How low will the Dow Go?

Discussion in 'Business & Economics' started by joepistole, Oct 6, 2008.

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How low will the Dow go before recovering?

Poll closed Feb 3, 2009.
  1. 9,000

    15.6%
  2. 8.000

    9.4%
  3. 7,000

    12.5%
  4. 6,000

    15.6%
  5. 5,000

    25.0%
  6. 4,000

    3.1%
  7. 3,000

    9.4%
  8. 2,000

    0 vote(s)
    0.0%
  9. 1,000

    9.4%
  1. milkweed Valued Senior Member

    Messages:
    1,654
    I disagree that the blame lies with republicans forecasting gloom and doom. The stock market is horrible and I think a bit under-valued. But each time I say that out loud some new and very real announcement of fact comes out and another "too big to fail" corp is failing and needs a handout.

    If I had investments in the market, I would be terrified to lose more. No one has any real idea of what is going on behind the scenes or how endangered their investments are.
    I agree that putting away some money for investment later is a good idea. I think this is the mindset of those with money. I wonder (not willing to say expect yet), should the idea of busting up ma bell be applied to these "too big to fail" financial corps?
     
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  3. joepistole Deacon Blues Valued Senior Member

    Messages:
    22,910
    I think the idea of busting up too big to fail corporations has merrit. But let us remember that we had rules to prevent this kind of thing from happening. But both Democrats and Republicans were guilty in repealing those laws.

    And for the last eight years we have had an administration that has been asleep at the helm and not enforced even the few remaining laws that remained from the Great Depression era. I must admit I was amazed with the speed with which they were able to destroy the financial system. I think it just reinforces the need for regulation of the markets. We need a regulator to enforce rules of the road. We have not had that for a long time.

    There are basically two things going on now. First there is the fundamental problem with confidence brought about by the destruction of regulatory systems and law. Second, there is a problem of perception. A lot of folks on Wall Street belive the Republican mantra and act accordingly and changing from a system of corruption to one of open and free competition scares the you know what out of them.

    For example, while many will admit Obama's healthcare plan has merrit. His plan to make Medicare Prescription Drug Program competitive scares the heck out of big pharma and health insurance companies. Under the Republican arrangement, there was not price competition. Under the Obama plan there is lots of competition. It scares them and rightly so.

    Yes it is a brave new world. But the Obama mission and direction are right on the money. We have to solve the healthcare criss and the financial crisis and they are both linked.

    Where I think this administration fails is with reregulating and recapitalizing the banks. They have been way behind the eight ball in this aspect. The need to Geithner off his butt and get moving. Frankly, I just don't think Geithner has it in him.
     
    Last edited: Mar 3, 2009
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  5. TruthSeeker Fancy Virtual Reality Monkey Valued Senior Member

    Messages:
    15,162
    If the government would stop bailing out companies like AIG, Citigroup and GM, then we would see the level I voted for -> 4,000. But the government insists throwing money at the black hole, so....

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  7. milkweed Valued Senior Member

    Messages:
    1,654
    I agree. And there were people out there "shouting from the rooftops" about the impending doom. I heard them. I listened and I paid off every debt I had 3 years ago. I cashed out the last small investment June 2008. I kept one government retirement account alive that I am vested in.

    Here I dont agree with your premise. The real problem was over-valued investments that people borrowed money to invest in. Not only were they paying too much, they were borrowing the money for the purchases. The sales pitches were great, if they would have been true. Houses go up in value [sub]longterm[/sub]. Interest rates are low [sub]but only for these few months of the 30 years of the loan, and after that you will still owe the whole principal[/sub]. Its good to borrow when interest rates are so low [sub] because we have you by the throat for the rest of your life[/sub]. Its sooo easy, just sign here on the dotted line [sub]because I work on a commission and I get paid when you sign[/sub].

    But that isnt the real problem. The 'global economy' is the true source of the issue. You got docks and warehouses stuffed full of cheap goods. Yet no one is buying them because... wait for it .... The people producing the cheap goods are not purchasing the products they produce.

    All the complaints about unions, american wages, etc. While there is some merit in discussion surrounding 'cheap labor', there is also the cause/effect of what happens when a consumer driven economy under-employs its consumers. No one has money to purchase the cheap goods.

    Just today on the news they reported this:

    The personal savings rate surged to 5 percent, the highest level since 1995 as consumers continued to sock away more of their incomes amid the deepening recession.

    Personally, I have to commend those who are facing the reality of credit vs cash. Hats off to those trying to ensure they can pay for what they need, in-spite of basically No Return for the banks having access to borrow out their money.

    This is part of this administrations failure. The other glaring failure it throwing money into this failed system. Its not even a band-aid. I looked at a link to where this stimulus money is going too. As I understand it, approx 1/2 is going to government, via state aid or Human services. My state has announced that our budget deficit will not be as bad because of the stimulas package. The money thrown to this state will not be going into new programs, nope! its going to pay for what they had previously planned to do with it. Good for government employees for sure. But they also put on a hiring freeze late last summer.

    As far as his health care plan, I know very very little about it, but from what I have seen, it is about government savings (which is good for the tax payer) but no real initiative for the issues of working americans and their employers being able to offer affordable health care to their workers (for the most part, healthy). It needs to be cost effective for me (as a worker) to pay a premium.

    Obama has his hands full, of that there is no doubt. He still has not faced the reality of the situtation. Americans are not working, their wages are falling, and there is no money to pay for the debts he is creating (and this started with the very first bailout, which if he was any kind of a leader, he would have voted NO)
     
  8. Captain Kremmen All aboard, me Hearties! Valued Senior Member

    Messages:
    12,738
    I did not think it would drop much below 9000.
    I was with Warren Buffet on that one so I had good company.
    I thought there would be support at 7,000.
    There hasn't been.


    Looking at the further rout today, I am now wondering how low can it go.

    Is there some residual value beyond which the DOW cannot drop, or could it drop to 2,000 or 1000, or 0?
     
  9. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

    Messages:
    23,198
    The poll is closed, so probably 2000

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    - That way no one is correct.

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  10. River Ape Valued Senior Member

    Messages:
    1,140
    I felt originally (long time ago) that the index would fall to around 7000 AFTER the shock of the plug being pulled on GM, and that it might then begin to recover. Today's renewed downward plunge, coupled with the fact that GM is still dying a lingering death, with the last rights not yet administered, makes me think that we are moving into new territory I had not expected. We need to get the funeral out of the way before we can move on.
     
  11. tablariddim forexU2 Valued Senior Member

    Messages:
    4,795
    Around 3500 would be in the ballpark, but it could take years. Meanwhile it could enjoy a short lived bounce of 2000-4000.
     
  12. candy Registered Senior Member

    Messages:
    821
    I think it will test 5500 and then get into a stagnation trading range for 18 months or so.
     
  13. nietzschefan Thread Killer Valued Senior Member

    Messages:
    7,721
    I said below 6000, if it goes below 5000, then some fundamental changes are going to happen, some major banks WILL fail perhaps even some "stable" governments(the ones that will keep bailing rich fucks out).
     
  14. ashura the Old Right Registered Senior Member

    Messages:
    3,611
    Good point, I made the mistake, at the time of voting, of underestimating the amount of new inflation that was going to take place. I'll clarify now by saying fuck the nominal value and that I think the DOW will end up bottoming out at being worth 1oz of gold.
     
  15. Captain Kremmen All aboard, me Hearties! Valued Senior Member

    Messages:
    12,738
    Ebay shares are still scraping themselves along $10.
    The bottom?

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    Surely they should benefit from people strapped for cash.
    Maybe if they stopped grabbing so much from each sale that it makes it difficult to make a profit, this would be a time of growth for them.
     
  16. StrangerInAStrangeLand SubQuantum Mechanic Valued Senior Member

    Messages:
    15,396
    It will go however low the rich & powerful want it to go.
     
  17. kmguru Staff Member

    Messages:
    11,757
    I think, people are taking their money out from the stock market due to stock volatility and personal use due to high unemployment.
     
  18. 15ofthe19 35 year old virgin Registered Senior Member

    Messages:
    1,588
    I don't put a lot of stock in what Jim Kramer says, but he did make an interesting point on Friday about finding a true bottom for the Dow. He basically ran a worst case scenario for all of the Dow components, running them to their 52 week lows, and even marking GM down to 0. With all of that, he couldn't get the Dow below 5,250. I really thought the market would catch fire at 7,500, so with it sitting where it is now I can see it testing a lower bottom before it reverses.
     
  19. joepistole Deacon Blues Valued Senior Member

    Messages:
    22,910
    I found that an interesting point as well. I would like to know more about his assumptions. But as you said, Cramer took GM to zero and assumed the worst case.
     
  20. kmguru Staff Member

    Messages:
    11,757
    And if people are putting a hold on sales, does that mean the number will get stuck somewhere?
     
  21. Captain Kremmen All aboard, me Hearties! Valued Senior Member

    Messages:
    12,738

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    In 1980 the DOW stood at about 900.
    GDP was approximately $2 Trillion.

    USA GDP is now about $13 Trillion.

    If the DOW had risen in line with GDP, it would now stand at 5850.

    Unless the whole economy collapses, I don't think that there is much more downside. Maybe.

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  22. joepistole Deacon Blues Valued Senior Member

    Messages:
    22,910
    Not a bad last three days!
     
  23. madanthonywayne Morning in America Registered Senior Member

    Messages:
    12,461
    I like your thinking, and I hope you're correct. But don't forget that much of what drives the stock prices is psychological, and Obama is not doing things to warm the hearts or ease the worries of most businessmen. I could see the Dow hitting 2,000.
     

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