Yes, yes, emailers, I see. We have a DOW with a 6800 handle — low of the day is 6,755.97.

Let’s discuss one of the all time worst calls — and all time best analyses — of my career.

Back in 2006, I wrote the now infamous Cult of the Bear series for the TheStreet.com. The response was both surprising and fascinating. All of the attention was on the random round number — 6,800 — forget the short term upside forecast, or the actual analysis; instead, all people saw was the big negative downside forecast.

The pushback was fierce — highly emotional, totally subjective. At the time, no one wanted to pay attention to any warnings remotely like this:

“It starts with the consumer, who after years of spending, finally tires. Soon, it infects corporate revenue and profits. Slowly, it cascades its way across different sectors: housing, durable goods, discretionary spending, entertainment. Eventually, the decay spooks the markets.”

I thought that economic breakdown was all very foreseeable, and yet even the mere mention of its possible occurrence was fought tooth and nail. It was as if a negative forecast was like BeetleJuice (say its name 3X and it appears!).

What I found so very surprising was that even the “bull call before the fall” portion was widely ignored. Despite having the highest forecast for the Nasdaq amongst all of the Business week prognosticators, and being amongst the top of the S&P500 forecasters –all anyone could see was that huge threatening worst case number.  It was weird to me.

I was surprised anyone took the year end numbers so seriously. I had been on record repeatedly stating that guessing a number on the market 12 months hence was an exercise in futility. In a column written years earlier, The Folly of Forecast, I couldn’t have been more explicit that these exercises are just for $h*ts &  giggles, nothing more. And when I ended up having the most accurate forecast for in WSJ competition the next year, I told Mark Haines it was nothing more than lucky guesswork. And yet still, people took it very very seriously.

The whole experience was really quite instructive to me.

The year end forecast I made was obviously wrong. These sorts of predictions are about timing, and my timing was awful. Markets rallied far beyond my bullish forecasts — 2000 points and 18 months on the Dow — before the eventual collapse. So I get zero points for timing.

Where I will take some props is on the psychology of market collapses: “The move from Dow 8800 to 6800 won’t be a rational, calmly contemplated affair. No one will be quietly wondering about option-expensing or multiple compression. Instead, it will be a severe overreaction to some external event.” — that was astute.

Also prescient: The analysis as to what was structurally wrong in the economy, and what was likely to go eventually cause major problems.  Looking at Long-term cycles, trading ranges, and P/E mean reversion was the correct approach. The 1966 to 1982 range was also instructive, as was noting we were likely to have “violent moves down and rapid blastoffs.” Reviewing that analysis, the cyclical, technical and economic reasons for a potential market collapse from Dow 12k to 6800 is still worth reading today.

But the timing? Not so much . . .

>

Dow January 2006 to Present

>

Sources:
The Folly of Forecast
The Street.com, 06/07/05 – 01:05 PM EDT

http://www.thestreet.com/comment/barryritholtz/10226887.html

Cult of the Bear, Part 1
The Street.com, 01/05/06 – 07:18 AM EST

http://www.thestreet.com/markets/marketfeatures/10260096.html

Cult of the Bear, Part 2
The Street.com, 01/09/06 – 07:12 AM EST

http://www.thestreet.com/comment/investing/10260656.html

Cult of the Bear III: Getting to Dow 6800
The Street.com, 01/18/06

http://www.thestreet.com/markets/marketfeatures/10262175.html

Category: Investing, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

70 Responses to “Better Late than Never: Dow 6,800”

  1. leftback says:

    Nobody ever gets time AND price correct, Barry. Witness the recent mea culpa from Buffett.
    Still those who criticized The Oracle should wait until the game is over – it’s only half time.

    I tell you what though, the market is way oversold here. Especially the useful real economy stuff.

  2. almost like it belongs in a “Fox/Hedgehog”-Textbook

    though, there is something highly disconcerting about the, all too obvious, current *Reality– that many would rather look at “Ink Blots”, than read Words, and Reflect..

    I wonder if someone bothered to raise: http://www.coastguardd5publicaffairs.com/go/doc/651/158930/

  3. Clem Stone says:

    If you really want to see some “fierce pushback”, try mentioning the possibility or ramifications of a small dirty bomb going off in an American city (or 10 cities) while we’re in the midst of the current financial meltdown. I find it fascinating how taboo that whole subject is.

  4. “The move from Dow 8800 to 6800 won’t be a rational, calmly contemplated affair. No one will be quietly wondering about option-expensing or multiple compression. Instead, it will be a severe overreaction to some external event.”

    The decline may not have been calm, but it seems pretty rational to me?

    Methinks that the too-little-too-late-too-panicked federal interventions make sitting out and waiting for what dust there is to settle the rational choice?

    Cash is an old king, in tattered robes, sitting on a cold throne, chilled to the bone. But better that than naked in a storm of indeterminate ferocity and indefinite length?

  5. Steve Barry says:

    Barry,

    I was bearish back then too…I like to think we WERE right and it took the worst malfeasance of government and financial institutions, plus some Maddoffery, to make the market go up when it really should have hit your 6800 target years ago. The problem now for longs is that it ain’t going to stop at 6800…in fact someone else’s great call with bad timing will blow your’s away…Bill Gross’ famous Dow 5000 call about 7 years ago. I’m just relieved that my thought process now seems to be right again, as things are on the path to sanity now…a painful path for most, unfortunately.

  6. Renting in Mass says:

    If you really want to see some “fierce pushback”, try mentioning the possibility or ramifications of a small dirty bomb going off in an American city (or 10 cities) while we’re in the midst of the current financial meltdown. I find it fascinating how taboo that whole subject is.

    Wow, non sequitur much?

  7. Myr says:

    You were spot on. Anyone who says otherwise has surely lost significant amounts of money. Those who agreed with you/listened to you didn’t lose money. That’s the only test.

  8. Jdamon33 says:

    Steve Barry, you really think the DOW will get down to 5,000? I have a lot of cash on the sidelines and I don’t really have the guts at 6,800 to add any shorts, so I guess I’ll just sit this one out and wait until the all clear sign comes from you and the others I respect on the board that have got this thing right.

    BTW, my Merrill broker would STILL have had me fully invested through all this. That is one model that will go the way of the dodo bird after all this is done. These guys make big money and don’t have a clue, a freaking clue how to play defense and protect their clients hard earned money. Buy and hold is dead and gone! My indexer friends who are down 50+% still don’t get it. Amazing.

  9. 1001 says:

    “The move from Dow 8800 to 6800 won’t be a rational, calmly contemplated affair. No one will be quietly wondering about option-expensing or multiple compression. Instead, it will be a severe overreaction to some external event.” — that was astute.

    sorry …. there’s no overreaction , this is orderly selling and in keeping with S&P 500 2009 earnings of $41 as Goldman forecasts … the S&P 500 should be 600 at best , probably 500-525 , and we are going there …. read GS’s report , or BPN’s or RBS’s from the last week’s macro calls

    and if AIG goes under , so does GE , as GE Capital has the most counterparty risk to them …. question is , do you allow the fire department to contain the fire from spreading to the rest of the street , or do you tell them to turn off the hoses and let the whole neighborhood go under

    ( disclosure … Long Gold , Long Oil , short TLT , short SPY )

  10. Ny Stock Guy says:

    Next stop, Blamo!

  11. CNBC Sucks says:

    Did Mark E. Hoffer mention the Hedgehog? I don’t know what Ron Jeremy has anything to do with this.

    If you missed my rant about the government hiring PIMCO to advise it on BofA, here it is: http://www.ritholtz.com/blog/2009/03/absolute-involvement-by-govt-aig/

    Well, I predicted Dow 5K sometime in the 2010s back on June 6, 2008, when it closed at 12,209.81, but if Obama allows Geithner to continue to hire people like PIMCO to fix our economic problems, even I might have been overly optimistic and we might be looking at Dow 6,800 as the good ole days.

  12. Scott F says:

    You are wrong, that was a great call — anyone who thinks anyone else can accurately forecast the future is an idiot.

    What mattered was the analysis and warnings about the coming armageddon, and you did that well — you made me money, and so I hit the Amazon wish list (Not the Rolex, but something nice).

    The next question is: Are you bullish yet?

  13. Steve Barry says:

    @jdamon:

    Yes…my call here last week said Dow 5000…it’s coming…maybe not this leg down…but it is coming.

  14. mark mchugh says:

    It’s all about the logic, your logic, and always has been.

    For years now, you’ve been like a bridge inspector for me. I doesn’t matter that you didn’t predict when the bridge was going to collapse, you warned anyone who would listen that it was structurally unsound. And that was HUGE.

    So, thanks.

  15. Steve Barry says:

    Larry still bullish…Kneale hoping 6600 is a bottom…wow

  16. Pat G. says:

    News Flash! Since Cashin’s DOW bottom was taken out, he’s switched to the S&P. According to him, if it breaks the 700 trend line which goes back to 1980 we “could” be in trouble. Hey Art, the stock market is already in trouble.

  17. tippet523 says:

    Barry

    The key to the Article was at 6800 we would see the best buying opportunity since the 2002 low.

    How do you think about that statement now?

  18. Transor Z says:

    @ Renting in Mass

    It’s also amazing how much pushback you get when you want to talk about the Illuminati’s role in taking over the world’s banking system or that Alexander Hamilton’s idea for The Grid in NYC was based on a landing-strip design provided by Ancient Astronauts to the Aztecs. :-p

    Talk about taboo subjects!

  19. “Still those who criticized The Oracle should wait until the game is over…”

    Does this game have a finite time period? Until we are famously all dead, there ain’t no such thing as “game over”. But the idea of investing is not return, but return of principal, thus one serious “aw-shit” wipes out decades of “atta-boys”. Sorry Warren.

    I’m w/ Steve Barry. Dow 5,000 is a distinct and not-distant possibility. Going forward (and backward, for me) buying anything that’s not a contractual obligation of the seller (i.e. , bonds, notes, etc., as opposed to stocks), is like rolling the dice in Vegas, but without the certainty and clarity afforded by a casino.

  20. worth says:

    Look at that chart with the bear markets that was referenced earlier.
    We’re now in a club with only 2 members: the “Great Depression” and whatever “now” will come to be known as by future gens. The chart lines are in lock step, and by this point (down 50%, a year and a half in), the Great Depression was only a little more than half-way done in terms of % drop and time elapsed.
    What gives ANYONE ANY indication that this thing is anything other than halfway done, in terms of elapsed time and price drop?
    Right now, I’m calling Dow sub-2000 (the G.D. % drop was 90%, why shouldn’t this one be?), but not saying when. And keep in mind the only thing that pulled us out of the Great Depression for good was the massive physical rebuilding of a devastated Europe and parts of Asia. We don’t have that now. Yet.

  21. KN,

    this: “make sitting out and waiting for what dust there is to settle” was, in so many words, the exact ‘advice’ being proffered on NPR, Friday, 27Feb009, after the close..

    National Propaganda Radio, ya gotta luv’ it..

    Jdamon,

    “my Merrill broker would STILL have had me fully invested through all this. That is one model that will go the way of the dodo bird after all this is done.”

    no kidding, Charlie Merrill should be hung in effigy during the nearby ‘Tea Party’

    People should focus on putting their Productive Assets to work in their County, before they think cross-Country, let alone, Trans-Nationally..

  22. leftback says:

    When the demon is at your door
    In the morning it won’t be there no more

    …..any major dude will tell you.

    Or to put it another way, there is less risk in buying here than there was at SPX 1550.
    Not saying we will not see 660, but the carnage is not going to go on forever.

  23. JohnnyVee says:

    While the drop has been pretty dramatic, a look at the DOW graph, or any indice, shows that we have a long ways to go. The downside risk appears to outweigh the up. The market is a great place to speculate, but to invest(?) NO.

  24. Steve Barry says:

    Seems that Ron Insana’s hedge fund went bust and he’s back at CNBC! Welcome back…grab some pom-poms and a Dow 5000 cap.

  25. franklin411 says:

    Where are all the malcontents and ne’er-do-wells who were carping about how the American economy was just fine and we were blowing our wad with the stimulus?

  26. MRegan says:

    @JohnnyVee

    “The market is a great place to speculate, but to invest(?) NO.” Good point.

    I argue that the above should be the real state of affairs. That the stock market be stripped down to reveal the one-armed bandits, loaded dice tables, tripped roulettes and wonky keno decks that make up the real deal. And let the card counters fight the pit bosses at 21. Investment needs to be reframed and those resources redirected. MH makes a good point about refocusing on the local- that is the tangible. We have abstracted so much that capital is beyond ‘consubstantiation’- what’s next – human sacrifice?

    BR’s point about timing is important- this market in my view has more damage to do. It’s like the blight has spread through everything and all the potatoes are turning to mush.

    Now, I hope my appearance here doesn’t provoke a thread death.

  27. Who took out C to the barn today and put it down? Is it on its way to below a dollar(like AIG)?

  28. Steve Barry:
    You didn’t know that Insana closed his fund? He closed it a while ago(he was one of the early casualities). I hadn’t seen him much on CNBC though. I was beginning to think he was too embarassed to show his face much.

  29. kmikev says:

    Ron Insana leaving CNBC to run a hedge fund was ALL I needed to get bearish on the market.

  30. Steve Barry says:

    Anybody know when hedge fund investors can request redemptions again?

  31. leftback says:

    The Republicans who were whining about the stimulus were indulging in pure political theatre. What concerns me the most here (and this view is shared by Krugman among others) is that the govt ended up choosing a middle way that may end up being both expensive and ineffective. If they are going to stimulate they have to do it in a big way and do it fast.

    We all know that Roubini’s estimate of about $3T is close to the mark – the $800B that is oozing out of DC is not going to be active quickly enough to prevent further economic contraction. Keep an eye on the price of gasoline as a key indicator of the battle between inflation and deflation, as the gas price feeds into all other prices.

    Do not be surprised to see additional stimulus, bailouts and TARP programs. There is tremendous determination to prevent a deflationary outcome.

  32. cfischer says:

    Wow Barry, I distinctly remember reading this article before I really knew who you were. Your airplane analogy I thought was excellent and echoed my sentiments. Well done.

  33. leftback says:

    Stevo: Many gates are scheduled to be lifted after March 31 but hedge funds may raise cash in advance to meet anticipated redemptions. We may be seeing some of the necessary deleveraging again this week.

  34. Steve Barry says:

    Citi about to “break the buck”

  35. franklin411 says:

    I agree, left.

    It seems that the President is a bit too much like FDR–FDR was actually very conservative, and it cost the nation a second wave of depression in 1937 after he imposed a balanced budget on the New Deal in 1936.

  36. That chart looks like a MSFT product launch

  37. MRegan says:

    @JohnnyVee

    “The market is a great place to speculate, but to invest(?) NO.” Good point.

    I argue that this should be the real state of affairs. The stock market should be stripped down to reveal the one-armed bandits, tripped roulettes, and wonky keno decks. The card counters should be allowed to fight it out with the pit bosses at 21. MH is right- investment needs to be reframed and redirected to the local, perchance the ‘tangible’. Capital has been so ridiculously abstracted that we moved way beyond ‘consubstantiation’- what’s next? Human sacrifice?

    Re current action- this market still has a mind to do more damage. BR’s point about timing is fully cautionary. My view is that bottoms don’t need to picked. Unnecessary risk.

    I hope this one posts and that I don’t kill this thread.

  38. Steve Barry says:

    @leftback:

    Thanks…I have to believe that anybody with money in any hedge fund that can’t afford to lose it, or that is too concentrated in one fund, will be running for the exits as if their hair was on fire.

  39. sweetman2.com says:

    Couldn’t disagree more with the title, Dow 6800 is one thing that I would have been better never to see again. Seriously though, I’ve been following you since thestreet.com, and it is in large part because of your insightful analysis that I moved my 401k almost entirely to cash in early 2007. Missed some upside to be sure, but quite happy now to have it largely intact. Thanks Barry.

  40. “make sitting out and waiting for what dust there is to settle” was, in so many words, the exact ‘advice’ being proffered on NPR, Friday, 27Feb009, after the close..

    What can I say, I got caught in the bear trap back in Oct (along with everyone else :p) and at this point I just cannot see what rules apply, and whether or not those rules will stand or for how long before the daemon ex machina puts its talon on the scale. Credit crunch? Buy cash flow with zero debt. BZZT! They got slaughtered too, thanks to overall decline! Even timing the government is a joke, as soon as Big Solar is supposed to gear up, oil implodes… I can imagine a future historical account of this period to read like a Lewis Carroll story, where up is blue and wet is ticklish..

    I made some money with SEF, SKF, SDS, but who knows what’ll happen when CDS contracts are paid with taxpayer bailout money, can you even imagine the outrage? Even if I profit from it, I’d still be enraged by it (but at least it’s anti-deflationary)…

  41. Bruce N Tennessee says:

    Interesting thinking that the markets are oversold…

    Certainly could be…but if so, the earnings of the S&P 500 for 2009 are…?

    If you can’t fill in the E, then what is the P?

    I see Mr. Buffett is talking about book value and not stock price…what is the book value of the IB’s?

    …just wonderin’….

  42. Paul S says:

    Actually the drop has not been as dramatic as 1929,and neither was it in 2000. I chalk that up to the fact that there are now way more investors with way more knowledge, in addition to the automatic positive inducement the constant 401k feed gives it. The market’s overall movement is governed by a certain inertia lent to it by the above facts. The market cannot move as irrationally as it has in the past since the role and influence of hysteria is now greatly reduced. If anything this has been a very rational pullback- the market was inflated, and then withthe mortgage collapse people had a very good reason to sell.

    Of course, once folks begin to adjust their 401k contributions to vehicles besides stock funds then we’ll get a much different dynamic. Folks are already reducing contributions if not outright tapping into retirements funds early and taking the penalties, because they need the money so desperately.

    5000? I doubt it. Once we settle down towards the 6000 mark there will be very great pressure to return to the market.

  43. scorpio says:

    i pray that Obama wakes up and fires Summers Geithner AIG soon, v soon. Wall St’s balance sheet needs to absorb Wall St’s losses. there is no alternative. the unnamed Administration person (Volcker?) in WSJ today who said he believes Geithner has met w Liddy of AIG “at least once” since we started giving them almost $200 BILLION frigging dollars. that shd be enuf to get Geitmo (who invented that? brilliant) arrested, much less fired

  44. KN,

    to be more clear, it was in the ‘too late to Sell’-context..

    Buffett might do well by ignoring ‘Historical’ Book Value, while he’s at..

    maybe he’ll remember the lesson ol’ Nappie taught us all, with his travails @ Waterloo–you know, the one about supply-chains, and all..

  45. ben22 says:

    @Steve Barry,

    Hard to say on the hedge fund redemptions b/c a lot of hedge funds have suspended redemptions or reduced allowed annual redemptions.

  46. Mannwich says:

    Greetings all from sunny, cool Ocala, FL. Between running activities here at The Villages with my parents in, including shuffleboard, pickleball (a cross between table tennis and tennis), lots of golf (including my first hole in one ever yesterday, no lie!), I have been lurking on my blackberry, if not commenting until now.

    Needless to say, I’m none too happy about returning to the real wold tomorrow in the North Pole. Being cloistered in this active retirement community la-la land in FL had an otherworldly feel to it. Like a bizarre alternative universe but lots of fun to pretend that GD II wasn’t upon us.

    Speaking of “reality”, karen, you getting my case of wine ready yet? Half the bet has come in (= or < DOW 7,000) and the other half (= or < than S&P 700) will hit soon, maybe even today. Nothing to expensive. My simple palate wouldn’t know the difference anyway. I only wish I had Steve Barry’s cojones. I knew this was coming and couldn’t pull the trigger all-in like Steve-O, therefore, I’m not making a whole lot of hay but am not getting murdered either.

  47. donna says:

    I think it IS the best buying opportunity since 2002. Trouble is, we aren’t in 2002, we’re in 1982, and heading backwards, through the 70s, and maybe further. How the market plays out in this mess, we’ll see.

    At any rate, we’re in for the long haul, 15 years out still, so I hope my fund investors are as good as I hope they are and manage to pick up something that will eventually skyrocket. Either way it doesn’t matter, since I never believed the statements as they came in before anyway. ;^)

    Maybe you wise investors think we are stupid to buy and hold, but hey, someone has to put the money up for investment in this country. If we all go to cash, we’ve got nothing to build with at all. I would prefer some of our companies at least remain solvent.

  48. “Of course, once folks begin to adjust their 401k contributions to vehicles besides stock funds then we’ll get a much different dynamic. Folks are already reducing contributions if not outright tapping into retirements funds early and taking the penalties, because they need the money so desperately.”

    Not only that, but company matches in 401K’s are rapidly disappearing.

    “maybe he’ll remember the lesson ol’ Nappie taught us all, with his travails @ Waterloo–you know, the one about supply-chains, and all..”

    There’s wisdom in experience, if you let it teach you…

  49. zot23 says:

    Steve Barry will be correct too, but really the bottom number is an arbitrary call. Let’s say it is 5000, or 4000, or 3000 just for fun. It just continues until we dismiss our illusions ad start basing our analysis on some sort of bedrock reality. Technicals, support levels, computer models, all this stuff is sand, build your castle on it at your peril.

    The market is a confidence game, always has been. The only thing that gives it credibility is that once upon a time it was actually based (and reflected) something real. As an aside, a con isn’t a con because you give it your confidence, the con artist loans you his confidence until you can grow your own. When the con man loses his nerve, stick a fork in him, he’s done. Does this market seem confident to anyone?

    So what is bedrock? Real things (raw materials) and real work (production.) Until we can figure out which of these America can base a new economy on we are sunk. Obama can put the economy on life support until the Chinese take his credit card away, and we can hope that people will buy overpriced houses with their welfare checks, but really what do we base our recovery on? The 70′s are gone my friends, along with the 80′s, and the 90′s. That was fantasy land, this is the bedrock game. Consumer is so tapped out it’s pitiful if it wasn’t so dangerous, oil will begin to creep up as soon as there is any market stability, and global warming is knocking at our doors (dry as a bone all winter in Denver, enjoying our usual mountain snowfall on the East coast?)

    I went 100% into gold and cash about 18 months ago, my “wealth manager” nearly had a heart attack trying to talk me out of it. The gain on the gold is more illusion, and the cash has made maybe 3% since. But I kept everything I had, my kids eat, our house has no mortgage or bill collectors at the door. The manager still calls me to talk about what a great buying opportunity the market is today, I tell him if he likes it today he’ll be estatic in another 3 months. My gold guy doesn’t call anymore, he’s too damn busy marking that stuff up to push it out the door.

    When will I go back into the market? Simple litmus tests: when the USA has a working and affordable rail system to move cargo and people across our nation in a reasonable and fuel-efficient manner, when taxes on the top 1% of earners is 50%+ (I’m not in this bracket but I’d be happy to pay it if I was again), when health care is a given and not a wish for any working people, when the USA can export something of real value and use for the future of the world (green tech of some kind?), and when payrolls for working folks increases to allow them to live reasonable lives with just a little frill here and there.

    Until that happens, the floggings will continue (to use an old punchline.) There is no bottom until these conditions are met or at least being worked towards. I’ll be watching from the sidelines until then. Obama’s on the right track IMHO, but he’s still got a long ass 4-8 year haul ahead of him.

  50. “but hey, someone has to put the money up for investment in this country. If we all go to cash, we’ve got nothing to build with at all. I would prefer some of our companies at least remain solvent.”-donna

    if, the above, is any indication of the majority opinion of the ‘de-vestor’-class, and, methinks it just might be, the EZ 4cast is for, as only Mr. T could put it: Pain, Pain, and more Pain–for the longside..

  51. ben22 says:

    o.k. here we go, now immelt is stepping in to buy GE stock
    this will look just as dumb as lewis and dimon

  52. NewDealdemocrat says:

    The DJIA fell to 6825 this morning. That means that the Oct. 2007 – present bear market is the 2nd worst in 138 years.

    The second worst, until today, was the loss of 51.51% from the market’s 1937 high of 194.14 to 94.13. When the DJIA fell below 6833, we surpassed that percentage loss.

    The worst, obviously, was the 1929-32 contraction of almost 90%.

    The S&P 500 is still about 5% away from surpassing its equivalent 1937-42 loss.

  53. Tom K says:

    Although I’m only 20% long, I’m actually starting to see some signs to warrant a bullish outlook, at least for the intermediate term. Pessimism is now beginning to reach the extremes we saw late last year and believe it or not, downward momentum is waning.

    http://www.regimenia.com/2009/03/3-1-2009.html

    Barry, I concur with your thoughts about the differences between forecasting and timing.

  54. leftback says:

    ben22: immelt is stepping in to buy GE stock…

    Right. It’s one thing for Ol’ Warren to get his sweetheart deal on preferred shares, quite another for Joe Public.
    The common may go down a long way. Does this thing go to zero as well or do we see infinite dilution?

    Buy real assets, avoid the smoke and mirrors and you’ll come out ahead. Anyone hear yet on CNBC if Prince All-Wally is about to TRIPLE DOWN on his bet in C?

    Short-term oversold condition, maximal negativity, bearish sentiment in MSM and a -700K NFP expected.
    Sell the rumor, buy the news. Rally by the end of the week.

  55. jmay says:

    Barry I think your most heroic call was the “Dennis Kneale Top.”

    Although you did start looking for a mid-term bottom when we went under 8000, as I recall.

    Picking the bottom on this one is going to be a VERY dangerous undertaking.

  56. constantnormal says:

    What I find utterly amazing is how smooth and orderly this slide has been. No thousand-point drops in the Dow (at least none that I recall), no trading halts while circuit breakers kick in — it’s all been very orderly, almost like schoolkids exiting the building during a fire drill.

  57. Steve Barry says:

    @Leftback

    I saw the Prince interviewed on CNBC about 5 years ago…his direct quote was “I will NEVER sell my Citi chares.” He may not get the chance at this rate.

  58. Dow 1500…a 90% fall, like the GD. And it would be rational, IMO, if a bit of an overshoot. If it happens, we may harken at the dawn of a new Dark Age. Where is growth to come from? Notwithstanding all the dire predictions about over-population routinely blathered in the MSM, except for a few sub-populations (Muslim Middle Easterners and Sub-Saharan Africans, of note), there is no growth, and in many cases, outright decline, in the human populations that make up the economic systems of which we are concerned.

    Economic systems can be no more vibrant than the individuals and families of which they are comprised, and aging and dying populations, by definition, are not vibrant and growing. This is apt to get interesting. As if it weren’t already.

  59. leftback says:

    @constant: I agree completely about the lack of screaming drops. It is amazing.

    The drop has been managed and massaged by so much governmental interference that we have reached this point with nary a bruise on Ol’ Humpty Dumpty, he just has a bemused look on his face rather like Hank Greenberg. Of course it was a bit more unpleasant for the Stanford and Madoff investors, and Prince All-Wally.

    @Stevo: Prince All-Wally is holding on to C for the big divvy. Tiny Tim promised him.

  60. Bruce N Tennessee says:

    J M Bouchers:

    How did you get to sign in as leftback? :)

    Knock that off right now, you hear?

  61. leftback says:

    @ Bruce, old boy, that’s jolly amusing: Ha ha ha.

    Remember that Johnny B calls a rally every day… wonder how his buy of C worked out?
    Leftback only calls the rallies at highly strategic intervals.

  62. constantnormal says:

    Is that a rally call I hear?

  63. leftback says:

    @ constant: Is that a rally call I hear?

    Later in the week, perhaps after more selling. At this point, very bad employment numbers are more or less priced in, so anything less than an awful NFP would likely trigger some buying. It has happened before in this bear.

  64. bdg123 says:

    I said you should go back to your original bearishness when you started to lighten up on your downside targets last year.

  65. Ugly close — near the lows of the day . . .

  66. DMR says:

    December 5, 1996: Greenspan’s Irrational Exuberance speech. Dow low was in the 6300s.

  67. worth says:

    As of the Oct. 2007 highs, we had an 8.0% compounded average return on the Dow from Mar. 1970, 784.12 to just above 14,000. 37.5 year span.
    As of today, we have a 5.7% compounded average return from the same starting point in March 1970, a 39 year span.
    That sub-6% stock market return over a 40-year period (including the miracle of the internet, mind you) is not exactly the “magic of compounding” formula to riches that they promised back in b-school.

  68. donna says:

    Well, yes, Mark of course there’s going to be pain. So what? The ride up was a fantasy, the ride down is real? How so?

    My house was somehow worth half a million, if I wanted to buy a bigger house and pay an even higher mortgage, or cash out and pay rent? Yes, I could have done so, but hey, then I would have been more broke, or renting. I still own the house I bought 25 years ago, I write off the mortgage I do pay, which is our only major tax break. Our 401K money is money we either invested or payed in taxes. I laughed at the statements when we became millionaires, I don’t bother looking at them now as what’s the point.

    All of you who trafe the markets, fine and dandy, but I can go to Vegas to gamble. To me, investing is ownership of companies I believe in, and I trust my fund manager sto do the same. Right now, there’s not a lot to believe in, so yeah, selling prices are low. So what? If I still believe in those companies, or my fund managers do and haven’t traded them, they are still worth as much as they were worth before. As more bargains come into play, hopefully I’ll come to own those as well, and eventually if things go well, I’ll own a lot of very good stocks and they’ll go back up. If things don’t eventually go well, we’re all screwed anyway.

    Trade away, have fun with your long and short position and gambling if you like. I prefer to spend my time and money and efforts to work on building a new future for my kids and (perhaps one day) grandkids. If that gives you reason to insult me and the others who like me still hope we have a chance, oh well, I don’t really care. Continue to gamble away our future, or pull out to cash or whatever. For all the good that does any of us.Somebody still has to believe, somehow, in the future of this country and its businesses. I guess that is just Warren and me. Oh well.

  69. donna,

    you go w/: “investing is ownership of companies I believe in, and I trust my fund managers to do the same.”

    seems fine to me, though, if you’d be so kind, pray tell, which co.s and or ‘fund mgr.s’ fit that bill?

    as an aside, and LSS: “The Capt. that went DOWn with his ship, never did lead his Navy to victory.”

  70. dunnage says:

    Dow 5000. We’re gonna see 3800 this year. And then that’s halved (may be 2010). Seriously, I’ll invest indiscriminately at Dow 1900.

    Brokers: they’re sales, and the good ones will tell you so with a broad smile. Remember Merrill’s emails proudly dumping stock on customers. The field is not level, was not level, and will not be level; why anyone would expect otherwise confounds me. Of course commodities are the exception, wanna try leveled. Interestingly Wall Street is doing their thing in Naked Shorts; ever wanted to know who runs the Treasury or the Bank of NY. By the way those Ivy League Supply Side educations don’t work in the cold. Few months ago Goldman closed a real estate hedge fund because everybody had the same algorithm. Gosh folks do we think we got something new? Hell, all this prosaic silliness was done with tulip bulbs. Admittedly we’ve globalized sales. Ah, back to sales: that ain’t a bonus, it’s my commission.