"Eisboch" wrote in message
...
"Canuck57" wrote in message
news
"Eisboch" wrote in message
...
"Tom Francis - SWSports" wrote in
message news
On Wed, 5 Nov 2008 18:34:01 -0800 (PST),
wrote:
So, my retirement fund loses $80,000 due to Dem Chris Dodd of the
banking comitttee and Barney Frank and the other dems who refused to
take action in 2005 when they were warned their actions were
endangering the economy
No - you lost $85,000 because you were stupid enough to keep your
funds in whatever type of account you had it in.
He hasn't "lost" anything unless he bailed.
Better to sit it out.
Eisboch
Only to a point. Last April I bailed off the US markets but keep to much
in the foreign markets. I had the right idea, but underestimated the
depth of this one. Still, not hurting as bad as many.
I don't see a domestic buying opportunity, I suspect this depression of
stocks is going to be with us for some time to come.
You might want to read this:
http://finance.yahoo.com/expert/arti...einvest/118916
Eisboch
I more or less hold the same view but think for 20% it would be closer to 5
or more years. Not to say you wouldn't buy now for the juicy dividend but I
am second guessing and holding of on more stock purchases at this time.
But the counterpoint, and probably why the markets are getting hammered are
as follows.
Obama's promises are going to cost lots of money. More than the banks!!
The money has to come from somewhere and more printing and debt is still
debt and it means inflation at some point down the road. So why invest in a
stock paying 3% dividend? (Yes, some pay more but hardly would be
diversified). So to anticipate inflation I need a 6-9% yield, a much lower
P/E which means lower stock prices.
Next issue, this isn't over not by a long shot. So far only the symptoms of
debt default are being addressed and debtors are getting away with murder.
This lowers the faith in the currency and it's value.
Next issue is there are more problems coming. GM and Chrysler for example.
They are bankrupt and few buying their products. If they do, it is because
they get it for 1/2 price. Seriously, there are serious signs of prices a
falling like a rock. This is a depression curve, in which case stocks will
depreciate with the costs. This might reverse if the government gets it's
act together. But it could also turn around quick to the next phase below.
Finally, at the tail end of the 70's interest rates went right nuts. His
analysis ignores what happens to a 3% dividend stock in 18% interest rates.
Yes, I said 18%. Real market rates for money need to yield depositors the
follow this equation:
savings interest rates must be greater than inflation + costs + taxes +
risk + profit
The above equation is severely broken in today's economics. While a stock
doesn't have to pay interest rates, it has to be close.
Interest rates and/or inflation will go nuts. You can't print trillions of
dollars and expect these two economic components not to notice.
There is also the fact that over 64 trillion dollars out there no longer
exists in this world. Between property devaluations, 401ks, stock accounts,
failed debt, there is going to be a spending whiplash potentially for
decades. You can't make that kind of debt to keep spending. Even the
government is going to get less taxes as a result.
And 800 billion, just addressed the symptoms, the cause is still out there.
Debts must be honoured or the currency/bank isn't worth crap.
Unlike the '70's though, I think this time the government is trying to cause
inflation as it would numerically increase the homes dollar value, even
though it was less in NPV value. For example, say I have a $300K home, and
inflation hits 50%. But because of the slow down, the house goes to $325K,
lower in NPV but higher in dollar so people don't walk away.
The difference from the 70's though is the government is pulling the
interest leaver so hard down towards 0 it is in fact causing a depression.
There is no liquidity crisis, there is a shortage of people willing to pay
market rates with good credit.