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. joepistole Deacon Blues Valued Senior Member

    Messages:
    22,910
    That is fine Ash, you and I will have to agree to disagree on this issue.
     
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  3. ashura the Old Right Registered Senior Member

    Messages:
    3,611
    Cheers.

    Please Register or Log in to view the hidden image!

     
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  5. Captain Kremmen All aboard, me Hearties! Valued Senior Member

    Messages:
    12,738
    If Hoover was around to defend himself, maybe he would say that his policies had been vindicated.
    After the depression, the US became the most prosperous country in the world.

    Maybe I have been reading pro-Hooverist propaganda, but I have always believed that his massive construction projects were a successful way of increasing the money supply and creating jobs. Slower, to be sure, than writing massive blank cheques, but long term more beneficial.

    I don't know a lot about it, and would like to hear other opinions.
     
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  7. Captain Kremmen All aboard, me Hearties! Valued Senior Member

    Messages:
    12,738
    DOW leapt by over 900 points yesterday.

    Are your short term bets on

    a) Another big rise.
    b) Little rises and falls.
    c) Another big fall
     
  8. joepistole Deacon Blues Valued Senior Member

    Messages:
    22,910
    I think it will continue to rise as the credit market loosen up. I put my money where my fingers were and invested a chunk of cash last week. It has paid off handsomely thus far.
     
  9. ashura the Old Right Registered Senior Member

    Messages:
    3,611
    Well, some people like to call it left wing propaganda but I'm not sure if that's the right term. I think people really do believe Hoover and FDR helped us get out of the Depression. But that doesn't change the fact that it's wrong, and macroeconomists are starting to realize that.

    You should check out the link I posted in post #80. It talks exclusively about FDR but as his intervention was more extensive by a number of degrees compared to Hoover, it should give you the Austrian impression of Hoover as well.
     
  10. joepistole Deacon Blues Valued Senior Member

    Messages:
    22,910
    Ash I think outside the Ron Paul camp you will be hard pressed to find anyone who thinks Hoover was an activist during the Great Depression. He is generally credited by historians with being a do nothing president who played the fiddle as Rome burned.
     
  11. ashura the Old Right Registered Senior Member

    Messages:
    3,611
    If our measure of activist is FDR, then of course Hoover doesn't measure up. I never said he did. But that doesn't change that fact that he did intervene extensively. Calling him a do nothing president is either a lie or an expression of ignorance. Which historians do you have in mind that thought of him as a "do nothing president who played the fiddle"?
     
  12. joepistole Deacon Blues Valued Senior Member

    Messages:
    22,910
    Ash you and I and have a disagreement. You view deporting aliens, and raising tarrifs and taxes as interventionist. Most historians do not. Raising tarrifs and taxes was the traditional role of government...nothing new there. However, raising taxes and tarrifs in a time of depression was not very helpful. I do not call raising taxes and deporting illegal aliens as intervening extensively.

    Most people view what FDR did as interventionist versus what Hoover did. Under FR the government started guarenteeing bank deposits, regulating banks, etc. That is generally considered interventionism.
     
  13. Captain Kremmen All aboard, me Hearties! Valued Senior Member

    Messages:
    12,738
    Thanks. Will look at that.
    Instinctively, I like the notion of injection of money into major projects rather than banks. It must be better than giving it to people who have taken your money and weed it up the wall.

    The objective at the moment seems to be the avoidance of a recession at all costs, but perhaps given the scale of abuse and greed, it is inevitable.

    Whether or not Hoover was a good President, the Hoover Dam is still there.

    I'll have to do some research before I make any comment on the merits of Hoover and FDR.
    But as the great Arnie once said "I'll be back"
     
  14. ashura the Old Right Registered Senior Member

    Messages:
    3,611
    Joe, I have to thank you. The discussion brought me back to Rothbard's "America's Great Depression" which had been gathering dust for awhile. I enjoyed popping it open again to review the details of Hoover's intervention. Here's a list of things he did even before 1930:

    • Influenced businesses to artifically prop up wages and expand activity, causing profits to fall when wages should have fallen
    • Under Hoover, the Fed, before 1930, expanded the money supply to then unprecedented records.
      • BTW, here's an excerpt discussing the steps taken by the Fed at the time to avoid a Depression: "Instead of going through a healthy and rapid liquidation of unsound positions, the economy was fated to be continually bolstered by governmental measures that could only prolong its diseased state. This enormous expansion was generated to prevent liquidation on the stock market and to permit the New York City banks to take over the brokers’ loans that the “other,” non-bank, lenders were liquidating. The great bulk of the increased reserves—all “controlled”—were pumped into New York. As a result, the weekly reporting member banks expanded their deposits during the fateful last week of October by$1.8 billion (a monetary expansion of nearly 10 percent in one week), of which $1.6 billion were increased deposits in New York City banks, and only $0.2 billion were in banks outside of New York. The Federal Reserve also promptly and sharply lowered its rediscount rate, from 6 percent at the beginning of the crash to 42 percent by mid-November. Acceptance rates were also reduced considerably."

        Sound familiar?
    • Hoover was a big proponent of subsidies, especially to farms, and the Federal Farm Board was enacted under his pen. The Board made a direct attempt at manipulating the market by hoarding surplus grain and cotton in efforts to raise prices and increase profits for farmers, ignoring supply and demand, and resulting in foreign farms increasing production to counteract American farms' hoarding.
    • Other subsidies include shipping and public works programs.

    And there's even more detailed in later chapters.

    Also, you keep trivializing the tax and tariff increases under Hoover which I think is sort of silly. Capitalism is directly based on capital and trade, and Hoover's policies sharply reduced both at the worst possible time. They had a direct effect on the market and economists of all schools agree that they played a significant role in worsening the Depression. I don't see how you could say they weren't government intervention.

    And there's more. Hoover was pretty much the father of the New Deal. I would suggest reading "America's Great Depression" in it's entirety to get a better handle of Hoover's role in causing the Depression with his intervention.

    You can read the whole thing for free here: http://mises.org/rothbard/agd.pdf

    ---​

    Captain Kremmen: Ignore my earlier advice. While the article I posted earlier is good reading, Rothbard's opus is really the answer to your questions. I highly suggest investing some of your time reading it via the link above.
     
  15. Captain Kremmen All aboard, me Hearties! Valued Senior Member

    Messages:
    12,738
    Hope you sold on Monday, otherwise all your profits have gone down the pan.
    DOW down 733 today.
     
  16. ashura the Old Right Registered Senior Member

    Messages:
    3,611
  17. joepistole Deacon Blues Valued Senior Member

    Messages:
    22,910
    Yes I did and bought them back today, and will be buying more in the days to come. But I suggest extreme caution operating in this market. You have to know what you want and what you are prepared to endure. I don't want to encourage anyone, especially novices, to step into this market.

    I am in this market buying on the basic fundamentals on investment...return. I am buying good solid companies with great cash flow and great dividends. So I am really not sensitive to stock price drops. I am prepared to by and hold until hell freezes over in neeed be. So if you are likely to obsess over stock price, this is not the time to get involved in this market. If you are like myself...willing to put money down for good stable dividend over a prolonged period of time, this market is for you and me. This a great buying opportunity for those willing to pay the price and know what they are getting into.

    If you are going to need the principal in the next 5 years; this is not the time nor the market for you.
     
  18. Captain Kremmen All aboard, me Hearties! Valued Senior Member

    Messages:
    12,738
    You are right Joe.
    There are some terrific bargains for a long term investor, so long as the companies concerned don't go to the wall. In which case they aren't bargains, they are foolish investments.

    Who would have thought a few years ago that General Motors would be a company with so many problems.

    I think that so long as people are thinking about getting a return in 5yrs, and spread their money between different sectors, they will do ok.
    Of course, we could have a period of hyper inflation, which would wipe out any gains.
     
    Last edited: Oct 16, 2008
  19. joepistole Deacon Blues Valued Senior Member

    Messages:
    22,910
    Yes, as long as we don't go back to the stone age, there are some good bargans and some well run companies with good cash flow selling at a great discount.

    Fear makes people do some irrational things sometimes. And I think one could make a good case that the market is not rational at the moment.
     
  20. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

    Messages:
    23,198
    In such a period you would be better off in equtites (stocks) than many other things. Political action would make the IRS index your capital gains to the inflation.
     
  21. Captain Kremmen All aboard, me Hearties! Valued Senior Member

    Messages:
    12,738
    Dow back in the 7,000s at 7997.
    The 6,000 people are getting ready to grab the crown. Hypewaders, your pessimism may have been justified.
    At todays rate, it could be before the end of the week.

    CEOs are getting nervous because talk is of allowing companies to go bankrupt, and restructuring them.

    This makes CEOs particularly nervous, because part of the restructuring will be to get rid of corporate jets, "conferences" in fancy resorts and other fat cat paraphernalia.

    Any sciforumers still investing?
    Will the day come when we see Warren Buffet in the soup queue?
     
    Last edited: Nov 19, 2008
  22. joepistole Deacon Blues Valued Senior Member

    Messages:
    22,910
    Nope not buying, I am thinking markets will slide at least until the end of the year. At year end I will look at buying. I am not trusting the current crop in Washington. Each time I think they couldn't fuck things up any more, they exceed themselves. So until a new administration takes over and starts moving us in the right direction, I am keeping my powder dry. I would not be suprised to see Dow 6000 they way these clowns are running things. But as an investor, you really have to keep your sense of direction...know why you are in the markets. And never be 100 percent invested at any given point in time. I prefer the slow gradual approach to investing move slowly over a period of time because you never have perfect information.
     
  23. tablariddim forexU2 Valued Senior Member

    Messages:
    4,795
    As prices drop people will be tempted to buy, especially with media pressure to. There could be a massive rally on the near horizon, but. A rally in a bear market may bring very good returns in the short term but then it could suddenly drop like a ton of bricks and bring prices way below today's levels, followed by a very long period of stagnation. Be very careful.

    Personally, I will wait until the post rally stagnation sets in 2-3 years from now, before choosing some good stocks for the long term.
     

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