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Is it possible for the stock market to go up in a 10 year period of stagflation and 10% unemployment?
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2010 Apr 14, 1:45am 3,490 views 11 comments
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10 year period of 10% unemployment? No. But I don't think your friend's statements assume this...it assumes a more normal economy.
how well did your friend predict the last drop? and I mean seriously! everybody says now they saw it coming!
It's easy to understand that a drop is coming (eg housing/last bubble) it's harder to predict when. It's easier to predict when something isn't going to happen. I've been thinking about this very question, because I've seen a lot of good gains on my portfolio, and I've been considering pulling out and sitting on the side lines for awhile. But in the last few days, earnings have shown exactly what this guy from JP morgan is saying. I'm thinking we're going to see good gains for at least the next year.
People might say "what money do people have to invest!" I'll counter that with "the 90% who are working have money", everyone who has a 401K plan is giving away money to people who MUST invest it. It's a steady stream coming into to them. How many big new companies are starting up right now? Not many. Thus there is less to invest into new companies, and more to invest into pre-existing companies. And another big one right now, if someone isn't saving to buy a house, or isn't buying a house, where is that money going? Into a 1% savings account? Probably not. Probably the stock market. So all of those people waiting before buying a house, are currently shoving more and more money into the stock market.
We will see a dip during elections this year. Uncertainty will do that, but it will recover the day after, regardless of who wins or loses.
Other than that, we've probably got a pretty good year ahead of us.
Well some of the money coming in is from the zero percent interest loans to the banks that then turn around and invest some for a minimum 4% gain in Treasury's but really are investing in the markets for even larger gains. Until people see a recovered portfolio they won't spend it so the idea is to add liquidity to the economy. Also it's the only game in town to produce profits perceived or otherwise. With inflation on it's way and expected to arrive sometime in late 2011 investing in real assets ( ie: real estate and others )may also start to take place if there is some paper profits available for that.
grywlfbg
2010 Apr 14, 6:56am
Any financial advisor who utters the term "sideline cash" should be fired immediately and you should not believe anything this person says. The stock market is a zero-sum game except during IPOs and bankruptcies/mergers/acquisitions. Any time someone buys a share of stock someone must have sold that share of stock so the amount of "sideline cash" is exactly the same. Anyone who claims to be a financial advisor who doesn't know this is an idiot.
Any financial advisor who utters the term “sideline cash†should be fired immediately and you should not believe anything this person says. The stock market is a zero-sum game except during IPOs and bankruptcies/mergers/acquisitions. Any time someone buys a share of stock someone must have sold that share of stock so the amount of “sideline cash†is exactly the same. Anyone who claims to be a financial advisor who doesn’t know this is an idiot.
Not every dollar in a savings or money market account. is a result of selling stocks.
Any financial advisor who utters the term “sideline cash†should be fired immediately and you should not believe anything this person says. The stock market is a zero-sum game except during IPOs and bankruptcies/mergers/acquisitions. Any time someone buys a share of stock someone must have sold that share of stock so the amount of “sideline cash†is exactly the same. Anyone who claims to be a financial advisor who doesn’t know this is an idiot.
stock trading is not a zero sum game because of commissions, fees and taxes.
if you trade and your stocks return zero percent, you're losing money because of the trading costs.
Well there you go! John Bailo says it is oversold, so it must be oversold! we don't need no stinkin facts or numbers around here!
RayAmerica
2010 Apr 16, 1:59am
The DOW is almost never a barometer on the health of the economy, as evidenced by the history of Great Depression. During the Depression, there were numerous "Sucker" rallies with the biggest occurring in 1932. Unemployment averaged 18% throughout the Depression, and yet the stock market had its rallies. Keep in mind too that the DOW is made of only 30 stocks. The factors that drive the DOW are very complex and numerous. As far as what is happening in the current market: interest rates are at historic lows, making stocks somewhat attractive. Personally, I believe there is a huge correction coming in spite of all the hype because the fundamentals of the economy remain very weak. For a quick and informative read on Wall Street, John Talbott’s “The 86 Biggest Lies of Wall Street†is highly recommended. He also exposes a lot of the lies and misinformation that exists regarding the overall state of our economy. Incidentally, Talbott accurately predicted in 2003 the housing collapse and is the author of 7 books on the economy, etc. I would highly recommend anything this man has written.
And look at the stock market today. Had you invested in 1930, 1932, 1937, 1942 it wouldn’t have mattered cause you’d be richer than hell had you held on till today.
Really? Investing $377 in DOW in 1930 would give you $11k today.
Investing it with a fixed 5% annual interest would give you $18,685.
On average, real inflation was definitely higher than 5% during these 80 years.
Investing it in Gold ($20.65 in 1930) or Oil would also provide much better return.
Vicente
2010 Apr 16, 6:57am
"So money coming in are people’s real hard earned/saved money and not conjured up money from the banks. "
Oh I have to disagree with this. The mere fact of megabanks being able to borrow at nearly zero and get a guaranteed 4% or more return on it is a huge boost. This and other still ongoing "special programs" are entirely conjured money.
How long can it go on? I dunno, but I use trailing stops. I don't depend on the advice of money managers and I don't depend on watching the market on a daily basis.
So I spoke with my buddy who is a financial adviser at JP Morgan. While the stock market hasn't returned to it's highs, my personal portfolio is nearly recovered. I'm getting that same giddy feeling where I'm checking my portfolio several times a day, just like the pre crash of 2007 and right before the internet bubble crash. I was telling him that I was thinking of liquidating my stocks and mutual funds for now cause I think that there's an impending second drop coming. He and his financial firm doesn't think that there will be second major dip. There will be 10% corrections here and there, but not the whopper we saw just a year and half ago. His reasoning is that corporations are running on skeleton crews and therefore their profit margins are increasing. He also cited that there are trillions of dollars( and regret) on the sidelines that didn't jump in this last market rebound. Any dips will be covered by sentiment of "I'm not going to miss out this time around." Also, most importantly, the leverage is out of the market. So money coming in are people's real hard earned/saved money and not conjured up money from the banks. He said at the height JP Morgan was leveraged over 30 to 1 now they are only leveraged 5 to 1. He has cash the sidelines, but he's long with all his stock/mutual funds and is basically going to buy dips. No selling in the near future. What do you think?
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