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« Why the Multi-Day Market Crash? | Main | What to Watch »

October 09, 2008

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Mike C

"If one accepts Ken Heebner's observation of reality, there is one set of conclusions. If one believes that the market is correctly signaling the next Great Depression, there is another. We shall revisit that dichotomy."

Very interesting Motley Fool post on this dichotomy:

http://boards.fool.com/Message.asp?mid=27078862

"But you know it's not quite Kansas, either."

Alisa

As a new investor, this is an exciting time for me. The buying opportunities seem too good to be true. There lies the problem. Are they? Too good to be true that is. Should I wait for further declines for the stocks on my watch list? Or, should I sell what I have in an effort to retain some of my initial investment. When will this crazy roller coaster ride come to an end?

RB

On the other side, AGG dumps almost 10% in 2 days. The end of the world must be here. Unbelievable.

Mike C

Understanding the factors behind the decline is important in finding opportunity. If one accepts Ken Heebner's observation of reality, there is one set of conclusions. If one believes that the market is correctly signaling the next Great Depression, there is another. We shall revisit that dichotomy.

Well, that really is the gazillion trillion dollar question, right? Either this is the greatest buying opportunity for hundreds if not thousands of stocks since 1982, OR we are only halfway through a 1929-1932 slide.

I've talked to and read several (what I consider) really smart people and pros the last few days, and I think the fear is there really is something "this time" to be scared of. I do not know.

I was cautious/bearish on the overall market for a really, really long time (see my comments on this blog that date back to 2007) and I've held a ton of cash for a long time with some accounts funded in 2007 and early 2008 sitting 70 to 80% cash since then.

I was right, but truthfully I wish I was wrong. All the old rules seem to have gone out the window. Individual stock valuations no matter how low seem meaningless and irrelevant. Technical measures of level of oversold mean nothing as the selling just goes on and on and on. Sentiment measures indicating fear/panic have failed to mark any sort of bottom.

When valuation appears to mean absolutely nothing, it is close to impossible to step up to the plate and buy anything.

Mista B

Looks like a lot of cyclicals and financials on that list. While there has clearly been panic selling, and I'm sure many stocks are mispriced, I recall very well back in 2006 hearing what a great bargain housing stocks were at 5 multiples. They forgot to mention it was a multiple of record earnings that was about to go negative in a big way. Bill Miller thought they were a bargain. That I still don't get. The guy has decades more experience than I do, and it was plain as day to me.

I speak with many business owners on a daily basis--and they're scared !@#$less about their businesses. They are locked out of the credit markets. I fully expect earnings to drop big time. Of course, Wall Street, being myopically focused on quarterly results will then reverse course and award a low multiple to record low earnings. That's when the true bargains will be had. Imo, we've only just gotten to fair value IF earnings hold up.

We'll nevertheless hit a temporary bottom once the mass liquidations end. It's amazing to live through a time like this. First time for me an an advisor. Glad I had kept cash levels so high. There are definitely good companies getting tossed out. Big cap tech and pharma look mighty attractive. I would expect tech earnings to take a hit for a little while, but they have plenty of cash to get through. Pharma is selling to a completely different group, though. I don't see any dropoff in the need for pharmaceuticals for about thirty years.

I sure hope the powers that be can find a way to unlock the credit markets, else this is only going to get worse.

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