun a massive deleveraging. Given that the federal and state governments are borrowing as far as the eyes can see and programs such as medicare and ss are net negative, Government spending is going to go through the roof in the next decade. If we had any parallel at all it would be Japan. Same bailouts, government spending, and re bubble. However, their market is currently at 70% of its highs in the late 80's. The thing that worries me is that many developed western countries are in the same boat as us. I think the possibility for an unprecedented sovereign debt contagion is higher than ever before. We are allready seing the effects in Greece and it could serve as an example of our future. Yes, people on this forum might be betting a little to much on one asset class, but the are far from ignorant and given our countries circumstances will probably end up wealthier than most of the sheep who blindly take your words. From reading your post in this thread, it seems that you are not realizing the amount of risk that is in this market.
hugolp
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If you check the DOW/gold ratio, the DOW is losing big time. I am glad you are making money, but I dont get why you make a cheap shot to metal holders when they are doing great too.
Looks to be having a teeny bit of trouble breaking 11K lately. More people are starting to call bullshit on this market IMHO. Consumer debt is consistently falling and the only times it's stable is when the gov't is pumping out credits for this or that to get people into more debt. $11.5B lost (or paid off) in debt just last month since no Cash For Clunkers and the house credit is winding down. That is NOT bullish for equities due to less and less consumer spending. How do you predict higher share prices for companies making less money?! For this reason alone, the equities rally is plainly bs on its face.
PMs have been rising along with the Dow, in case you missed that.
PMs have been rising along with the Dow, in case you missed that.
Revenues have gone down but companies have maintained their earnings by cutting costs (P/E ratio is still around average), couple that with growth in India,China and Brazil stocks of multinational companies will continue to outperform.
They can only "cut costs" for so long. Many have already been cut to the bone to maintain a profit. The downward spiral of less borrowing (and thereby less spending) dictates there's a point where costs can no longer be cut just to maintain some level of profitability. Where that point is exactly is anyone's guess but it's still there and a mathematical certainty as long as debt continues to fall. The Feds have been trying to offset this with "stimulus spending" but even that can only last so long...
You do bring up an interesting issue though, companies that have basically outsourced their whole operation, short of keeping executive offices in the US, may defy this trend BUT I see a logical disconnect somewhere in pumping up the US stock market based on companies that don't produce anything in the US other than bloated executive salaries and don't sell anything in the US. They might as well not even be American companies at that point. If we want to take that issue further, can we really look at a bunch of corps with few, if any, productive jobs in the US and say the economy is improving based on their share prices? The fundamentals behind this "rally" just aren't there.
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Old Ducker
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But there is still strong growth in emerging markets you can't discount that, as for reason why companies are moving away from US is because of rising tax rate and increasing cost of doing business here due capital gains, Health care etc. Yes soon the American companies will be in name only.
In 2004, 2005 when the DOW was about 10.3K, the economy was BOOMING and credit expansion was in full swing. The music was playing and there was seemingly no shortage of chairs.
No way this rally is organic; it's PURE speculation.
If I was a private equity firm, had $240 billion burning a hole in my account and just wanted to buy a company outright, I could either buy Apple or I could purchase Toyota and Honda and Nissan.. My point? The market is totally irrational right now. Just look at Ambac shares today.
No way this rally is organic; it's PURE speculation.
If I was a private equity firm, had $240 billion burning a hole in my account and just wanted to buy a company outright, I could either buy Apple or I could purchase Toyota and Honda and Nissan.. My point? The market is totally irrational right now. Just look at Ambac shares today.
If i was hedge fund manager i would rather buy Apple than all 3 auto companies why? Apple is growing and has net income was 8+ bill vs 4 bill in losses for toyota and 2 bill in profits for Honda/Nissan in 2009. 2010 is not shaping up too well for Toyota and in automotive sector there is too much capacity and fierce competition (from Hyundai and Chinese/Indian autos) so expect a lot of consolidation, i would not be surprised if Honda gets bought up.
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