why the stock market will go up in 2008

[grapejelly]

I think that the stock market will become the recipient of a lot of the capital that is now in bonds.

As Ty Andros has written, Mises' "crack up boom". Marc Faber has talked about this a lot too.

Why would investors have money in bonds if the currencies keep sinking against gold?

Wouldn't they want to get something for the currencies? Or am I a year or 5 early in this prognostication?

[Jim Nickerson]

I think that the stock market will become the recipient of a lot of the capital that is now in bonds.

As Ty Andros has written, Mises' "crack up boom". Marc Faber has talked about this a lot too.

Why would investors have money in bonds if the currencies keep sinking against gold?

Wouldn't they want to get something for the currencies? Or am I a year or 5 early in this prognostication?

Just my opinion, but I don't think there will be some renewed ascent of the equity indices (perhaps in the world) until the derivative issues play out, and from the hints I see that is a year or more or more away.

[FRED]

I think that the stock market will become the recipient of a lot of the capital that is now in bonds.

As Ty Andros has written, Mises' "crack up boom". Marc Faber has talked about this a lot too.

Why would investors have money in bonds if the currencies keep sinking against gold?

Wouldn't they want to get something for the currencies? Or am I a year or 5 early in this prognostication?

Good luck. We'll keep playing the Debt Deflation Bear Market described in Time, at last, to short the market (http://itulip.com/forums/showthread.php?t=2774).

[Tulpen]

Inflation of the US dollar means that corporate sales will "grow". This "growth" will reflect itself in appreciating stock prices.

[Orforded]

I'm relatively new to all this so please take everything I say cum grano salis. According to many on this site and the prep note for the economist Nourini Roubini's presentation at Davos, and many others, our economy is in for a hard fall nationally and it will not be decoupled from the world economy, meaning 4 hard quarters of U.S. recession and global slow down. According to Roubini 10% fall in housing prices takes two trillion dollars of value out of the economy. Someone else said if you compare the unraveling of the credit problem to a baseball game we are at the national anthem. Roubini says the virus of financial loss travels from subprime, to near prime and prime mortgages, to commercial real estate, to auto loans and credit cards, to leveraged loans, etc. If he's right who in this environment will invest in any market unless they get in at bargain basement prices. I am not an economist and as noted above I have very little sophistication in these matters, but everything Roubini, Jansen and others say about these problems makes a great deal of common sense to me. Roubini says that recession will take inflationary pressure off energy and commodities so in 2008 cash is king

Personally, I'm trying to figure out what to do with my savings, so any comments on these issues, pro or con, will be greatly appreciated.

[Jim Nickerson]

I'm relatively new to all this so please take everything I say cum grano salis. According to many on this site and the prep note for the economist Nourini Roubini's presentation at Davos, and many others, our economy is in for a hard fall nationally and it will not be decoupled from the world economy, meaning 4 hard quarters of U.S. recession and global slow down. According to Roubini 10% fall in housing prices takes two trillion dollars of value out of the economy. Someone else said if you compare the unraveling of the credit problem to a baseball game we are at the national anthem. Roubini says the virus of financial loss travels from subprime, to near prime and prime mortgages, to commercial real estate, to auto loans and credit cards, to leveraged loans, etc. If he's right who in this environment will invest in any market unless they get in at bargain basement prices. I am not an economist and as noted above I have very little sophistication in these matters, but everything Roubini, Jansen and others say about these problems makes a great deal of common sense to me. Roubini says that recession will take inflationary pressure off energy and commodities so in 2008 cash is king

Personally, I'm trying to figure out what to do with my savings, so any comments on these issues, pro or con, will be greatly appreciated.

If one is not an insider somewhere, then one looks as you have and as you have written above to the opinions of others. I think one takes the best advice from whom one considers the best analysts (EJ?, Roubini?) and makes one's decisions accordingly. It looks to me as though you have a pretty good handle on things. I'm not prepared to argue you out of your apparent position.

Patience.

[merry]

I think that the stock market will become the recipient of a lot of the capital that is now in bonds.

I'm hoping you are right. Just yesterday I decided to move my 401K balance from something called a stable value bond fund to an S&P index fund. With my 401K, it's either this index fund, my company stock, bonds, or some crappy mutual funds.

My logic is that the unwinding of the derivatives mess and the subsequent rescues will cause tons of extra liquidity to flood the market. It seems to me that bonds would be very unattractive if the money supply is expanding rapidly.

I know there are many threads here that say the market is going to fall a lot more but I'm not sure I want to be in bonds right now. Oh what to do...:confused:

[grapejelly]

I'm hoping you are right. Just yesterday I decided to move my 401K balance from something called a stable value bond fund to an S&P index fund. With my 401K, it's either this index fund, my company stock, bonds, or some crappy mutual funds.

My logic is that the unwinding of the derivatives mess and the subsequent rescues will cause tons of extra liquidity to flood the market. It seems to me that bonds would be very unattractive if the money supply is expanding rapidly.

I know there are many threads here that say the market is going to fall a lot more but I'm not sure I want to be in bonds right now. Oh what to do...:confused:

I'm pretty much into precious metals and playing that for the long term.

At some point there is a flight out of debt instruments...and I think it will go into tangibles such as gold, silver and commodities...and perhaps equities.

US equities.

[BiscayneSunrise]

I'm hoping you are right. Just yesterday I decided to move my 401K balance from something called a stable value bond fund to an S&P index fund. With my 401K, it's either this index fund, my company stock, bonds, or some crappy mutual funds.

My logic is that the unwinding of the derivatives mess and the subsequent rescues will cause tons of extra liquidity to flood the market. It seems to me that bonds would be very unattractive if the money supply is expanding rapidly.

I know there are many threads here that say the market is going to fall a lot more but I'm not sure I want to be in bonds right now. Oh what to do...:confused:

There's always cash.

[FRED]

I'm relatively new to all this so please take everything I say cum grano salis. According to many on this site and the prep note for the economist Nourini Roubini's presentation at Davos, and many others, our economy is in for a hard fall nationally and it will not be decoupled from the world economy, meaning 4 hard quarters of U.S. recession and global slow down. According to Roubini 10% fall in housing prices takes two trillion dollars of value out of the economy. Someone else said if you compare the unraveling of the credit problem to a baseball game we are at the national anthem. Roubini says the virus of financial loss travels from subprime, to near prime and prime mortgages, to commercial real estate, to auto loans and credit cards, to leveraged loans, etc. If he's right who in this environment will invest in any market unless they get in at bargain basement prices. I am not an economist and as noted above I have very little sophistication in these matters, but everything Roubini, Jansen and others say about these problems makes a great deal of common sense to me. Roubini says that recession will take inflationary pressure off energy and commodities so in 2008 cash is king

Personally, I'm trying to figure out what to do with my savings, so any comments on these issues, pro or con, will be greatly appreciated.

We've been displaying and updating this chart since mid 2006. Keep in mind that if you invest in the DOW you are investing in this.

http://www.itulip.com/images/RealDowNotes3.gif

[merry]

There's always cash.

I'm afraid that my 401K doesn't have that option. They even took away the money market option a few years ago. When I complained, my co-workers said I needed to increase my risk tolerance. My choices are very limited. The only way I could get control of that money is to quit my job and I won't do that.

[BiscayneSunrise]

I am sorry to hear that; all of your choices yield equally unpleasant results.

Quit your job, roll your 401K into an IRA, then get re-hired?

I suppose quitting your job permanently becomes a comparison of the potential drop in value of your 401K vs. the loss of your earning potential at that job.

[Jim Nickerson]

I'm afraid that my 401K doesn't have that option. They even took away the money market option a few years ago. When I complained, my co-workers said I needed to increase my risk tolerance. My choices are very limited. The only way I could get control of that money is to quit my job and I won't do that.

How about short-term bond funds?

[merry]

How about short-term bond funds?

I only have four bond funds to choose from, three of which invest primarily in mortgages so I would like to avoid those. The last one attempts to maintain a dollar share value and says this:

Stable Value Fund--High-quality, fixed income securities, including investment contracts issued by banks, insurance companies and other financial institutions, and government, corporate, asset-backed and mortgage-backed securities. The fund manager may use derivatives such as futures, options, and swaps as a substitute for taking a position in the underlying asset, for hedging risk, and for managing liquidity. Using derivatives involves risks which could decrease the value of the fund.

That is their "most conservative" investment choice. It won't cost me anything to jump back into that, if that's what makes the most sense. Otherwise I could just take my chances with the S&P Index Fund.

I seem to remember Marc Faber saying something along the lines that if he had to be invested in stocks or bonds right now, he would choose U.S. stocks.

[Jim Nickerson]

I only have four bond funds to choose from, three of which invest primarily in mortgages so I would like to avoid those. The last one attempts to maintain a dollar share value and says this:



That is their "most conservative" investment choice. It won't cost me anything to jump back into that, if that's what makes the most sense. Otherwise I could just take my chances with the S&P Index Fund.

I seem to remember Marc Faber saying something along the lines that if he had to be invested in stocks or bonds right now, he would choose U.S. stocks.

I'm far from giving good investment advice, but the description "asset-backed and mortgage-backed securities. The fund manager may use derivatives such as futures, options, and swaps as a substitute for taking a position in the underlying asset, for hedging risk, and for managing liquidity" doesn't strike me as so safe right now.

Just out of interest, how much has the stable value bond fund lost since July. Put the symbol into http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=gld&draw.x=25&draw.y=12 and see. A bond fund I was in SWYSX got its innards ripped out since July, and I suspect it had to do with the derivatives mess.

As I wrote above, most all of us have to rely upon information from others and then decide which of those "others" might be closest to correct. Perhaps for the choices you are given, Faber's opinion might best fit you, and it might or might not work out, just like all investments.

[merry]

Just out of interest, how much has the stable value bond fund lost since July. Put the symbol into...

Actually, it hasn't lost anything--it earns about 3% and maintains a 1$ share value (but it is not a money market). It's internal to Fidelity so it won't be on any stock sites. But that fund description scares me so much that I've been dying to get out of it for the last six months.

Thank you for listening. :)

[Jim Nickerson]

Actually, it hasn't lost anything--it earns about 3% and maintains a 1$ share value (but it is not a money market). It's internal to Fidelity so it won't be on any stock sites. But that fund description scares me so much that I've been dying to get out of it for the last six months.

Thank you for listening. :)

If you are correct it has not lost anything since July-August, then by Jove it has been stable through a good bit of turbulence.

How about 50-50 between stock fund and stable value fund? Good luck, come back in a year and tell us how it worked out.

[Andreuccio]

Actually, it hasn't lost anything--it earns about 3% and maintains a 1$ share value (but it is not a money market). It's internal to Fidelity so it won't be on any stock sites. But that fund description scares me so much that I've been dying to get out of it for the last six months.

Thank you for listening. :)

My 403b is with Fidelity. We have a much wider variety of choices (over 100 different funds). I didn't see any "Stable Bond Fund" listed. Still, it sounds like a good conservative place to ride this out, unless you expect the market to rise. From my limited experience, though, betting against the Tulip is a good way to lose some money.

[c1ue]

Actually, it hasn't lost anything--it earns about 3% and maintains a 1$ share value (but it is not a money market).

Not to try and scare you, but you are aware that inflation is officially pretty close to 3%, and by many accounts (including iTulip) is running double that?

So your good performance means you are merely keeping even with official inflation, and 3% below 'shadow' inflation.

Or put another way - is the number of loaves of bread you could buy with said money in June 2006 the same as June 2007? Or June 2007 vs. June 2008?

This is the ugliness of the inflation tax on savers.

[Andreuccio]

Not to try and scare you, but you are aware that inflation is officially pretty close to 3%, and by many accounts (including iTulip) is running double that?

So your good performance means you are merely keeping even with official inflation, and 3% below 'shadow' inflation.

Or put another way - is the number of loaves of bread you could buy with said money in June 2006 the same as June 2007? Or June 2007 vs. June 2008?

This is the ugliness of the inflation tax on savers.

The problem she faces is the limited choices in her 401k. If all the other funds are off 20%, but she makes 3%, she's done the best she can. Too bad there isn't a Fidelity Loaves of Bread fund.

[touchring]

Corporate sales depend on global growth, which in turn depends on how fast EU, India and China will slow down. If a slow down causes oil prices to fall, it will cause a calamatic bust of new energy stocks -that will bring down the entire stock market like the dot com bust.

So ironically, whether the stock market will fall will depend on whether oil prices will fall!

At the moment, the EU is slowing down very quickly, combined with high interest rates, China is having a nation wide weather disaster and India, Internet is down.

Things don't look good. A few more non-economic weather or man-made disasters will really bring down the world economy. :eek:


Inflation of the US dollar means that corporate sales will "grow". This "growth" will reflect itself in appreciating stock prices.

[Uncle Jack]

Inflation of the US dollar means that corporate sales will "grow". This "growth" will reflect itself in appreciating stock prices.

We already passed peak earnings. Inflated dollars or not, sales, revenues, earnings, pick your favorite number - they will all decline this year.

[c1ue]

The problem she faces is the limited choices in her 401k. If all the other funds are off 20%, but she makes 3%, she's done the best she can.

I understand that - which is why I have previously mentioned the best alternative is to either get a 2nd part time job which includes the right to invest in a self directed 401K, or write a lot of letters to get this option added to your existing company's 401K policy. Or of course, quite and return immediately.

[Andreuccio]

I understand that.

I know you do. My comment was directed more at her, and for clarification, than at you. Sorry if I implied otherwise.

I have a question for you, though: I notice you manage to misspell Andreuccio even when it's automatically written (correctly) by the computer. Did I do something to piss you off? Is it just good-natured ribbing? Did you have a bad experience in a pizzeria that's caused you to have a sub-conscious, xenophobic reaction to the mechanics of Italian spelling and grammar? What gives? :confused: :)

[Jim Nickerson]

I know you do. My comment was directed more at her, and for clarification, than at you. Sorry if I implied otherwise.

I have a question for you, though: I notice you manage to misspell Andreuccio even when it's automatically written (correctly) by the computer. Did I do something to piss you off? Is it just good-natured ribbing? Did you have a bad experience in a pizzeria that's caused you to have a sub-conscious, xenophobic reaction to the mechanics of Italian spelling and grammar? What gives? :confused: :)

Doesn't the "cchio" work out phonectically? Like Pachino?

[c1ue]

No, nothing personal taken nor implied.

I guess my fingers just cross linked your e-name and Verrocchio's :rolleyes:

[Lukester]

Andreuccio -

Beh, non mi sorprende per niente. Questi Americani sono un gran mucchio di ignoranti. Tanti soldi, case enorme, veicoli che sembrano grandi come brontosauri, ed un Presidente che francamente sembra un rincoglionito con la sua guerra contro il terrore che sta portando il paese alla bancarotta.

Tutto sommato, preferirei vivere in Perugia!

Pero' devo ammettere che i "New York Giants" sono una vera e propria meraviglia. Ci hanno dato una vittoria contro i Patriots che potra essere raccontata per cinque generazioni. Questi sono giganti davvero.

Che la pace ed il benessere siano il tuo felice avvenire, Andreuccio!

[Andreuccio]

Doesn't the "cchio" work out phonectically? Like Pachino?

Well, since you asked:

In English, ch is typically (maybe always?) read as in chin.

In Italian, a c before the vowels a, o, and u takes the k sound. In front of i or e, though, c takes the English ch sound. If you want the hard k sound in front of an i or an e, you have to put an h between the c and the i or e. Thus Pinocchio vs. Pacino.

The same rule applies to the letter g. This gives you spagghetti vs. Luigi.

The cc in Andreuccio has the ch sound, like Pacino, the cch in Verrocchio has the k sound, like Pinocchio. (They translate, btw, as True Eye and Pine Eye, respectively.)

It's a little confusing at first, but believe me, learning the phonetic rules in Italian is child's play compared to trying to learn English spelling.

[Jim Nickerson]

Well, since you asked:

In English, ch is typically (maybe always?) read as in chin.

In Italian, a c before the vowels a, o, and u takes the k sound. In front of i or e, though, c takes the English ch sound. If you want the hard k sound in front of an i or an e, you have to put an h between the c and the i or e. Thus Pinocchio vs. Pacino.

The same rule applies to the letter g. This gives you spagghetti vs. Luigi.

The cc in Andreuccio has the ch sound, like Pacino, the cch in Verrocchio has the k sound, like Pinocchio. (They translate, btw, as True Eye and Pine Eye, respectively.)

It's a little confusing at first, but believe me, learning the phonetic rules in Italian is child's play compared to trying to learn English spelling.

Thanks for the lesson, Andreuccio,now if I should only remember it.

[c1ue]

Lukester,

As someone who can read Latin, do you really think I don't understand what you're saying?

Grow up.

[Andreuccio]

Andreuccio -

Beh, non mi sorprende per niente. Questi Americani sono un gran mucchio di ignoranti. Tanti soldi, case enorme, veicoli che sembrano grandi come brontosauri, ed un Presidente che francamente sembra un rincoglionito con la sua guerra contro il terrore che sta portando il paese alla bancarotta.

Let's not get nasty. :)

Tutto sommato, preferirei vivere in Perugia!

Yeah, me too, though perhaps for different reasons.



Che la pace ed il benessere siano il tuo felice avvenire, Andreuccio!

Same to you. I'd answer you in Italian, but it's been close to two decades since I've used it. I can still read it pretty well, but I'd just embarrass myself trying to write it.

[Lukester]

Let's not get nasty. :) .

Hey let's set the record straight here - C1ue seems to be laboring under the impression this was about him? In fact I was not even thinking of C1ue. I referred to President Bush, and the NY Giants, and to Americans driving cars the size of a Brontosaurus.

So 'let's not get nasty' is a complete misapprehension. I will say this: C1ue is giving me the distinct impression he's wandering around with a bug up his nose in my regard. My message is: 'it ain't all about you pal'. You can't go around reading everything people say as some sort of personal affront.

[Andreuccio]

Hey let's set the record straight here - C1ue seems to be laboring under the impression this was about him? In fact I was not even thinking of C1ue. I referred to President Bush, and the NY Giants, and to Americans driving cars the size of a Brontosaurus.

So 'let's not get nasty' is a complete misapprehension. I will say this: C1ue is giving me the distinct impression he's wandering around with a bug up his nose in my regard. My message is: 'it ain't all about you pal'. You can't go around reading everything people say as some sort of personal affront.

I didn't mean just about C1ue. I don't want to slam Americans in general, either, or anybody else, for that matter. (I would make an exeption for Bush, though. Slam away.) In any case, no worries. :)

[Andreuccio]

No, nothing personal taken nor implied.

I guess my fingers just cross linked your e-name and Verrocchio's :rolleyes:

Cool. :cool::)

[metalman]

grape, jim, & tulipen,

in this thread from jan 08 you're stock bulls... didn't buy into the itulip debt deflation bear market scenario. six months into the year, what are your thoughts?

[phirang]

duck 'n cover :D.

There's a whole lot more defaultin' to be done, and until then, watch out!

[Jim Nickerson]

grape, jim, & tulipen,

in this thread from jan 08 you're stock bulls... didn't buy into the itulip debt deflation bear market scenario. six months into the year, what are your thoughts?

metalman, see here (http://www.itulip.com/forums/newreply.php?do=newreply&noquote=1&p=38883).

[metalman]

metalman, see here (http://www.itulip.com/forums/newreply.php?do=newreply&noquote=1&p=38883).

read most of it = you were long. yes?

[Jim Nickerson]

read most of it = you were long. yes?


From 9/21/07 to 1/18/08 I was long the inverse index ETF's.

From 1/18/08 to 2/29/08 I was long the index ETF's.

From 3/3/08 to 3/18/08 I was long the inverse index ETF's.

From 3/18/08 to 4/7/08 I was long the index ETF's.

From 4/10/08 to 4/18/08 I was long the inverse index ETF's.

From 4/18/08 to 5/21/08 I was neutral.

From 5/21/08 to Friday 6/20/08 and still a bit, I was long the inverse index ETF's.

[metalman]

From 9/21/07 to 1/18/08 I was long the inverse index ETF's.

From 1/18/08 to 2/29/08 I was long the index ETF's.

From 3/3/08 to 3/18/08 I was long the inverse index ETF's.

From 3/18/08 to 4/7/08 I was long the index ETF's.

From 4/10/08 to 4/18/08 I was long the inverse index ETF's.

From 4/18/08 to 5/21/08 I was neutral.

From 5/21/08 to Friday 6/20/08 and still a bit, I was long the inverse index ETF's.

long shorts, long longs. ha! very funny. net it out... since dec. 2007 long or short? or was it all wiggle, wiggle, wiggle? and what now?

me? short and hold dec. 2007. but you knew that.

[Jim Nickerson]

long shorts, long longs. ha! very funny. net it out... since dec. 2007 long or short? or was it all wiggle, wiggle, wiggle? and what now?

me? short and hold dec. 2007. but you knew that.

There is no netting out whether I have been long or short. The net as I see reality is that since the DJI and SPX tops on 10/9/2007, I've gained 12.59%

I put in a post (http://www.itulip.com/forums/showthread.php?p=38672#post38672) how I was allocated on 6/19, and as I said, I have reduced my long inverse index positions and SRS positions from ~18% to ~7.7% as of Friday's close and closed my SKF position (financials), otherwise my allocations are the same as they were Thursday except I have more cash bonars now.

And as I said, I am waiting to see if an upward bounce develops from the level of the DJI lows of Friday and in Jan. and Mar. IF I can detect a bounce upwards, I will close my inverse positions and open long +200% positions. If the DJI heads on down through its lows as noted above, I'll hang onto my current inverse positions.

Something else I try to keep looking at with regard to market direction is the $BKX--Philadelphia Bank Index. Here is an 8.5 year chart of that index. http://stockcharts.com/h-sc/ui?s=$BKX&p=D&yr=8&mn=6&dy=0&id=p91654529265&a=142292528

This mother has gone straight down in about the last two weeks added to nearly straight down since Jan 07. It is just about at levels of July and Oct 2002, and either it is going to keep crashing or bounce in here I think. If it bounces, then I think the general equity market will too.

[Jay]

There is no netting out whether I have been long or short. The net as I see reality is that since the DJI and SPX tops on 10/9/2007, I've gained 12.59%
Does that 12% include trading fees?

[Jim Nickerson]

Does that 12% include trading fees?

Yes, Jay, any stock trade costs me 8.95 bonars. I can buy a 1000 shares of whatever for that or I could buy one or a hundred BRKA for that. The fees I pay for trading are insignificant. Didn't use to be that way years back, but then I didn't trade so often.

[Jay]

Yes, Jay, any stock trade costs me 8.95 bonars. I can buy a 1000 shares of whatever for that or I could buy one or a hundred BRKA for that. The fees I pay for trading are insignificant. Didn't use to be that way years back, but then I didn't trade so often.
While you're at it, I'll take 100 BRKA too.