The status of the stock market and economy - is the crash of 2008 over and when can we start to see things getting better?
Posted by Blueeyes at 12/6/2008 12:28 PM 
Categories: Educational, Politics, Finance, Money, Economy, Business, Current Events, Advice, Barack Obama, Career
Categories: Educational, Politics, Finance, Money, Economy, Business, Current Events, Advice, Barack Obama, Career
Yes, after all the turmoil, fraud, lies and similar crap that has been going on in the financial sector, finally everyone from the economists to the President (George Bush, not president elect Barack Obama) are in agreement that this is a serious recession. The final indicators have all shown a drop in GDP which incorporated with a shrinking economy and serious job losses (over 500,000 last month alone) state that this is one of the three worst recessions of the past century and that includes the 1929 great depression in those 3. So, if we have been in this recession for over 400 days as most experts agree, then when will we start to emerge and when will things get better? Basically, what can we expect going forward?
Well, first we have to understand a little principle of fundamental economics. All recessions consist mainly of 2 parts and this recession is no different: the 2 parts are the stock market and the economy. The economy follows the stock market by about 6 to 10 months and basically repeats what the stock market does. So what does this mean? It means the stock market has already priced in the worst recession since 1929 already and has bottomed out. It will take some time and slowly come back up - but don't expect the DOW to get back over and stay over 10,000 anytime soon. It will take some time and thre will still be some dips and more devastating news especially in the global economy as some countries and their stock markets, like Russia, Brazil, China and others have taken one heck of a beating and are not done yet.
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Now, this is the good news. The bad news is that we need to realize that the economy is now where the stock market was in June or July and still has to go through the capitulation that occured in October and November (that was the severe drop of around 25% to 30% in the DOW that occured during these months as investors lost all hope and faith in the markets and took record withdrawals to cash). So, what does this mean? Basically the economy will experience the same 25% or so drop like the stock market did.
The economy will continue to fall with more job losses, more bankruptcies, house pricing problems, unemployment, state tax revenue short falls (can anyone say California?), etc... But it will only last a few months and then it will start to swing the other way - slightly. By next summer, all analysts predict things will get better and we will embark on the beginning of the next bull run which should last another 3 to 4 years (you can also see this by checking the options market and looking at how future options like puts and calls for larger stable stocks are pricing - most are going up as you get closer to June of 2009).
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The economy has been wounded bad, but it will rebound nicely and for those that can afford to invest wisely now in good, solid companies the returns will be massive - I just heard from a local PBS radio station of one investor that only invests in bad times like this and then sells when he starts to see things topping out. According to him, if you invested $10,000 correctly right now you could easily be a millionaire in less then 5 years due to the fire sale prices on equities (stocks) across the board (and especially in countries like Russia, China and Brazil) enormous returns one will experience when the market turns the other way (this would easily best the enormous returns of Berkshire Hathaway legend Warren Buffett). That would definitely be a nice way to start the next 10 year period of most peoples lives.
This is solely opinion and not financial advice. For proper financial advice please see a licensed finacial advisor (make sure they are fee based as their advice will be what helps you best - commissioned based financial advisors are only looking out for what pays them the most, never your best interests - and always stay away from whole life insurance as it is one of the worst investments or wastes of money out there and is never a good idea - ever. Buy term life insurance as needed).
Well, first we have to understand a little principle of fundamental economics. All recessions consist mainly of 2 parts and this recession is no different: the 2 parts are the stock market and the economy. The economy follows the stock market by about 6 to 10 months and basically repeats what the stock market does. So what does this mean? It means the stock market has already priced in the worst recession since 1929 already and has bottomed out. It will take some time and slowly come back up - but don't expect the DOW to get back over and stay over 10,000 anytime soon. It will take some time and thre will still be some dips and more devastating news especially in the global economy as some countries and their stock markets, like Russia, Brazil, China and others have taken one heck of a beating and are not done yet.
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Now, this is the good news. The bad news is that we need to realize that the economy is now where the stock market was in June or July and still has to go through the capitulation that occured in October and November (that was the severe drop of around 25% to 30% in the DOW that occured during these months as investors lost all hope and faith in the markets and took record withdrawals to cash). So, what does this mean? Basically the economy will experience the same 25% or so drop like the stock market did.
The economy will continue to fall with more job losses, more bankruptcies, house pricing problems, unemployment, state tax revenue short falls (can anyone say California?), etc... But it will only last a few months and then it will start to swing the other way - slightly. By next summer, all analysts predict things will get better and we will embark on the beginning of the next bull run which should last another 3 to 4 years (you can also see this by checking the options market and looking at how future options like puts and calls for larger stable stocks are pricing - most are going up as you get closer to June of 2009).
Clear up cloudy headlights to new again and save hundreds over replacements with the best - New Lite headlight cleaner from MDWholesale.com!
The economy has been wounded bad, but it will rebound nicely and for those that can afford to invest wisely now in good, solid companies the returns will be massive - I just heard from a local PBS radio station of one investor that only invests in bad times like this and then sells when he starts to see things topping out. According to him, if you invested $10,000 correctly right now you could easily be a millionaire in less then 5 years due to the fire sale prices on equities (stocks) across the board (and especially in countries like Russia, China and Brazil) enormous returns one will experience when the market turns the other way (this would easily best the enormous returns of Berkshire Hathaway legend Warren Buffett). That would definitely be a nice way to start the next 10 year period of most peoples lives.
This is solely opinion and not financial advice. For proper financial advice please see a licensed finacial advisor (make sure they are fee based as their advice will be what helps you best - commissioned based financial advisors are only looking out for what pays them the most, never your best interests - and always stay away from whole life insurance as it is one of the worst investments or wastes of money out there and is never a good idea - ever. Buy term life insurance as needed).
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