BiggerPockets

The stock market dumped all over itself today and if it does not bounce back tomorrow (fingers crossed) we may actually be close to capitulation.

Once, if, that happens we will bounce a round for a while then the beginnings of a recovery will start to peek out of the rubble.

The stock market is always a leading indicator, the economy as a whole has at least six to nine turbulent months ahead.

Mike, you are so right. Given the fact that we have chased away our manufacturing base, I fail to see how we're going to borrow our way out of the large hole we've borrowed our way into.

Creating wealth can only happen when you create something that other people want to buy. We've let the college boys in charge of our educational system, financial system and government tell us that we should let those silly foreigners make everything we need. Whoops, now we have no means to dig ourselves out of this hole.

I'd suggest the best place to put money these days would be to create local co-ops to lend money to start small manufacturing businesses and for local mortgages. We have the communication tech to cut out the middlemen and start a new economic revolution in this country. We don't need $1mil a month accountants running MEGACORP to make things happen.

Originally posted by MikeOH

I also think that the ecomony has many years of turbulent times ahead (maybe a decade). As long as an increasingly small number of taxpayers are expected to provide ever larger entitlements and handouts to an increasingly large number of people, this country will be in serious decline. A TOTAL COLLAPSE of our system and a fresh start is the only hope to restore our country to greatness (in the distant future) that it previously had. This collapse WILL happen and is a 100% certainty - the only question is whether that collapse will occur now or in a few years.

Well, there are a combination of things happening that may help pull us back from the abyss.

As I wrote on my blog today about preparing for the Obama Coronation in January, the truly wealthy pay only as much tax as they choose to pay. Since they don't tend to live hand to mouth like many Americans, they can delay or accelerate their incomes as they desire. They can choose when to realize and pay tax on capital gains, etc.

As Obama raises the taxes on the highest income levels, the revenues coming into the Treasury will drop. They always do and they always will.

To prepare, I am taking some capital gains off the table before the end of the year and setting it up so I can reduce my income for as long as I have to in order to pay same or less dollars in taxes as I do now.

I am not rich by any means, but I am grateful I don't have a debt load requiring me to generate an ever larger amount of income to cover the taxes and keep my head above water.

The net-net is as the revenues fall, there might be more pressure to reign in spending. It has happened before. Look at the Clinton budget projections before the 1994 election and after.

But, for now, it is time to make sure we as individuals can weather the perfect storm that will hit Washington in January. Pelosi in the control of the House, Reid in control of a possibly filibuster proof majority in the Senate and Obama in the White House to rubber stamp the evermore draconian socialist "reforms" we will see from Congress.

I think Friday was a bottom, though probably not THE bottom. I think we could actually see a rally between now and the end of the year-although I see this as a 'strengthen the strong, weaken the weak' rally where people harvest tax losses and offset long term gains in order to better position themselves through picking better investments or moving from individual stocks into indexes/mutual funds. Many advisers look to harvest taxes at the end of the year once the capital gains/losses are known. We have started to harvest losses already, nearly 3 months early (started in mid Sept) to take advantage of the down market and to try and lock in losses now before we move into a traditionally stronger time period.

I would recommend to those of you with taxable accounts to think about harvesting your taxes now-there are so many options out there right now that you can save $$ on taxes and still be in the exact same position. I can sell VV and buy VLACX and take the tax loss and still be in the exact same underlying investment! Next year if the market goes down, I can sell VLACX and buy VV for a tax loss. Remember, it's only bad to sell at the low if you get out, if you sell some stocks and buy stocks back, you just saved some $$ on your tax bill while staying in the market. And saving tax $$'s can really make this market easier to handle.

(Do you really think this is a vote Obama for higher taxes or McCain for lower taxes? I think the only difference is which taxes get raised, by how much and how often based on how much we're in the hole already and we're sinking rapidly. There's no way either of them will be able to lower taxes since the biggest federal expenses-military, social security & medicare are 'untouchable'.)

Originally posted by Nc Mark

One problem with real estate is that it is neither liquid nor transportable.

I get your point but guess I'm a the glass is half full type of person.

Real estate is something you can touch, feel, and even if everything is going bad around you - you still have something thats "real".

<<In any event, I'm glad Buffett is buying stocks because that's a better indication of a bottom to me than any Princeton-educated talking head opining on CNBC.>>


I won't say that Buffett's buying is a negative but it is definitely not as good as what is being touted in the press. Yes he did step in with a lot of cash for 2 companies, but he would only invest in Preferred shares, paying 10% interest along with warrants priced at currently low prices. If Warren thought things were so great, why didn't he just buy the common stock? Why did he demand the extra protection-in terms of the liquidation of the company-of Preferred status and the 10% yield. If prices are this low and this is only a temporary situation, why not buy the common stock? The price only has to move $2/share to make 10% for Warren which has been happening in a day or two. Why did he want warrants (options) instead of flat out buying at the current prices if things were so great? Also, if GE & GS, 2 of the best companies in the world, have to pay 10% to raise $$, what does that say about other companies and the state of current affairs?

I just can't see this as the huge positive it is being made out to be.

Bob - check the link I posted.

Buffett is buying _common stocks_ at _market prices_ for his personal portfolio.