Wave 2 of Market crash

Wave 2 of Market crash

Real Estate Investor · Georgetown, MA · Member since 2008 · 250 posts · 6 votes

Could we see another substaintial downturn in the market?

It's funny how quickly the media swung after Monday's huge gain. Everyone said how it was over sold and this was due. They expected the market to float closer to 10,000 in the coming months. Although they didn't expect much appreciation. They said it was most likely the bottom.

Its true in the next week or two we may catch or breath from this huge fall but I don't think it's over.

Wave 1 of the selling, was a bit of panic and also the banks/investment companies dragging everything down with it. A lot of the down turn hasn't effective quarterly earnings reports just yet. We are seeing a glimmer of it now in the Q3 reports....the real blood will be in Q4 and 2009 forecasts.

The retail numbers that came out today and led to the sell off are really just the begining of what investors will see on balance sheets/income statments. They realeased a 1.2% drop in sales in the month of September, which was before this colossal market crash. Think of what Octobers numbers will look like and how about this years holiday season vs last years.

Although we may stablize in the near term I think we will shortly see wave 2 of this market sell off , this time based on real numbers.

Though many believe this is already priced into the market, I don't believe it is fully priced in. I think estimates/sales/target numbers are going to be crushed and it will probably lead to a phase 2 of panic selling.

You'll also see unemployment numbers rising which really scares main street, because it hits home more.

I think we've got a ways to go in the Market sell off. Today was just a small indicator.

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Manhattan, NY · Member since 2008 · 801 posts · 61 votes
17y
Originally posted by MikeOH:

My suggestion is to buy food, water, and ammo - WHILE YOU STILL CAN!
And...

Use the credit cards to do it, that way it will be free! /snark

See this reply in the discussion

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  • Joshua D.Pro Member
    BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votes
    17y

    I agree completely - couldn't have said any of it better, myself.

    Nice analysis.

  • Investor · Bellefonte, PA · Member since 2008 · 1k+ posts · 88 votes
    17y

    I don't think we've seen anything yet. My guess is that there will be another sell off of the people that wanted to get out in the first wave but figured it was to late so they might as well stay in it. When this peak hit (it may have yesterday) I think we're going to see another big sell off.

    -Michael

  • Homeowner · aztec, NM · Member since 2008 · 2 posts · 0 votes
    17y

    I agree as well, there is still a lot of bad economic indicators that won't be calculated until we near the end of the fourth quarter.

    Christmas sales normally either boost or downturn the market. Chtistmas sales may give us an indicator of what early 2009 will look like.

  • Claremont, CA · Member since 2008 · 6 posts · 0 votes
    17y

    I thought your post was regarding the "wave" of foreclosures and the second wave that hasn't hit yet.

    Specifically, all those people in NICE homes and higher end areas that bought or refinanced with pick-a-pay style loans that have neg-am payments with the minimum payment. A HUGE chunk of the population in areas like Orange County, North San Diego county, areas of LA, are in those types of loans...and win the bomb goes off, when those loans "recast" when the balance gets to 115% of the original loan...WATCH OUT! A whole new wave of people walking away and foreclosure activity will hit.

    Of course, this may be avoided by lenders taking the time to modify these loans, but it the process could still make for a mess in the real estate market for at least another year or two...

  • Residential Real Estate Broker · CA · Member since 2008 · 27 posts · 0 votes
    17y

    Yeah, i thought you were talking about Real Estate too. These option ARM's are about to hit the fan something serious...

  • Real Estate Investor · Chicago, IL · Member since 2008 · 10 posts · 0 votes
    17y

    I have to agree with the original post. This is definitely not over.

    I'm currently using all of the fundamental economic data to grow my forex account. Even as crazy as the market is right now, there is still money to be made.

  • Real Estate Investor · North Carolina · Member since 2008 · 1k+ posts · 483 votes
    17y

    Investing 101 says: "Don't put any money in the stock market that you're going to need in the next five years."

    This is more obvious with real estate.

    What may come next is a mass move by individual lemmings who invested in mutual funds and decide to SELL now that their holdings are down so much. If enough of them do that then the weight of redemptions will force the markets down even more.

    Of course, our wise and beneficent government will probably step in with a trillion dollar buyout to make these poor misguided lemmings whole again..... and punish all the evil fund managers.

  • Real Estate Investor · Georgetown, MA · Member since 2008 · 250 posts · 6 votes
    17y

    Sounds the tsunami alarm. This one is bigger.

    As I mentioned a month ago in this first post..Wave 2.

    I think it crested today and broke....look out below. Newer lows all over the place.

    Credit loosened briefly for a brief time after the bailout announcement. If you look at the CMBS swaps they are through the roof, beyond the early Oct levels pre bailout. They are up 300% in the last week. The banks are tigtening up once again.

    The auto makers is just another kick in the pants. This $25 B bailout is going to do jack sh*t! Its not going to make people buy cars, right now at the current purchasing levels of consumers in the car market none of the big 3 can turn a profit, regardless of the $25 B going through. How far does that money go across 3 companies....? AIG burned through $85 Billion like it a 2 week pay check.

    Banks who are receiving money aren't using it to lend they are buying/acquiring other financial companies that are in trouble. Not the point of the money.

    Unemployment claims are going to go up substaintially through the holidays.

    Q4 when it hits the street is going to be absolute murder for retailers compared to this time last year.

    This second wave will cause additional panic...because we had stabilized briefly and many people thought the worst was over. As we hit new lows people more liquidation of stocks and mutual funds.

    You can bet with all these layoffs foreclosures continue to rise and we are hitting a second wave of rate resets going into 2010 to add more salt to the wounds.

    I see another 15% or more...which would put us below 6,500.

  • Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
    17y

    In the great depression, stocks declined about 89%. That would put the DOW at about 1,500. Elliott wave theory suggests the Dow will be between 400 and 1,000. On the technical side, I see no support below 7,200 until we reach 5,500 (more accurately 5,700).

    Mike

  • Real Estate Investor · Beijing, CA · Member since 2008 · 32 posts · 0 votes
    17y

    I agree with your assessment that we have some more bad news to get through and the market probably still has some ways to go before you see complete capitulation but thats just how markets work. Right now you are seeing panic at work. Some companies are starting to sell at prices below their cash on the books. After a period you will see everyone wake up to that fact and the buying will start all over again. What burns me up is that the housing market can't, (or isn't allowed to), work itself out the same way. Did you notice how the S&P is dropping to historical prices in the late 90's? There wasn't really a stock bubble but the markets are working their way down to what the buyers and sellers will accept due to all this bad news. Now for the last 7 years they've securitized homes. Peoples mentalities have changed to a home as a high return investment instead of a place to park your furniture. The problem with a high return investment is that sometimes it just goes bust. Will these investment homes be able to work their way down to historical price levels? It doesn't look like they are going to let that happen. My feeling is that if they don't let this housing collapse work itself out, (like the stock market is doing now), we are going to be in this recession for a long time.

  • Real Estate Investor · Georgetown, MA · Member since 2008 · 250 posts · 6 votes
    17y
    Originally posted by MikeOH:
    In the great depression, stocks declined about 89%. That would put the DOW at about 1,500. Elliott wave theory suggests the Dow will be between 400 and 1,000. On the technical side, I see no support below 7,200 until we reach 5,500 (more accurately 5,700).

    Mike



    It depends on what type of Elliot Wave Cycle you are looking at. Obviously at this point you have to compare it to a super cycle or a grand super cycle given the level of retracement.

    I'm not sure I see that 400-1000 level possible. I'd be utterly shocked to see that. I think your call of 5,500 is definately possible and you are right on the money with the 7,200 barrier. If you use Fibonaci with the wave theory 7,200 is the next key barrier.

  • Real Estate Investor · Georgetown, MA · Member since 2008 · 250 posts · 6 votes
    17y
    Originally posted by Kurt Applegate:
    I agree with your assessment that we have some more bad news to get through and the market probably still has some ways to go before you see complete capitulation but thats just how markets work. Right now you are seeing panic at work. Some companies are starting to sell at prices below their cash on the books. After a period you will see everyone wake up to that fact and the buying will start all over again. What burns me up is that the housing market can't, (or isn't allowed to), work itself out the same way. Did you notice how the S&P is dropping to historical prices in the late 90's? There wasn't really a stock bubble but the markets are working their way down to what the buyers and sellers will accept due to all this bad news. Now for the last 7 years they've securitized homes. Peoples mentalities have changed to a home as a high return investment instead of a place to park your furniture. The problem with a high return investment is that sometimes it just goes bust. Will these investment homes be able to work their way down to historical price levels? It doesn't look like they are going to let that happen. My feeling is that if they don't let this housing collapse work itself out, (like the stock market is doing now), we are going to be in this recession for a long time.

    I agree. Although I don't think people really see homes as a high return investment. I think they looked at it as they can't lose money with a housing investment. I think you are seeing the bottom drop out on stocks faster just because they are more liquid and in a sense intangible. To most people...whats a stock? Its not something you really see, hold, feel...unless you go get your certs., but no one in the general public does that. While a home is more a tangible hard asset that they see. You can see the materials, land, technology. So they have a more difficult time devaluing that type of investment then stocks. Not to mention the personal value homes hold, people become attached.

    It's a lot easier to sell a stock at a lose and blame a bad CEO then it is to sell a house at a lose and blame yourself for over buying and not using common sense.

  • Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
    17y

    It's a lot easier to sell a stock at a lose and blame a bad CEO then it is to sell a house at a lose and blame yourself for over buying and not using common sense.

    That's why you need to blame your mortgage originator or real estate agent.

  • Real Estate Investor · Georgetown, MA · Member since 2008 · 250 posts · 6 votes
    17y

    Hahaha...that's what some people do.

  • Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    17y
    Originally posted by Kurt Applegate:
    Right now you are seeing panic at work. Some companies are starting to sell at prices below their cash on the books.

    Don't you think this means investors believe there is no way to extract this cash? If the cash could be had, like in GM's or United's case, some investment group would come in, take the cash and discard (i.e., liquidate) the company. But these companies have such large liabilities that there's no way to actually discard the company and its liabilities quickly enough to snap up the cash.

    There's been a long-standing theory that at some point the markets would plummet because retiring baby boomers would start spending them money and would need to start pulling cash out of the market. That would reduce demand for stocks, resulting in falling prices. Perhaps, just like with the housing market that was pumped up by easy money and many cheerleaders, the same is now happening in stocks. I don't think anyone really thought of the runup from 2002 until this summer as a bubble, but maybe that's exactly what it was. We were just all distracted by the housing bubble and didn't notice.

  • Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
    17y

    I don't think anyone really thought of the runup from 2002 until this summer as a bubble, but maybe that's exactly what it was. We were just all distracted by the housing bubble and didn't notice.

    I think that is spot on. If you haven't read it yet, I suggest "Crash Proof" by Peter Schiff. He lays it all out there.

  • Real Estate Investor · Georgetown, MA · Member since 2008 · 250 posts · 6 votes
    17y

    Hey Mike,

    Just revisiting this thread. We broked 7200 as of late. Next stop 5,500....?

    That is downright scary.

    The fundamentals are starting to impact now. GDP down 6% today, consumer spending Q4 lowest since 1982....etc. Jobs release next week.

    S&P just broke the key support level of 740 today. Well see if it pops or drops after that one.

  • Real Estate Investor · San Antonio, TX · Member since 2008 · 553 posts · 20 votes
    17y

    Looks like drops!

  • Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
    17y

    Dave and Lee,

    Yes, next stop 5,500! The government has been trying desperately to hold the 7,700 level and they were not successful. Now, even after spending trillions of dollars, our major institutions are broke (still only in business due to funny money being pumped into them); many of our largest industries are broke (again being sustained by money printed out of thin air); Americans are over-extended; housing prices continue to plummet; layoffs are accelerating; and the government has just gone on the biggest spending spree in all of recorded history. If that weren't enough, Obama promises to raise our taxes; raise corporate taxes; diminish the home mortgage interest deduction; diminish the deduction for charitable giving; start a new socialized medicine entitlement; and enact a disasterous cap and trade system that will raise utility bills for EVERY American and raise fuel prices by $2 per gallon!!! The socialists are also trying to find a way to take your guns!

    OBAMA IS A CLUELESS SOCIALIST THAT IS ABSOLUTELY GOING TO DESTROY THIS COUNTRY!

    My suggestion is to buy food, water, and ammo - WHILE YOU STILL CAN!

    Mike

  • Manhattan, NY · Member since 2008 · 801 posts · 61 votes
    17y
    Originally posted by MikeOH:

    My suggestion is to buy food, water, and ammo - WHILE YOU STILL CAN!
    And...

    Use the credit cards to do it, that way it will be free! /snark

  • Aurora, IL · Member since 2008 · 153 posts · 20 votes
    17y

    yea especially if u have a citi card lol

  • Indianapolis, IN · Member since 2008 · 759 posts · 185 votes
    17y

    I saw news story the other day about the run up of gun and ammo sales.

    The story felt that it was due to the economy......but they never mentioned the fact that people are nervous because the dems control our entire government right now, and that they have a strong record of being for gun control.

    Talk about skirting the issues!

  • Joshua D.Pro Member
    BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votes
    17y

    The Nikkei and other major exchanges in Asia are down between 3% and 4% on Monday . . . will the bloodletting continue here?

  • Real Estate Investor · Member since 2008 · 340 posts · 34 votes
    17y

    None of this is surprising. The markets are apolitical and are shorting based on the US's (Obama's) stimulus plan, omnibus package and budget.

  • Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
    17y

    Once we break 7,000 on the DOW, we may get some accellerated selling to the downside. There really isn't much support between here and about 5,500 (more precisely (5,700) on the DOW. In the great depression, the market lost 89% of it's value. That's about 1,500 on the DOW. Elliot wave theory suggests a low of 400 and 1,000 on the DOW. Wouldn't that be interesting?

    Mike

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