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

    Art Cashin on CNBC, who is pretty good. Mentioned that S&P at 700 level is the most important technical area of support for the current market. He said if they break it and its bounces back there could be a significant bear rally. But if they break and and continue to sell of we could be in for a sell off like you are talking about Mike.

    I also agree that 7,000 is a very strong mental/emotional barrier to break through.

    Could be an ugly week or we could get the rally wheels on for a bit.

  • Real Estate Investor · Northbrook, IL · Member since 2009 · 21 posts · 0 votes
    17y

    I'll call the bottom at 5900 @end of March

  • Real Estate Investor · StL, MO · Member since 2008 · 296 posts · 152 votes
    17y

    Take this for what you paid for it but since this thread is talking about the stock market I thought I'd add this: I work at an Investment Advisory firm and through all of this we have had 2 clients call up and say "I can't take it anymore, Sell everything!". The first time was the week of the Oct low/bounce and the second time was the week of the Nov low/bounce. We received 2 more phone calls on Monday saying to "Sell everything". So keep your eyes open for a tradeable bounce possibly coming soon-I'd like to see a nice scary opening drop-but this recent drop has been slow and steady, even the day that the markets moved up was slow and steady. Considering how low we are, we should have seen a sharper rally on that day so that tells me the demand to buy isn't there right now but it would get there on a big WOOSH down open.

    I would caution you to put too much emphasis on the Dow right now, it's a price-weighted index (meaning stock price matters) while the S&P 500 is a market capitalization weighted index (stock prices don't matter). Out of the 30 Dow stocks, 5 are priced less than $10, 3 between $10-$15, 4 between $15-$20 and 5 between $20-$25 a share. The Dow used to replace stocks that fell below $10/share. It's now politicized-can you imagine what would happen if GE, Bank of America, Citigroup, Alcoa and General Motors were all kicked out of the Dow? American Express, Intel and Pfizer are close to that kick out point and Microsoft and Disney are close behind at $16. Use the S&P 500 right now, even though indexes are dynamic and change over time, the Dow is departing from its historical operations so it has lost some forecasting ability-but it still has the psychological aspect of that's what people hear and talk about most of the time.

    I've noticed that about a year ago, most of what I read predicted a low of around 600 for the S&P 500 (only -15% more from here!). Now I'm seeing projections ranging from 350-550 based both on technical analysis and projected P/E ratios.

    A couple of things to think about:
    1954 was the year the Dow made a new high from the 1929 crash.
    Japan's stock market just made a 25 year low.

  • Lincoln, NE · Member since 2008 · 249 posts · 46 votes
    17y

    I think the new bottom will be at 4500 by June 2009.
    What are your predictions for Real estate market rebound.... year?? I say 2013.

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

    Bob, what are the economic differences in those two situations? How was it dealt with?

    The 29' Crash, then Bottom 32' and Break even of 54' was a 25 year cycle to get back above water.

    The Japan collapse was slower(not a true crash) and it still is bleeding today as you mentioned 25 years later and still hitting lows. The question is, when, if ever do they get back to their early 90's high.

    In October/Nov of 2008 it almost felt like we were going to witness a 1929 crash with Lehman going down and AIG on its death bed. But the governement "saved" AIG and a few of the other huge banks. It may have stopped the crash but it seems as though the selling is slow and protracted now, more similar to Japan's scenario.

    Which brings me back to your original point about the 2 first big drops and the following pops. The selling since the beginning of 2009 has been consistent but not drastic. Which doesn't allow for the proceeding pops.

    Which is the question that has been tossed around here a few times. Is it better to just drop and drop hard in order to start over or do you attempt to do something and stave it off leaving us with a spinning of the wheels for decades to come. I'd prefer to let it all fail.

  • Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    17y

    I'll stick with my 3900 as the bottom, within 12 months. As for real estate, depends on area. www.forbes.com lists 12 month projections, when the bottom comes for each area, and how much more prices will fall before they hit bottom. Go there and pull up "25 worst housing markets". Then go to the "25 best housing markets". You'll find mine on top, AGAIN(3rd year in a row). It is 1 of only 2 predicted to be in positive this year. Some areas have another possible 30% loss or more to go. They were late to the party...
    All bottoms are projected to be by 4th quarter 2011. I hope that is correct. Studies were done by Moodys, and Fiserv, 2 of the better ones.

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

    Personally, I'm pessimistic. But I won't bet on my often-wrong opinion on it.

    So -- how many of you are actually putting your wallets on the line and shorting the market?

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

    The President spoke today . . . the Dow fell 281 - cool! I'd love to see a statistical model that examines market reaction on the days Obama talks . . .

  • Real Estate Investor · Las Vegas, NV · Member since 2008 · 1k+ posts · 447 votes
    17y
    Originally posted by Joshua Dorkin:
    I'd love to see a statistical model that examines market reaction on the days Obama talks . . .


    The market is just showing that it has absolutely no confidence in Obama or his proposed solutions. Not really a surprise.

    :cool:

  • Jeff TumbarelloPro Member
    Real Estate Broker · Fort Myers, FL · Member since 2008 · 1k+ posts · 323 votes
    17y

    THe funny part about the market drop.

    The market goes up based upon the chinese stim. plan

    Till we realized, thats the money we intended to borrow

    DOW will rest between 5250 to 5700

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

    All bets are off at this point. There is no way I’d make a prediction on the market. To much is happening out of Washington these days. Heck, Obama could have an epiphany and become a supply-sider (which I doubt).

    Also, there is that 900 pound gorilla sitting in the room, our fiat currency. The American money supply has tripled in the last three months, yet all that cash sits on the sidelines. On top of that, there is no guarantee that foreign investors and sovereign funds are going to continue to fund our public sector spending. I hate to go into Ron Paul mode, but our fiat currency is paper backed by public opinion and if that should collapse, God knows what will happen to the stock market.

  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    17y

    Why even think or talk about such a volitile market. Too much opportunity in a much more controlled environment (RE) to make cash IMHO.

  • Real Estate Investor · Wyoming, MI · Member since 2008 · 195 posts · 10 votes
    17y

    NON FARM PAYROLL!!
    lookout friday morning...it's gunna be bad news BUT we have no idea what affect it will have.

    it's a fun report to trade if u do news trading though :woohoo:

  • Real Estate Investor · Member since 2008 · 340 posts · 34 votes
    17y
    Originally posted by nationwidepi:
    Why even think or talk about such a volitile market. Too much opportunity in a much more controlled environment (RE) to make cash IMHO.

    Agreed. It is like talking about the best way to herd cats.

    I'm sticking with REI.

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

    Because the stock market woes are directly affecting us as real estate investors. As the stock market drops, it is destroying the wealth, savings (what little there was), and retirement of millions of Americans. As the wealth of Americans drop, they are far less willing to spend. As they slow their spending, demand for products decreases and businesses cut production and lay employees off. As employees are laid off, they reduce their spending futher, causing even less business demand. It becomes a vicious cycle and we're smack dab in the middle of it.

    Furthermore, as people are laid off and lose their houses to foreclosure, banks have less capital with which to lend. That's where we are now. Banks are only allowed to lend so much money based on the capital they have. As their capital decreases, so must their lending.

    Capital One just sent out millions of notices telling their customers that their interest rates are being raised dramatically "due to extraordinary changes in the economic environment". The notice then tells the customer that they can decline the interest rate change and if they do, their account will be closed. The translation is that they don't have any money with which to lend. They're trying to subtly get customers to close their accounts and to generate higher income from those customers they retain.

    All of this is affecting real estate investing, just as it is any other business. Yes, this is an unprecedented opportunity to buy properties at a big discount, but can you get the money to rapidly expand your business? Will people with money be willing to spend their money? Not many. People are beginning to hoard cash for protection.

    The rental property business has never been better here in Ohio, but I have cut way back on personal spending because I believe that the economy is going to collapse. In addition, I'm also concerned that the socialist Obama is going to significantly raise taxes and punish entrepreneurs. He may even be so stupid as to put a moratorium on evictions, as I've been saying for a long time. I believe that is a REAL RISK from a socialist government. He has shown that he doesn't care about business, he's only interested in his lazy, socialist, deadbeat constituents.

    Mike

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

    I found this to be interesting.I'm not sure how accurate the ounces of gold number but it is trying to show that if our currency was backed by gold and what our current debt is gold would have to be worth....

    Is it a sign of the coming inflation once this budget hits the books down the road?

    I don't it'll come close to 12k an oz but it just shows you how out of whack this deficit has become and how quickly we are just printing the money.

  • Real Estate Investor · Las Vegas, NV · Member since 2008 · 1k+ posts · 447 votes
    17y

    In the category of “it’s going to get worse before it gets betterâ€:

    The latest jobs report shows unemployment at 8.1%. Of course, that’s because of the “fuzzy†way that these things are mentioned.

    From the article:

    If you include those who don’t want to work or have given up looking the rate is probably over 20%. In the Great Depression the rate was about 25%, but of course the Government changed the way it calculates things so that the numbers don’t look as bad as they really are.

    http://finance.yahoo.com/news/Jobless-rate-bolts-to-81-apf-14564130.html

    :cool:

  • Los Angeles, CA · Member since 2008 · 557 posts · 70 votes
    17y
    Originally posted by Dave Kennedy:

    Putting the Numbers Into The Equation:

    $3,125,000,000,000 / 260,272,000 ounces of gold = $12,006.67 per ounce of gold.

    Is it a sign of the coming inflation once this budget hits the books down the road?

    I don't it'll come close to 12k an oz but it just shows you how out of whack this deficit has become and how quickly we are just printing the money.


    Scary stuff. That's brings up a great question. Is gold really at an all time high, or is gold still very low given the context? To me It doesn't feel the same as say, buying a house in 2006 and speculating that the price will continue to rise 20 percent a year. Gold feels less risky than that to me today even at its high. I may be wrong. Either way, I am referring to tangible GOLD, not GLD :)
  • Real Estate Investor · Las Vegas, NV · Member since 2008 · 1k+ posts · 447 votes
    17y

    People have become so numb to the numbers. Billions and trillions are thrown around without anyone really understanding how big the numbers are. Back in the late 1970s when Ronald Reagan was campaigning against Jimmy Carter one of the big issues was the staggering size of the Federal Deficit that Carter had run up. That deficit was an astronomical $73 Billion, a mere pittance compared to today’s numbers. Obama is shooting for a deficit 25 times that!

    p.s. Watch for tomorrow’s post on the BP Blog outlining my unique solution to all of this…you’ll love it.

    :cool:

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

    Richard, we are looking forward to your blog!

    The problem I can already see with your future post is that it will be filled with common sense logic and simple solutions that would work.

    Who is going to listen to that kind of dribble!!! :lol:

  • Fort Myers, FL · Member since 2008 · 59 posts · 0 votes
    17y
    Originally posted by Richard Warren:
    People have become so numb to the numbers. Billions and trillions are thrown around without anyone really understanding how big the numbers are. :cool:

    Check this out! Illustrates the point really well -

    http://www.pagetutor.com/trillion/index.html

  • Investor · colorado springs, CO · Member since 2009 · 283 posts · 45 votes
    17y

    An interesting graph on national debt.
    http://zfacts.com/p/318.html
    Wow, I would've never guessed...

  • Real Estate Investor · Georgetown, MA · Member since 2008 · 250 posts · 6 votes
    17y
    Originally posted by Mike Seluk:
    Originally posted by Richard Warren:
    People have become so numb to the numbers. Billions and trillions are thrown around without anyone really understanding how big the numbers are. :cool:


    Check this out! Illustrates the point really well -

    http://www.pagetutor.com/trillion/index.html



    OMG, that is hilarious. It actually helps understand just how big $1T is. That is scary, its also sad how small $1M is in $100 bills.
  • Real Estate Investor · Las Vegas, NV · Member since 2008 · 1k+ posts · 447 votes
    17y
    Originally posted by Dave Kennedy:
    It actually helps understand just how big $1T is.



    Another way to understand the magnitude of the number is to convert money to time. Instead of using $1, use 1 second.

    1 million seconds = 11-1/2 days

    1 billion seconds = 32 years

    1 trillion seconds = 32,000 years!

    :cool:

  • Real Estate Investor · Georgetown, MA · Member since 2008 · 250 posts · 6 votes
    17y
    Originally posted by Richard Warren:
    Originally posted by Dave Kennedy:
    It actually helps understand just how big $1T is.



    Another way to understand the magnitude of the number is to convert money to time. Instead of using $1, use 1 second.

    1 million seconds = 11-1/2 days

    1 billion seconds = 32 years

    1 trillion seconds = 32,000 years!

    :cool:

    That begs the question....how fast can the print bills and why can't we use that technology to travel at the speed of light and move to a new earth? :mrgreen:

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