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NY stock exchange has lost 52% of its value in 18 months. (An optimistic rant)

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Bucky Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 10:05 AM
Original message
NY stock exchange has lost 52% of its value in 18 months. (An optimistic rant)
The following is not intended as a pep talk, but is simply how I see the future.

I've been worried these last few months, seeing what collapse of overextended financial institutions has done to my retirement portfolio. But as I went over my investments and reviewed my financial situation last night, I started to get a more objective, long term perspective on what's happening with my speculative money. And in the big picture, I think things are gonna be pretty good.

The stock market always increases in value over any twenty year period--which is about the retirement timeline I'm looking at. Properly seen, the current drop off in the values in the stock market is a 50% off sale on Wall Street. So I'm optimistic. I'm gonna buy into stocks big over the next few months. Maybe optimism is the American disease. But I'm betting my retirement on Barack Obama's view that a smartly applied stimulus will keep the country crawling along until the natural rhythms of the market start to move us forward again. I'm betting my retirement on the belief that people wanting to work and an economy responsibly managed will produce real wealth over the coming 20 year period.

I leave the panic, the doomsday scenarios, and the fear mongering to the Becks, Limbaughs and Hannitys of the world. They scream "socialism!" and (God bless 'em) "communism!" with the same giddy, clueless panic in their voices that they used to scream "torture!" and "Iraq's WMDs!" the last time they wanted us jumping at shadows. Their doom and gloom is a thin denial masking their sinking awareness that the Bush style unregulated market makes about as much sense as an unlubricated automobile engine. Their no regulation philosophy has all the sense of a motorist morally opposed to traffic lights. Republicans don't believe in changing the oil, rotating the tires, stopping at intersections, or fastening their seat belts. Hot dog drivers may get you there faster, but Republican economics remains unsafe at any speed. That doesn't mean traffic is a flawed concept. It just means Bush, Cheney, and Paulson were shitty drivers.

Nothing's a sure thing in the messy science of economics, of course. The market may drop a little more, but the wealth that built up the American economy over the last three generations is real wealth. We've drifted off from our core strength of vibrant, robust middle class. But the American middle class is only stretched thin, not worn out.

I don't see much falling off left to do. The wealth of the stock market, while certainly not the real source of wealth in this country, is rooted in the very real economic heft of our free institutions and culture. Americans like to work and the overwhelming focus of the stimulus package is on getting more people working. The stimulus package may not cure the recession that Bush's Bubble created, but it will keep a few more of us busy and buying, and thus help stave off a real economic collapse until new technologies and new innovations start to refuel the engine of capitalism again--as they always have throughout history.

Work produces wealth. Even the Republicans with their inability to distinguish between business management and piracy can't fuck up capitalism. Capitalism, properly managed, marries productive human ingenuity to the basic human desire to buy new stuff. If anything defines the American people, it is our hungry, clawing passion for getting new stuff--all kinds of stuff: electronic stuff, closet filling stuff, shelf packing stuff, potable, chewable, malleable stuff. If anyone ever tells you to "Go get stuffed," you thank them. You tell them, "Yes, dammit, I will get stuffed. I will get over stuffed, for I am an American!"

God bless our stuff.

A country founded on the right to pursue happiness has tapped into the most powerful force in human nature--the desire to have a decent life, to wallow in our shallow materialist bliss. Our economy may be suffering from a crises brought on by an unfettered perversion of our materialistic culture--from banks pushing credit lines to Republicans looting the treasury beyond our ability to pay--but this is a crisis of mismanagement, not of the basic American formula of a people free to pursue their own lives and work to achieve their dreams.

So I'm betting my retirement on Obama. I think over the next four years we're all going to see the president's gamble that renewed investment in new technologies, smarter transportation, and a well-respected intellectual infrastructure will pay off. Or, more to the point, I'm betting on my country and human nature. I'm betting that the Democratic vision of focusing on middle class wealth--making life better for ordinary families and trying to bring more people from lower classes into the middle class--makes more sense than the Republican vision of pushing wealth into the upper classes and praying that enough crumbs trickle down to the rest of us. You probably won't see stock prices skyrocket with the (ironically) more conservative management style of Democrats. But in the long run, I think we'll see a sounder, safer future because our people are in charge.

I'm not just betting my retirement portfolio on it, I'm betting my country's future on the Democratic vision. And if you look at America's history, you'll see it's really not a gamble at all.
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Tigermoose Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 10:17 AM
Response to Original message
1. Well said!
I too share your optimism.

And after we get out of this mess, we have to figure out how to leverage the government to create a SUSTAINABLE capitalistic economy built upon universal healthcare, education, and green energies. Luckily for us, Obama is on the job doing just that.
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Loge23 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 10:20 AM
Response to Original message
2. Good luck with that...
As long as CEO's continue to "make" 100x+ the salaries of their average worker...
As long as companies prefer to make money in the financial casino rather than from what their core business is...
As long as American companies continue to ignore American workers in favor of cheap labor abroad...
As long as American companies dole out stock options as if they are worthless pieces of candy....
As long as American companies ignore innovation...
As long as American financial markets place greed over value....
As long as idiots continue to play the market shorts and longs instead of investing in value...

...I'll pass. They stole my 401k. They are thieves. Fuck 'em.
(a bitter rant)
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paparush Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 12:02 PM
Response to Reply #2
10. As long as companies are given the same (more?) rights as individuals....
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ginnyinWI Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 10:21 AM
Response to Original message
3. me too--we have no choice but to believe.
We already have most of our retirement in the stock market. We are about nine years away from retirement and are going to hang on. No sense selling and locking in our losses. Obama will be President during most of those years, so I have a lot of hope.
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mimitabby Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 10:28 AM
Response to Original message
4. me too!
yes, I bought stock today, my own company's stock actually!
I'm betting on Obama too.
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Froward69 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 10:55 AM
Response to Original message
5. I really could not aford it but
I threw down $100 in Ford stock. lets see where it goes... I am following President Obamas advice. LONG TERM Investment...
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uponit7771 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 11:05 AM
Response to Reply #5
6. Fords coming out with some really good green cars, 5 speed transmission and upgraded
...looks might kick US automakers back up.

I just pray the prices go down when health care is address'd, if that's whats killing them in competition they should address it.
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lumberjack_jeff Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 11:26 AM
Response to Original message
7. Values are getting pretty close to companies inherent worth.
Am I buying back in? Not yet, but maybe soon.

In December, I predicted a low of about 6500. Now, I think it'll go lower than that, but hopefully not by much.
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StrongBad Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 11:47 AM
Original message
I share your optimism
I don't see any more substantial economic contractions past 2010. That being said, there is a possibility of a sustained period of anemia where not much happens.

But total economic doomsday? It would have happened already if this crisis were to get us there.
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StrongBad Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 11:47 AM
Response to Original message
8. I share your optimism
I don't see any more substantial economic contractions past 2010. That being said, there is a possibility of a sustained period of anemia where not much happens.

But total economic doomsday? It would have happened already if this crisis were to get us there.
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Pab Sungenis Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 11:54 AM
Response to Original message
9. A 50% off sale, however, means nothing...
...if prices are jacked up 85 or 90% beforehand. We might discover that the true, viable level for the market is actually 7,000 or 8,000. Either way, to expect it to zoom back to 12,000 isn't optimistic, it's delusional.

The market will go up. The question is, how high can it really go without forming another bubble. I have a sneaking suspicion 8,000 is it.
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Bucky Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 04:26 PM
Response to Reply #9
12. You really think the market is not going to go up past 8000 in the next 15 years?
Inflation alone will put it that high between now and 2024.
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Pab Sungenis Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 04:45 PM
Response to Reply #12
14. 15 years? Maybe.
But I doubt it will consistently stay above it.
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slutticus Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 12:56 PM
Response to Original message
11. Yip. I look at it as a sale as well. We'll see.......
My 401k has "only" lost 40% of it's value so far. I consider myself lucky.


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musiclawyer Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 04:41 PM
Response to Original message
13. I will become more optimistic when the dead flesh gets cut off
Chrysler--not really a car company anymore. Not run by car people. It's good stuff needs to get turned over to Ford etc.

The Zombie banks-- Kill them or fix them. The well run banks should be rewarded with market share.

Once I see Obama's people get out real surgical tools, I'll be happier.
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regnaD kciN Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 04:55 PM
Response to Original message
15. The way I look at it...
...most if not all of the "collapse" has simply been the funny-money bubble of the past decade coming back to earth. Now, stock prices are more in line with the baseline of reality.

Therefore, I'm cautiously optimistic. I think we're about as low as we can reasonably go (not saying it won't go lower, but that would be a psychological panic move rather than one based on a reasonable assessment of value, and hence something that would probably rebound fairly quickly). I do expect that people who buy in wisely at this point stand to do well in the future -- but I would caution that I don't expect stocks to return to the 14,000 level anytime in the near- or mid-future, simply because, the next time they do so, it will be due to real-world values increasing, not because of financial legerdemain creating a huge increase in apparent value that is doomed to crash to earth again.

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depakid Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 05:12 PM
Response to Original message
16. Bottom line is that the market hasn't been trading on fundamentals
There are plenty of sound, dividend paying companies out there with sustainable business plans that have been oversold- and if people are willing to wait on them (as opposed to going for the get rich quick mentality) over time they'll be very good investments.

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mistertrickster Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-04-09 06:14 PM
Response to Original message
17. I think you're right, Bucky. Here's why . . .
1. Historically, the stock market always comes back. It did it in 1929 to 1939 and it'll do it again.

2. Even after the market went down 2000 points under BushCONs, stocks were still a pricy 24 to 1 (or so) Price to Earnings ratio.

Now the P/E is 12 to 1. Historical average is about 16 to 1.

But wait, there's more. Right now, earnings suck. They suck blue whale. As soon as earnings go up, P to E will be even better.

3. Big hedge funds are already buying up fire-sale condos in Florida. The people who make the big bucks have the guts to buy into a bad market. That's what "buy low, sell high" means. It doesn't mean waiting until everybody else is buying and then following the herd.

Bon chance, mon amie!

No guts, no glory.
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