I know, I know…two COMPLETELY different things…BUT…ARE THEY???
What IF…the big BUYING opportunity a lot of US (me included) have been waiting for is no different than buying a home in 2007 because prices had dropped by 20%???
Think about this…
OIL…fell from July to last month…some say it’s STILL gonna fall more…$147/barrel…low of about $30 recently…Haircut???
80% drop
Copper…similar 80% price drop.
Scrap metal…anyone notice people aren’t stealing cat converters off cars anymore…80% drop in price. When scrap dealers were paying $140 each for them, they got stolen…At $20 each…There’s EASIER things to steal.
Gas…From a high of $4.50 to a low of $1.65
What if the DOW was as OVER PRICED as all these other markets??? What if the EVENTUAL fall is a similar 80%???
That puts the DOW at 2800!!!
What if what we are now seeing is EXACTLY what these other markets have ALREADY shown us??? A BIG, LONG, DRAWN OUT…DROP…Which is happening because NO ONE knows WHERE the damage to company profits will stop.
If you don’t know how bad it will get??? How do you know what is CHEAP???
The more I see…The more I think we are experiencing a ONCE IN A LIFETIME repricing of ALL ASSET CLASSES.
The stock market is a reflection of earnings and value…If you cna;t VALUE IT or determine future earnings…It will continue to fall in price and most likely…
I know one thing, the peaks in all of the above mentioned things will not be seen again for a while. Its gonna be a LONG time coming back to those levels.
there’s a problem with comparing resources with stocks. the reason for the fall of copper, oil,gas, steel,etc is the economic demand has fallen off for them. oil was speculated to almost 150, i guess you could argue that what stocks are (speculation) but the dow going to 2800 is obsurd. Are we in bad shape yes but once the bugs are worked out of the system the economy will be back. real estate will be back to where it was before the bubble. i believe it was a 3-5% appreciation rate before the bubble i could be off on those numbers.
Liquidity,
If I said last March ( when the Dow was 12,000) that in one year the market would lose almost half it’s value, would you have said that’s absurd? Nouriel Roubini predicts that the market will drop another 30 to 50 % from current levels.
roubini said another 30-50% drop from here ??? i havent seen that video or read that but just because someone was right about the downturn doesnt mean he will be right about all of it. He would be an economic advisor is if he was spot on. the stock market has declined to price in a depression in terms of numbers.
peter schiff was also calling this for 2 years now, BUT he thought the rest of the world would be in better shape and lost a bundle on overseas markets. he’s also the guy touting 2000 or 3000 an oz for gold.
Does that mean if I load up on penny Sh**tybank stock I’ll be rich in a few years? Or does the potential for the common stock holders to be wiped out of the picture exist in this scenario? The big question is will the shareholders be screwed or not?
Liquidity,
You owe it to yourself to sign onto Nouriel’s site. There is a free trial membership. I’ve read many of the pop economists opinions. What makes Roubini different is the scope and detail of his work. He supports his opinions like no one else.
One thing to consider is that every one of his bearish predictions happened. Not only did they happen, they happened sooner than he estimated and the results/yields were worse than he estimated. Does that make him bullish?
I’ve read Roubini’s predictions and agree with them…You should also look at Robert Shiller’s theory that in every major market correction through out history OVER CORRECTION has taken these markets to lows never thought possoble.
Look no further than the DOW in 1929…
August 1929 DOW = 380
October 1929 DOW = 190
The Dow would eventually OVER CORRECT to a MIND NUMBING 40
That’s right the bottom for the DOW was made in 1932 at 40.
I guarantee NO ONE thought that number was possible.
I am not saying we ARE headed to DOW 2800…What I AM saying is the POSSIBILITY should NOT be ignored. We are in uncharter waters here. Nice snap back rally today.
At some point things WILL GET BETTER…My fear is that this MESS took decades to create and may take a decade to run it’s coarse.