How low, can she go?

I never expected the infamous Dow 6,800 to become an UPSIDE price target . . . its now 5% above us.

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Category: 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.

69 Responses to “Dow 6,500 ?”

  1. Steve McCann says:

    Social Proof: A Tool for Determining Authority | In the Library with the Lead Pipe

    Submitted on 2009/04/27 at 2:28pm

    [...] The series of calculations involved for each title in the above factors could then be represented within a library OPAC or a periodicals database in a way similar to that of PostRank’s system. If it was built correctly it could be used to quickly and easily “drill down” to relevant cognitive authorities within any given research context. Of course there is a potential downside. The first is the immense amount of data that would have to be managed on an ongoing basis. The second, and perhaps more pressing, would be the problem of unintended consequences. Just because a piece of information is socially dynamic, doesn’t mean that it is correct or even helpful. A cautionary tale from the world of finance involves the below chart highlighting the financial bubble which peaked in 2006/2007. In figure 5, the analyst Barry Ritholtz (lower left) recognized early on that the fundamentals of the economy did not support the high valuation of stocks. He was proven correct, but not until the market collapsed in 2008/2009. [...]

  2. Winston Munn says:

    Dow 6800???

    Geez, Ritholtz, always the damned optimist….

  3. Myr says:

    BR, over what time frame?

  4. Bruce in Tn says:

    Lefty:

    You are on about the S&P this leg…If I win I’d like these DVD’s…..

    http://hotair.com/archives/2009/03/05/obama-the-cheapskate-25-dvds-for-gordon-brown/

    Obama the Cheapskate: 25 DVDs for Gordon Brown?

    (Perhaps we won’t need those tax increases after all…)

  5. DeDude says:

    Yeah, Dow 6800 you hopeless optimist, goldilocks, cheerleader, tool :-)

  6. Bob_in_MA says:

    Q ratio of .3 would mean less than 5,000, maybe 4,500.

    Every major bear market has ended at a Q ratio of less than .3.

    People with 401ks are still making contributions to equity funds. When that turns consistently negative, maybe we’ll be in the final phase.

  7. Clem Stone says:

    All you have to do is look at at 20+ year chart of the S&P to see a huge magnet at 450.

    Last time we were there i was reading AT THE CREST OF THE TIDAL WAVE and thinking we were at the mountain top instead of on the launch pad.

  8. miamiocean says:

    What I found interesting reading my former equity mutual fund 2008 annual report:

    1) they INCREASED their holdings in GE
    2) they reduced or sold their positions in Coca Cola, Wal-mart, General Mills, Abbott Laboratories and Union Pacific
    3) they ADDED Goldman Sachs to their portfolio
    4) they purchased positions in Deere, Boeing, Tiffany, and Mariott

    They sold or eliminated more solid positions and bought into companies with uncertain futures. Why ? Any one have any guesses ? My very uninformed guess would be that they were forced to sell to raise cash.

  9. dsimmons says:

    2500 to 3000. We retrace all .com value added plus all housing and credit value added. Then, we have to take our medicine of zombie banks or default or debt deflation or all a combination of all three. That puts us back in the 1990 range.

    Is that a valid guess, well I KNOW it’s crap as all foreward looking predictions based on the tea leaves of the past are – so, yes, it’s valid. Truth, lol, fah-get-boutit.

  10. NamNam says:

    Brutal in trying to make money in this market.
    Flight to safety in treasuries. When will people learn?
    This kind of slow, grinding action over the board scares me much more then the volatility of the month before.

    If it was falling knife before, now it’s a train, rolling down the slope.

    Thinking about S&P at below 500 level is quite insane. It means that on average, every company will trade below 1 $.

  11. llandson says:

    @NamNam:

    All I have to say is “no.”

  12. Bruce in Tn says:

    Lefty:

    Sorry about how Mr. Brown got treated…but I’m sure they’ll kiss and make up…

    Did you see the CNBC story about how the consumer has started to spend again?

    http://www.cnbc.com/id/29549825

    Consumers Start Spending Again Amid Grim Economy

    Well, I wondered about this so I went back and looked at the spending numbers released this week, in the first part of the week…

    http://online.barrons.com/public/page/barrons_econoday.html

    Personal Income and Outlays

    The money quote:

    “Prior to January, personal consumption had declined for six months in a row.”

    Now there was a blip up for January, but it seems to be an awful lot of wishing that a one month blip is the new trend…I think I’d like to see this continue before coming to this conclusion…what I see says that people are trying to save more, that more people have put off purchases as they are becoming more concerned about job safety…

    Just one more story that makes me wish I had Bloomberg instead of CNBC too….

  13. moconn says:

    Unfortunately it seems like all confidence has left the system and an insufficient pool of buyers committed for even the intermediate term exist. I think the dow ultimately settles in the 5,000-5,500 range, which represents a decline from the peak of 61%-65% (approximately). It seems like worse case scenario of 70% decline from peak would be at the approx. 4,300 level. I feel like we may be approaching a real crisis of confidence among the general population, more so than already exists.

  14. Foghorn Longhorn says:

    NamNam.
    Thinking about S&P at below 500 level is quite insane. It means that on average, every company will trade below 1 $.
    Ouch that’s gonna leave a mark.
    Looks like it is time to double down, what, have you people no gravitas?

  15. bubba says:

    Barry,

    I love your blog and read it religiously, but for the life of me I cannot understand why you keep trotting out your Dow 6800 call made 3 years ago. You were flat out WRONG, Barry. Your call was for 2006, the fact that we’re below that target now in 2009 is meaningless, as far as trading/investment thesis goes. By my calculations anybody that listened to you would have been down 14% in 2006 and 29% from the high in 2007, and most likely would have taken their loss and moved on. Sorry for the rant, but you do yourself a disservice if you keep harping on this 6800 call.

  16. sfharris81 says:

    S&P 500 at 500 is a bit optimistic. Somewhere between 0 and 5 is probably more realistic when you discount the end of the world. I don’t think “investors” could be any more pessimistic. I’m sure a complete collapse of the current economic system would be welcome news.

  17. Paul S says:

    Wel if they keep layong off folks at the current rate then the 401k contributions to the markets will have even less effect in propping the whole freaking charade up.

  18. DMR says:

    My gut tells me that this is more like Dow in 1938 or Nikkei in 1998. Leading sector is tech. If the Nasdaq low of 2002 holds in the medium term, then this crash was more about taking care of unfinished business (the use credit to stanch the dot com mess). If so, we’re probably within a few weeks of a medium term low and will probably see a bounce soon due to the Obama dollars followed by a final low around 2012 in the 900-1000 range for the Nasdaq. If the Nasdaq makes a significant new low, I’m wrong.

  19. CNBC Sucks says:

    Yeah, Winston, call him Ritholtz. People are starting to pick up on my attitude. If you want to get extra saucy, you can call him “Republican Ritholtz”. But only if you like the guy.

    In my first post on CNBC Sucks last June 6th, when the Dow closed at 12,209, I said “Dow of 5000 / 6000 through much of the the 2010s”. I didn’t think we would get there so quickly. Also, even though CNBC guests keep denying we are in a depression, U-6 hit 16% (h/t ME Hoffer), which is near a 2/3 GD, and I also didn’t think we would get there so quickly. I can now officially start worrying about being overly pessimistic.

    Becky Quick returns next week, so my page view generator is back. On that note, I leave you with the popular http://cnbcsucks.wordpress.com/2008/06/26/becky-quick-is-the-hottest-flat-chested-chick-of-all-time/

  20. Bruce in Tn says:

    @miamiocean:

    Uh, Abby Joseph Cohen doesn’t work for this bunch, does she?….

  21. batmando says:

    spx 666 mark of the beast coming up?

  22. fred55 says:

    Is U6 very similar to pre-Clinton headline? Anyone know FOR SURE?

    As to SPX, I believe as its cap weighted that you could have a barbell where, say,
    half the companies trade small and half…

    Actually has anyone compared OEX and SPX during this? Normally OEX accounts
    for most of the information in SPX but I’m wondering here if they shouldnt be
    diverging heavily?

  23. leftback says:

    Closing in on AT’s 645-660 target area, chaps. Andy was spot on about the sloppy nature of this downward wave.
    I was surprised to find I am up on the day. My stock picking must be improving.

    @Bruce, the bet is on, the DVDs for you or a burger for me, perhaps at one of the Alain Ducasse or Daniel Boulud places. There are probably a bunch of empty tables there for Lefty and his legion of admirers.

    Bubba, p*ss off while BR is having fun, will ya? This is history in the making.

    @miamiocean: those long only mutual fund guys have no experience or creativity. Plus it is OPM !! Sorry…

  24. jacobsk says:

    the vix chart looks like it wants to spike high. next week will be pretty interesting

  25. mlomker says:

    I like the level of pessimism that we’re starting to see. Wave 3 isn’t going to end until everyone that wants to sell has done so. Then we can watch ‘investors’ get sliced and diced in the wave 4 rally.

  26. miamiocean says:

    @Bruce in Tn…. she did from 1976-1982 — but is now with GS. I can not find any direct relationship between her and the mutual fund company that manages our 403b accounts.

  27. donna says:

    Tracking the depression crash quite well, actually.

    Joy.

  28. Todd says:

    Back to Dec 1996 if it closes at this level.

  29. ottovbvs says:

    Since it’s gone 1000 below my bottom I have no right to speak on this topic but interestingly Doug Kass who I follow is catching the falling knife and forecasting a bottom this week. I know we have the GE’s of this world in there but I’ve started buying over the last ten days….some of this stuff is cheap by any yardstick.

  30. batmando says:

    Short covering begins @ 3:35?

  31. Left some SDS $$ on the table today, but who knows how soon ultrashort ETFs will be allowed to exist, given growing discontent with swaps and resentment of “vultures”..

    Or maybe I’m just a pussy. ;)

  32. Bruce in Tn says:

    @miamiocean…I was being a little Snarky, but the point is the same…I’d say some economist had a feeling things were going to get better so they got out of the “old reliables” and put money in a little more risky venture…

    I still remember vividly during the lost decade of Japan’s watching Cnbc and seeing the Merrill Lynch prognosticators say, with REAL CONVICTION….that Japan was their best idea for the coming year…both years they were dead wrong, of course…

    I’d say somebody talked somebody else into changing their investment style/risk and it didn’t work out…

  33. AndrewShaw says:

    holding ure and uyg over the weekend on the 52wk lows, what the hell, anymore I don’t know what to think. might be worth a few pennies in the premarket monday, or maybe not. if it works out I’ll take the fam to disneyland.

    “I just robbed a grocery store, I’m goin to dizz knee land…”
    “I just flipped off president george, I’m goin to dizz knee land”

    -early 90′s college radio song, fits my present attitude just fine.

  34. Wow, any clue what turned it on a dime? Anticipation of Bailout Sunday again?

  35. jbruso says:

    To “Book Value” on the Capitulation Express.

  36. zell says:

    If memory serves me well, which is a llongshot, Barry’s 6800 call was partiaaly based on the Bird Flu spreading further and stifling commerce. Anywho, how do you make a good call with Alan Greenspan at the Fed.

  37. leftback says:

    Low:666.79 Folks, the bottom is IN, at least for March 2009.

    Another up day over here at Schadenfreude Asset Management.
    Watch out Mr Shorty, they love to do a spot of intervention over the weekend.

  38. Jlvngstn says:

    How low? We won’t know until October after the rest of the economy adjusts to the contractions and the 2 million unemployed in the last 90 days and the hundreds of thousands more in the coming months. The government has ceded 10% unemployment and the market has to adjust to 50% production. I cannot even fathom a guess as to how low but bottom talk at this point is irrational exuberance at its finest.

  39. arcticpup says:

    I bet we’re at 5,000 by the end of the month… and Obama has to dig into the thesauras to describe further weekly job losses.

    I’ll help…. immense, vast, great, massive, enormous, incalculable, colossal, giant, gigantic, astonishing, gobsmacking, overwhelming, flabbergaster, beating, crushing, devastating, engulfing, ravaging, distressing, destroying, ruining, wrecking, flattening, annihilating, smashing…

    but again… these words can be used to describe the difference of value between my holdings pre-October 2007, when I was warned to get out… and now…

    Oh well… the market will turn around sometime… and at least I’m not the only sucker in this pickle, and I’m not a retiree… so I have time to make up the difference… and will likely experience several more ups and downs of the market…

  40. leftback says:

    Leftback has just deployed some toes that have been previously safely out of harm’s way.
    Wonder what BR and AT are up to today??

  41. batmando says:

    Only pinky-toes for me, this little piggy called AA, this little piggy called COP.

  42. NamNam says:

    I read this blog regularly, both for the insight and the comments.

    Before, it used to be many comments on Friday closing, projections, comments and some arguments.
    Today, all the writers’ seams to be speechless.

    The mood as I feel is:

    “We knew it’s going to be bad, but that bad!?”

    I think, everything that happens today is teaching my generation of economist, market analysts and all the folks that think they have a crystal ball that “We just don’t know”.

    If we learn our lesson, hopefully, there will be a steady and solid growth in the future.
    Not that fast, but solid.
    Have a good weekend everyone

  43. ottovbvs says:

    Jlvngstn Says:

    March 6th, 2009 at 3:56 pm
    I cannot even fathom a guess as to how low but bottom talk at this point is irrational exuberance at its finest.

    …….I guess we’ll see whether you or Doug is right

  44. DMR says:

    http://dshort.com/charts/bears/mega-bear-quartet-extended-large.gif

    This chart from dshort.com supports my theory in my earlier comment. Everybody seems to be fixated on the 1929 parallel due to the crash of the Dow (in blue). But, the 1937-38 crash and Nikkei1990-1998 similarities with Nasdaq ’00-09 support my theory that we’re close to a major bottom, but with no recovery in sight for many years.

  45. Clem Stone says:

    What i find incredible is the number of people coming on CNBC in the past 6 months telling mom & pop to buy options. That is truly the worst advice i can think of for the average investor. The CBOE must be loving it though.

  46. leftback says:

    Look at it this way, gentle readers: everyone gets f***ed in a bear market, even Mister Shorty.

    right now if The Bear gets hungry over the weekend he has a choice of treats on Monday morning – he can eat up one or two of Lefty’s and batmando’s little pinky toes for a snack – or he can take a great big bite out of Mr. Shorty’s ass and draw lots of blood in the process. On Monday we’ll find out what looks the most tasty.

    just sayin’…

  47. DL says:

    DMR @ 3:01

    “If the Nasdaq low of 2002 holds in the medium term, then this crash was more about taking care of unfinished business (the use credit to stanch the dot com mess). If so, we’re probably within a few weeks of a medium term low…”

    I think you could be right about the Naz holding its ’02 low. But QQQQ got down to $20/share (on a closing basis) on 10/9/02. It’s now at $26. So it could still drop another 20%.

  48. DL says:

    leftback @ 4:28

    “everyone gets f***ed in a bear market…”

    Even nimble traders like AT…?

  49. leftback says:

    @DL: AT is very smart and probably doesn’t carry overnight risk. I had a good day today, as well. :-)

  50. TrickStar says:

    I was one of the guy’s who said 750 was bottom. As Paulson retraced on TARP, I thought 750 was “financial meltdown” level. That was so naive.

    I now believe that we could trade at a single digit multiple on ’09 earnings. I also believe that earnings estimates for 2009 are going to worse than currently forecasted.

    9x at $39 =351 – Doesn’t seem so crazy. Which is why I’m still shorting the S&P when it’s sub 700.

  51. Ottovbvs and others out there who are buying now because things are “cheap,” my question is, “Why?”

    Just because a stock is cheap doesn’t mean that it will eventually make you money; in fact, it increases the risk of losing your capital at a much quicker pace. The stock could just be garbage and not worth even $0.02 a share. Calling a stock cheap means that you’re prematurely calling a bottom and predicting a turnaround.

    If you insist on buying, wait until a bottom is carved out and the market has decisively shown a change in trend. Until then, look into shorting strategies or perhaps a relative-value market like foreign exchange. You can make money in these times without searching for a bull market.

  52. tagyoureit says:

    Well, at least we had great music and great bands in the early nineties. If I can’t have wealth, I damn well better have killer tunes!

  53. Steve Barry says:

    Here’s my market update:

    Since my call 2 weeks ago that the market would likely freefall, the S&P is down an amazing 11%. We are getting to my 500 target fast…and it won’t bounce here with 21 day put/call still (amazingly) just off 3 year lows…short interest on vapor…no capitulation volume. QID up 17% in those 2 weeks….press the shorts.

  54. Steve Barry says:

    Looks like the Fast Money crowd is calling for a bounce coming…wrong…hedge fund redemptions into early April will cause the rout to continue…you could get a big bounce then, which I would play in gold miners.

  55. Michael M says:

    It seems to me most people believe that once we hit the bottom we will bounce. But maybe once we find a bottom we just stay around that level for a while, or for a long time.

    Same could be true for real estate and other asset types.

  56. Steve Barry says:

    One more call…I see gold plummetting over the next few weeks, with equities…that will set up the buy in April of miners.

  57. Bob_in_MA says:

    “NamNam Says:…
    Thinking about S&P at below 500 level is quite insane. It means that on average, every company will trade below 1 $.”

    heehee. That’s meant to be funny, right? You know they don’t merely add up the share prices?

  58. DL says:

    Steve Barry @ 5:19

    I’ve been expecting the same thing, and I hope you’re right. But GLD and GDX have been holding up pretty well, even on down days for the S&P.

  59. leftback says:

    @Stevo: Respect for many good calls, dude, but I’m not that bullish on the GDX as yet. AUY was really soft today.

    Gold has been playing a role as a safe haven, along with the US$, for a few weeks now, and I think we may see that reverse sharply at some point. You were absolutely right a few weeks ago – when Gold:Oil peaked at >25 – about going long oil:short gold, and I think that trade has some legs for a while. If oil stays as firm as it was this week, then there has to be a major rally in the energy/materials stocks before gold/silver. The GDX may be stuck in a range for a while $30-$33. If there are no asteroid impacts over the weekend, gold tends to sell off on Mondays.

    You have a good point about Hedge Trimming™, but it’s probably been going on all along.

  60. CyHastings says:

    tagyoureit Says:
    March 6th, 2009 at 4:40 pm

    Well, at least we had great music and great bands in the early nineties. If I can’t have wealth, I damn well better have killer tunes!

    Surf’s Up
    http://www.youtube.com/watch?v=Z_36va50Xvk&feature=related
    ;)

  61. constantnormal says:

    Gosh … looking out over all these prognostications, I just wanna bronze them as memorials/warnings to future traders …

  62. jason says:

    @CyHastings

    Gibby and Paul were accounting majors but never thought I would see anyone post a link to them on a economics blog, bravo. I just saw them on New Year’s Eve.

  63. deanscamaro says:

    Oh! Oh! Oh! Look at that “Bull Market Charge” at the end of the day; up 33 points. We have hit the bottom!!!!

    Don’t mind me, I’m just practicing calling the bottom. Every other idiot like me is trying to make their name in the world by calling the bottom, why shouldn’t I?

  64. MikeG says:

    Well, at least we had great music and great bands in the early nineties.

    MC Hammer and Vanilla Ice???? Color Me Badd???

  65. Mannwich says:

    @MikeG:

    True enough but you’re forgetting about: Pixies, REM, Nirvana, Alice & Chains, Soundgarden, Jesus & Mary Chain, to name a few. There are many, many more.

  66. DiggidyDan says:

    hmmm. this may be A bottom, but is not THE bottom. I predicted S&P 474 from statistical analysis of historical S&P data, Robert Shiller’s CAPE, and Tobin’s Q. I also predicted to my friends last October when the great plunge was occurring that the end of this recession would be when one of the Big 3 Automakers goes bankrupt. That’s looking more and more true these days with the latest news on GM (of course that was assuming that the government would let it happen). I see a short term rally back up, topping in June when we get more bad numbers and job cuts get even worse, gas prices go back up from reflation and decreased production, and then GM or another major player that is synonymous with american capitalism (perhaps GE or a Sears or bank that isn’t big enough to avoid failing) goes down, creating the final blow and sell off down to the ultimate bottom in October.

    Too bad i didn’t follow my own advice and get entirely out long and go short retail and shipping like my analysis told me. I seemed to succumb to naivete and hubris of thinking my fundamental analysis and screening of particular stocks is better than most in the market, therefore my holdings will not fall far enough to justify the loss of dividend income and transaction costs, as well as the proverbial catching the falling knife syndrome at times. Ooops!

    Luckily i’m young and my “market tuition” as they say was only about 15k. Coulda spent more on that for a year at UF, but got scholarships instead! The real world is a real bitch of a professor tho and i remember having more fun at keg parties and more attractive young females back then!

    I am thinking of adding more long positions again soon in resource based stocks. . . ADM, BHP, BP or COP, PCU. This is based upon the theory of global reinflation on items that are still needed in the real world and have the ability to control the supply when demand drops combined with the effects of massive increase in the money supply. Just dig, drill, or harvest less and the price goes back up, Genius! I have a feeling these will bottom before the rest of the market does and return faster, plus the dividends are looking nice right now if they hold up.

    PS, don’t listen to anything i say, i’m a proven idiot and loser and i suck at life.

  67. philipat says:

    Would already have been 6500 Friday (It’s already Saturday here) had the PPT (Or perhaps GS) not emerged again ahead of the weekend?

  68. gloppie says:

    Dow 3000 before 2010.

    Weeeeee.

    SPlaT

  69. Erik says:

    Markets are social mood driven energies. The mood is pessimistic and will remain like this the coming years and this is global. Reason is that almost everybody lived in credit for the last 10 years. I have always been amazed the last 8 years by the spend mentality of the US. You can explain a child that if it has 1 euro you can only add credit to the momentum that the 1 euro is completely paid to interest. After that…..boom, the party is over and back to work. This leverage that was used up is now being used with the same force in the other direction. Most likely scenario is deflation. Altough there will be countertrend rallies, after this bottom?, stocks should go much lower in the coming years. So a possible strategy, keep your cash and wait for the time to buy stocks for a bargain or a house. When this will be? I do not know, humans have proven to often not capable of prediction. Just work from the now and do not listen to experts to much, most of them do not trade and are paid by the word.