I have two words for you. Karl Marx.
You should read his analysis of the inherent contradictions in the capitalist system and his predictions on the effects of speculation, credit, finance and fictitious capital on the economy.
Global markets are down 50% since October 2007, which is a much steeper drop than the initial market crash of 1929. Furthermore, the amount of middle class investors in the stock market today far outweighs the relatively few elite investors who participated in the 1920s, so the effects of a crash are felt by a much larger proportion of the general population. We can already see that those with the most to lose (i.e. the middle class) have already had their savings effectively wiped out in the initial stages of the current crash.
We are only at the beginning of an economic apocalypse the likes of which we have never before seen and no amount of faith in the market is going to prevent the evaporation of tens of trillions more in wealth and savings. Just wait until the alt-a, option arms and commercial mortgages turn over.
What world are you living in? The major indexes are off approx. 50%+ in the last 12 mo. not to mention, we grew at a rather sluggish pace over the last 10 years anyway. More propaganda, the stock market has been devastated, are you kidding me with this article. In order for the markets just to get back to where it was, per the downturn, we have to climb 100%+, and during a year period …this has only happened a few times in the history of the market (early days of the market, never with an economy with the size and complexity were have today). Who was the moron that wrote this story…you can look at anything from snapshot view and say it’s not that bad…take the aggregated perspective for a more accurate view. For every $1 U.S. dollar you give me, I’ll give you back $0.50, if the market’s not that bad as you wrote then put your money where you mouth is and quit writing non-sense.
To Michael, Upstate NY.
I sure can be wrong and DOW can jump back to 14K in whatever coming months or years.
I just don’t see it as a good thing. If it happens, it will mean either another bubble or hyperinflation.
Any of the above will completely destroy financial life (or what’s left of it) for 95% of the population.
Let’s face it – everyone is an armchair expert in this economy. No one knows! I say just do what makes you comfortable – by the end of the year the dow could be up, could be down, that’s the only FACT for sure!
Dow 3000? I sure hope you are wrong. No offense intended at all, but the fact is, as I posted in the “audacity of hopelessness” forum, history has repeadedlt shown that no one really knows anything, least of all the future. If in 1980 you would have said Dow 14000 in 2007, you would have been laughed out of the online forum… but then, few people predicted that there would be online forums…. 
I think, we have different definitions of “normal”. I think, markets are much closer to NORMAL than they were in 2007.
When DOW settles somewhere between 3000 and 4000, it’ll just come back to where it’s supposed be.
I love these articles as a contrary indicator! Please keep posting.
Very interesting Paul, It looks like you posted the article yesterday after it was crystal clear we would open way down.
This is ONLY a traders market. Also, the FED/treasury intervention has caused the market to go both illiquid and down.
Simple — if the Gov’t and FED doesn’t stop the chaotic money distribution the market and economy will continue to worsen. The FED & Gov’t have damaged the economy.
So, the market isn’t as BAD as it appears? Really? I mean, who really has faith in the markets and the numb-nuts who bet and work on it. The ‘oracles’ of Wall Street have been proven to be what they are – the Wizards of OZ and they have been caught with their pants around their ankles. Who cares what the markets do? Do these people have special powers and can predict the economy and the future? I say that there will be numerous failures of regional banks as is already taking place and which I said would happen quite a while ago and the banks and other industries will take further hits as the economy grows worse and unemployment continues to rise. This isn’t just ‘another recession’ and historicals are irrelevant to predict what will happen going forward – it’s any ones guess as to what will happen. I for one will NEVER invest my money in the stock market as I have come to realize it is one big scam after another and the little guy has no chance to win. All the funds want our money so we can pay them fees and bonuses to lose our money, and boy have they done a good job at that. I have been reading your prognostications for a long time and they have been wrong almost every time. Your optimism is getting in the way of reality and its time you see what is really happening in the world.
Mr. LaMonica, this is article is so inane and vacuous I cannot even respond to its substance…other than to tell you that this article is inane and vacuous. Reminds of your column of summer 2008 when you said the market was oversold, due for a rally, and things weren’t really that bad. Do you write just to provoke by taking such assinine positions?
Some stocks will do OK in these uncertain times. People will still need to buy food, energy and health care. I have some of my money in consumer staples, agriculture/basic materials, energy and health care.
Will unemployed/broke people buy new cars, houses or tech gadgets? I seriously doubt it. I stay away from real estate, consumer discretionary, finance and anything that is not absolutely essential for day to day operations. We had a paradigm shift from “greed is good” to “thrift is cool”. Invest accordingly and you’ll be OK.
We might see inflation kicking back up depending on the extend of future bailout/stimulous packages and quantative easing (ie. printing money) by the FED & government. As our debt, public and private, grows and our ability to repay our obligations diminishes there are only 2 ways out of the dilemma. Default or the printing press which translates into deflation or inflation respectively with the latter being the more politically correct solution. However, the day of reckoning on the debt trap might still be a decade away but we probably already reached the point of no return.
The great depression part deux will happen in about 6 years or so when the next epic crisis hits and the feds have no more money to bail out failed banks, a flood of retirees all stampeding for the exits, and bad business models like Detroit. Foreign governments may also pull support due to immense loss potential. I’m afraid it will be a lot like 1929-1933 in 2015-2019 since retirees got burned this time and won’t have patience to lose money again next time. There will be no relief buyers for years. The Dow may trade as low as 3,000 in 2019. Though this is scary, This will create a healthy effect similar to a forest fire aftermath where new trees (investors) can really make a growth killing in a newly inagurated bull market around 2020.
Dow bounce should begin in May based on historical precedent. However, this is a crisis that has some similarities to 1974 (-40% plunge) and 1929-1933 (-89%!). So, we may still have some distance to the downside this year(dow -60%). In any case, recovery should be underway in 2010. Markets will rise again to 14,000 about 2014-2015 and then fall dramatically again, we are in a secular (long-term) bear wave until 2018-2020.
Simply put, the global unemployment rate is about fifty percent, poverty rate around sixty may be? Half the people in the world would do anything to have three meals a day, Most of the people have no health care, no clean drinking water, no minimum wage, workers rights, or even human rights. Then tell me how great it is to be in a global economy, ad explain to me how i compete with these people for a job, and what I can sell them. Also tell me what I must give up to stay competitive, and tell me how we are helping the people in Tibet and Darfur.
All of the misguided spending that Congress and the President are enacting will cause some jubilation in the short term and the market will run up in misguided anticipation of better times ahead. That will be the time to take your money and run as fast to safe ground as you can. When the realization sets in about the amount of money we have thrown at this government induced financial collapse, this recession that everyone is claiming to be a depression will seem mild. The draconian tax increase and spending cuts that will be needed in the future will be sold to us again as something we must do immediately to save ourselves. This will cause a revolt the likes we have never seen from both the haves and the have nots.
What’s that saying about doing the same thing over and over again and expecting a different result? Paul keeps asking the same questions over and over again, I cannot fathom what Paul’s expectations are…
Unfortunately, with the rate of descent here, in Europe, and in Asia there can be little hope for any significant rally this year. Most of the stimulus plan will kick in by the summer of 2010. While the full effect will not be felt until the end of 2010, the stock market should see some benefit months prior to the economic turn or around October 2010.
The DOW will most likely go up from 8,000. I wouldn’t doubt that 8,000 is around the bottom; however, you shouldn’t take the rise of the DOW in nominal terms as if we’re on the road to recovery.
Put the DOW against gold. If the DOW rises in nominal terms, but is still losing against gold, than 2009 is going to continue down the spiral.
Before I even clicked on this article I knew this was you La Monica.
Whats next “5 Reasons to up your 401k contribution” ??
Get real… GM will file for bankruptcy, the stimulus will not work, next stop DOW 6000.
HANG ON TO YOUR HATS!
Yeah. Sure. It’s going to get better soon because the “floor” has been reached and if it is up three days in a row, and you do the Hokey Pokey, it will turn its self around… You get the idea.
2009 will not be as bad as 2008, but it isn’t going to get better till 2010 or later. Sorry. Keep the faith.
Ken in Dallas your there.
Ken in Ohio your out there. Optimism is great but it doesn’t beat realism.
It is more likley we will hit DOW 3500 or below by 2010.This is not your usual economic problem but a real nasty one the kind that comes about once every 100 years. Soit’s not unusual for guys like KEN and LAMONICA not to see the forest for the trees. The worst case scenario will probably be averted somewhat with all the tircks the government is trying. In a nutshell you will not see DOW 14,000 until 2020 or beyond. This WORLD CRISIS will take that long to iron out and we will not be the same America you once knew. As KEN from Dallas said it’s going to be a long bumpy ride. Ken your like my son who was at the park this weekend and some kid was running around poiting a knife at people and I asked him why he did not call me or come home. Oh nothing was going to happen to me. Luckily nothing did.
As a financial analyst of a major corporation… I can tell you now that the DOW volume will decrease even further through the rest of this year, and into next year. We have NOT bottomed out yet.
I have foreseen a worsening economy due to the greed that has occurred for the past ten years or so. This is one that will last for another 4-6 years. And the Markets will soon realize their true demise.
Your continued insistance on writing senseless material is appalling. Are you being paid extra to influence the psychology of the average investor? Others have rightfully pointed out your irresponsible articles of the past. You obviously know very little about these matters. First of all this is a crisis of living beyond our means the magnitude of which very few realize. Housing is only one facet of the entire credit bubble and irresponsible credit practices this country has been allowing to happen for years actually several decades. Our national debt teeters against us and who is our major buyers of that debt our friends? We are literally hanging on the thinest branch of the tree with a 2000 lb elephant coming toward us. I would refer you to Carl Swenlin and his evaluation of realistic PE’s for the S&P 500 so you can se what real value stocks hold right now. Stocks are about as valuable as a guy in the desert selling tall glasses of sand. You sir are an idiot and that’s being nice. Click the link below and at least get realistic enough to weigh several facts before you shoot your mouth off.
http://www.decisionpoint.com/ChartSpotliteFiles/090213_earn.html
I’ve only lost $6000 but it’s enough that I will NEVER put any more money back in the market until my home and everything else is paid off! Matter of fact when I can break even on some I’m taking money out!
Once the DOW drops to 7729 -25+25 for three sessions in a row it should begin to climb slowly but steadily through 2009, with increasing rate beginning late 2009 though 2010 with further accelerated growth late 2010 and through 2011 then tapering some into 2012 and beyond to 14000 -100+50 by 2015.
My favorite contrarian indicator just flipped. If this columnist thinks it’s “not as bad as you think” we’ll be testing Dow 6,000 soon.
At John A. Emison,
La Monica should apologize to the public for this (among many others which I wont quote here):
I quote from this:
http://money.cnn.com/2008/05/28/markets/thebuzz/?postversion=2008052812
‘Recession? Maybe. Depression? Get real. Yes, the economy is in rough shape. But comparisons to the Great Depression are misguided.’ on his May 28 article
Is anyone in good mental standing willing to continue reading this or even worse act based on it?
If it was possible, I’d reach through the DSL cables, grab you all handlebar style by the ears, shake violently and say GET THIS THROUGH YOUR HEAD: LOSE THE OBSESSION WITH HOUSE PRICES.
The housing bubble wasnt’t “the” problem as we’ve all been told to believe. It was only a symptom. The housing boom only served to mask the fact that we had completely dismantled and offshored our production economy and manufacturing base. The stratospheric rise in home values provided a great way to sidestep traditional (read: sustainable) fundamentals: Allow some people to spend more than they earn and live a lifestyle that was otherwise unobtainable. No more, no less. The reason they are now crying the loudest is because they had a taste of “the good life”, have seen it stripped away from them, and now they’re sitting there crying like the spoiled, self serving irresponsible brats that they are.
I’ve posted numerous times on Mr LaMonicas board and he has still evaded an answer: what color is the sky in his world? (As an aside, I should say that I enjoy reading his blog if for no other reason, he always provides me with a great laugh.)
Anyway, back on topic. I used to think that the DOW and the stock market had some base in reality. Today, I no longer believe that to be true. I think the whole thing is a crock and moved a-la puppet strings by a handful of manipulators who make money not on what the value is, but on what the value is on any given day; ergo: the swings. They run it up one day, make a fortune. Crash it the next and cash in. And round and round it goes. There is no sound reason that I can think of that says 1) why it should be a single point above 4000, and 2) why it gyrates the way it does. I think the whole thing is a crock anyway.
So it comes back. It craters further. It remains static. I don’t know. And to be quite honest, I don’t really care. Let the Bull Market cheerleaders like Mr LaMonica congregate amongst themselves in fantasyland. Those of us who live in the real world will plan and act accordingly.
I’m glad LaMonica has his 401K in this market. My retirement money is out and it’s going to stay out.
I don’t trust Wall Street and I don’t trust the corporate business media. You spent all of 2005 and 2006 trying to discredit those who called the sub-prime/real estate/banking bubble while you were assuring us that it was “contained.”
Hope is the operative word; actual fact is quite another.
In my view the damage to the economy which continues unabated will serve to keep investor money very liquid and / or invested in instruments such as high grade bonds. The actual S and P and Dow will lanquish and may even find 2009 lows to be in the 6500 or lower range. There will not be a recovery until other aspects of the economy are stablized and that means a reduction in the unemployment rate, stablization of home prices, reduction in foreclosures and such. It is these factors that drive the market – not the inverse.
The stock market goes up 8% a year. This is the historically proven fact. Of course we can all expect that being smarter than everyone else we can beat this return.
No, it’s probably worse.
Just like spring 1930, stocks recovered and everyone thought good times were back, only to find they were about to lose even more money as the year wore on… then came 1931, 1932 and 1933.
Today, the economic fundamentals are much worse and government meddling will only prolong the pain and delay the recovery.
The party is over, guys. Time to save money, get out of debt and stop spending more that you make. If history and human nature are any guide, the slope will be mostly down for many years until the Dow trades between 4000 and 5000. Not be until we are closer to 2020 will we feel like putting the party hats back on.
Well, half of the problem is the media, because half the markets value is driven by perception. The newspapers, and TV, these reporters, they try to sell more news by getting everyone whipped up in a panic, and it becomes a self-fulfilling event. As soon as the news reporters decide to become happier, the market will recover. I dont get it… the liberal media got Obama elected, what more do you want ?? Start the party already.
The stock market still has a way to go down before any sort of recovery happens. I know that sounds harsh, but its the reality. Lets all be realistic that this is a secular bear market and not just a blip on the radar screen. Hope for the best but plan for reality.
The market will bounce back a little, then go bust again in ever lessening bounces as the air seeps out of the balloon and the speculators extract their last bit of blood and flesh. It is the Chicago way – take the suckers and take them again and again until they have nothing.
I can tell you one sector Paul that is definitely seeing signs of hope within this financial crisis, college/universities. With all the hundreds of thousands of laid off personnel now considering switching careers, colleges and universities are enjoying unprecedented amounts of enrollment thanks to needed degrees. And with subsidized/unsubsidized loans still very easy to obtain (let’s admit it, FAFSA will give a loan to anyone with a heartbeat, even if they’re going to school for anthropological studies of 18th century Russia), and the new stimulus bill supposedly containing money credit for college, it’s a good time to be running these schools nowadays.
It currently seems less likely that the market’s returning to “normal,” as if anything the market’s done in the past decade has really been normal, and more likely that the market’s taking a breath before the other shoe drops.
There are still plenty of shoes out there. There are significant billions tied in commercial real estate financing agreements written in terms that can’t be renewed. There might be the unemployment consequences of bringing troops home from war, or there might be the realization that we can’t really extricate ourselves from the quagmires Bush put us in. Our largest financial institutions are still insolvent.
We may be at the beginning of the road to recovery, but it’s still going to be a long, bumpy ride.
The stock market will not bounce back until the baby boomers are dead. They currently hold the majority of assets that were invested in the market. They can’t afford to go through these wild market gyrations and I am afraid they will not return to equities.
I’ve already involuntarily donated my 401K to the market. I’m pretty much screwed as far as retirement goes, thanks.
If you think they’re getting more of my money, you’re dreaming.
Fool me once, shame on you… fool me twice…
There are reasons for hope this year. We had GDP growth in the first half of last year and decline in the second half. This year, we may see decline in the first half and growth in the second, reversing 2008 ! This is certainly the intent of the ARRA stimulus program. It contains about one-third each of state aid (stop the bleeding), tax cuts (restart the heart), and public works projects (rehabilitation) to avoid the problem with the tax rebates fizzling out last year. Spending will be highly focused to onshore suppliers of goods and services. It should work, but kill all of these bank bailouts; they are a waste, throwing good money after bad.
The stock market collapse is overdone, having dropped 50% with a GDP drop of less than 5%. It could recover before the economy recovers, and it should. We will be getting back to basics: food, clothing, shelter, health, and social, in that order. Everything else is just stuff, and stuff will continue to struggle compared to needs.
-
Rich nations want others to cut greenhouse gases. Who pollutes the most? More -
Many businesses were laid to rest in '09. 8 familiar names now gone. More -
The Becerras spoiled themselves with a puppy. Here's what 6 other readers are indulging on. More -
Consumers looking to buy electronics for holiday gifts won't have to break the bank this season. More
Get use to it people. We wont see 14,000 for 10 years if not longer!
Time to clean house – lesson learned for young people (up coming generations) let’s hope. “dont do what we did”.