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Reactive1's Account Talk
- Thread starter Reactive1
- Start date
JohnMauldin@InvestorsInsight.com
Consider the equity markets, which we regard as a long-term measure of the market's evaluation of the state of the economy. In March 2000, the S&P 500 peaked at 1530. This was the top of the market. In October 2002, 18 months later, the S&P bottomed out at 777. Over the next five years it rose to 1562 in October 2007, the height for this cycle. It fell from this point until Nov. 12, 2008, when it closed at 852.30. This past Friday, it was at 873.29.
We do not know what the market will do in the future. There are people much smarter than we are who claim to know that. What we do know is what it has done. And what it has done this time - so far - is almost exactly what it did last time, except that in 2000-2002 it took 18 months to do it, while this time it was done in about 16 and a half months (assuming it bottomed out Nov. 12). But even if the market didn't bottom out then, and it falls to 775, for example, it will have lost 50 percent of its value from the peak. This would be more than in 2000-2002, but not unprecedented.
The point we are making here is that if we regard the equity markets as a long-term seismograph of the economy, then so far, despite all the storm and stress, the markets - and therefore the economy - remain within the general pattern of the 2000-2002 market at the 2001 recession. That recession certainly was unpleasant, what with the devastation of the tech sector, but the economy survived. At the same time, however, it is clear that things are balanced on a knife's edge. Another hundred points' fall on the S&P, and the markets will be telling us that the world is in a very different place indeed.
Consider the equity markets, which we regard as a long-term measure of the market's evaluation of the state of the economy. In March 2000, the S&P 500 peaked at 1530. This was the top of the market. In October 2002, 18 months later, the S&P bottomed out at 777. Over the next five years it rose to 1562 in October 2007, the height for this cycle. It fell from this point until Nov. 12, 2008, when it closed at 852.30. This past Friday, it was at 873.29.
We do not know what the market will do in the future. There are people much smarter than we are who claim to know that. What we do know is what it has done. And what it has done this time - so far - is almost exactly what it did last time, except that in 2000-2002 it took 18 months to do it, while this time it was done in about 16 and a half months (assuming it bottomed out Nov. 12). But even if the market didn't bottom out then, and it falls to 775, for example, it will have lost 50 percent of its value from the peak. This would be more than in 2000-2002, but not unprecedented.
The point we are making here is that if we regard the equity markets as a long-term seismograph of the economy, then so far, despite all the storm and stress, the markets - and therefore the economy - remain within the general pattern of the 2000-2002 market at the 2001 recession. That recession certainly was unpleasant, what with the devastation of the tech sector, but the economy survived. At the same time, however, it is clear that things are balanced on a knife's edge. Another hundred points' fall on the S&P, and the markets will be telling us that the world is in a very different place indeed.
The IMF's chief economist has warned that the global financial crisis is set to worsen and that the situation will not improve until 2010, a report said Saturday.
Olivier Blanchard also warned that the institution does not have the funds to solve every economic problem.
"The worst is yet to come," Blanchard said in an interview with the Finanz und Wirtschaft newspaper, adding that "a lot of time is needed before the situation becomes normal."
He said economic growth would not kick in until 2010 and it will take another year before the global financial situation became normal again.
The International Monetary Fund on Friday promised to help Latvia deal with its economic crisis after it assisted Iceland, Hungary, Ukraine, Serbia and Pakistan.
But Blanchard said the IMF was not able to solve all financial issues, in particular problems of liquidity.
Withdrawals of capital leading to problems of liquidity "can be so significant that the IMF alone cannot counter them," he said, adding that massive withdrawals of investments from emerging countries could represent "hundreds of billions of dollars.
"We do not have this money. We never had it," he said.
The IMF had spent a fifth of its 250 billion dollar (200 billion euro) fund in the last two weeks, Blanchard added.
He also urged central banks around the world to cut interest rates, after the Swiss National Bank made a surprise one percentage point rate cut Thursday.
The central banks "should lower interest rates to as close to zero as possible," he said.
Olivier Blanchard also warned that the institution does not have the funds to solve every economic problem.
"The worst is yet to come," Blanchard said in an interview with the Finanz und Wirtschaft newspaper, adding that "a lot of time is needed before the situation becomes normal."
He said economic growth would not kick in until 2010 and it will take another year before the global financial situation became normal again.
The International Monetary Fund on Friday promised to help Latvia deal with its economic crisis after it assisted Iceland, Hungary, Ukraine, Serbia and Pakistan.
But Blanchard said the IMF was not able to solve all financial issues, in particular problems of liquidity.
Withdrawals of capital leading to problems of liquidity "can be so significant that the IMF alone cannot counter them," he said, adding that massive withdrawals of investments from emerging countries could represent "hundreds of billions of dollars.
"We do not have this money. We never had it," he said.
The IMF had spent a fifth of its 250 billion dollar (200 billion euro) fund in the last two weeks, Blanchard added.
He also urged central banks around the world to cut interest rates, after the Swiss National Bank made a surprise one percentage point rate cut Thursday.
The central banks "should lower interest rates to as close to zero as possible," he said.
Well, my boredom is pretty unmatched, still clinging to 100% G Fund. My sense is that at best we will see sideways movement with high volatility at times, up and down, which in my book, and under the IFT limitations imposed, leaves the best option in accumulating funds. Much of the bad news may be built in to the current market price, but conditions this bad make any serious move far too risky, now as the big hit comes from consumers hurt either in reality or psychologically we should see a major 4th quarter downturn, and my real fear, a serious commercial mortgage meltdown.
wv-girl
Member
He forgot to close his tags. He is saying be street smart. I think.
The Dow Jones Industrial Average finished January down 8.84% on the month. Perviously, the worst January for the Dow had been that of 1916, when it fell 8.64%. Friday, the Dow dropped 148.15 points to 8000.86 after briefly dipping below the 8000 mark. The Dow has fallen five straight months and in 12 of the last 15.
The S&P 500-stock index lost 2.28% Friday to end at 825.88, for cumulative losses in January of 8.57%. Until Friday, its worst January from 1929 onward occurred in 1970, when it lost 7.65%.
Both stock-market indexes are off by more than 40% from their 2007 highs.
Historically, stocks' January performance has been thought of as an informal indicator for the market's direction the rest of the year. When the S&P declines in January, the index loses an average of 2.4% in the next 11 months, according to data going back to 1950 from Ned Davis Research. When the S&P climbs in January, the index posts an average gain of 12.3% in the next period.
The S&P 500-stock index lost 2.28% Friday to end at 825.88, for cumulative losses in January of 8.57%. Until Friday, its worst January from 1929 onward occurred in 1970, when it lost 7.65%.
Both stock-market indexes are off by more than 40% from their 2007 highs.
Historically, stocks' January performance has been thought of as an informal indicator for the market's direction the rest of the year. When the S&P declines in January, the index loses an average of 2.4% in the next 11 months, according to data going back to 1950 from Ned Davis Research. When the S&P climbs in January, the index posts an average gain of 12.3% in the next period.
budnipper1
Active member
I don't doubt the statistics. This article gives similar info. But
in this one, the writer suggests that investors should not necessarily
depend on the trends of the past as a tool for predicting what might happen next.
-"it's a different world now".
["The Standard & Poor's 500 index was down 8.57 percent for the month, its worst January ever
and a worrisome sign for investors who see the first month as a trendsetter for the 11 that follow.
They're believers in the January Barometer: As January goes, so goes the year.
Since 1950, there have been only five times when January got it wrong in a big way.
That gives it an accuracy ratio of 91.4 percent. Throw in the 10 years since then when the market
hasn't moved much in a year, and January is still accurate 74.1 percent of the time, according to the
"Stock Trader's Almanac," a book that tracks market trends.
But after a horrendous 2008, some Wall Street veterans say 2009 isn't a time for looking at past trends.
"We're in a different world. If the last two years have taught us anything it's to be very skeptical about
statistical predictions of markets," said Jerry Webman, chief economist at Oppenheimer Funds Inc. in New York."]
http://www.google.com/hostednews/ap/article/ALeqM5jF5iJ1AWqwqXS6MUOP_pE-gQDjGQD961NRBG0
in this one, the writer suggests that investors should not necessarily
depend on the trends of the past as a tool for predicting what might happen next.
-"it's a different world now".
["The Standard & Poor's 500 index was down 8.57 percent for the month, its worst January ever
and a worrisome sign for investors who see the first month as a trendsetter for the 11 that follow.
They're believers in the January Barometer: As January goes, so goes the year.
Since 1950, there have been only five times when January got it wrong in a big way.
That gives it an accuracy ratio of 91.4 percent. Throw in the 10 years since then when the market
hasn't moved much in a year, and January is still accurate 74.1 percent of the time, according to the
"Stock Trader's Almanac," a book that tracks market trends.
But after a horrendous 2008, some Wall Street veterans say 2009 isn't a time for looking at past trends.
"We're in a different world. If the last two years have taught us anything it's to be very skeptical about
statistical predictions of markets," said Jerry Webman, chief economist at Oppenheimer Funds Inc. in New York."]
http://www.google.com/hostednews/ap/article/ALeqM5jF5iJ1AWqwqXS6MUOP_pE-gQDjGQD961NRBG0
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