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Old 03-02-2009, 05:59 PM   #1
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Man...it is now looking very much like the 1930 drop to the great depression!

I really hate to say it, but it looks like we are blowing past a recession and straight into another great depression.
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Old 03-02-2009, 06:35 PM   #2
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Man...it is now looking very much like the 1930 drop to the great depression!

I really hate to say it, but it looks like we are blowing past a recession and straight into another great depression.
Well, yes, we're getting into something more extreme than anything seen post-WWII, however, realize the great depression lasted all through the 1930's and 1940's. Even WWII didn't pull us out of that depression. It was the early 1950's before the stock markets and employment recovered back to pre-depression levels.

This is, indeed, the first time that banks have teetered on the brink of failure since the great depression--but for different reasons.

I was a child during the 1970's. I remember things being very, very tough at that time for us and for other families we knew. When my husband and I married in 1982, the economy was doing pretty poorly, too. I remember things starting to pick up around 1984 even though 1982 was the "low" and the current economic expansion and stock market bull run started in '82.

The USA has been beyond full employment since something like 1999. Its just now in the last year down to reasonable employment numbers. We're nowhere close to the great depression numbers in terms of unemployment. What was it--25%? hugely different than what we have now--though that can change, yes.

Good time to cut back on expenses and go cruising Gee, that's what you're gonna do, Ken! smart fella that you are.
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Old 03-02-2009, 06:53 PM   #3
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Lori is an HR Director and says a wave like never before is building here in California...unemployment numbers are going to explode this quarter and next.
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Old 03-02-2009, 08:02 PM   #4
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Lori is an HR Director and says a wave like never before is building here in California...unemployment numbers are going to explode this quarter and next.
So, we'll get back to the numbers we had in the 1970's and early 1980's, I suppose and worse.

As I recall, California never saw the high unemployment that other parts of the country did in the 1970's and early 80's. But, California is really beginning to see dark days this go-round.
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Old 03-02-2009, 08:12 PM   #5
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So, we'll get back to the numbers we had in the 1970's and early 1980's, I suppose and worse.

As I recall, California never saw the high unemployment that other parts of the country did in the 1970's and early 80's. But, California is really beginning to see dark days this go-round.
I believe the 70s was an inflationary cycle with Carter in command...a completely different set of circumstances. I am sure we will eventually get to inflation, but not till a new world banking order is in place and the damages of astonomical bail-outs begins to be realized.

I'm not an economist...so I could be totally wrong about everything. My real concern is how to cover and protect the Kitty!
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Old 03-02-2009, 08:23 PM   #6
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Dow at 6785...if someone would have told me it would hit this 6 months ago, I would have told them that they were nuts!

Dow Jones Industrial Average(DJI: ^DJI)

Index Value: 6,785.52

Trade Time: 3:23PM ET

Change: 277.41 (3.93%)

Prev Close: 6,855.64

Open:

I remember reading predictions of DOW down 50+%, but I didn't think it would really happen.
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Old 03-02-2009, 08:27 PM   #7
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I'm no expert (apologies to Kirk) but:

Hold overheads down and hang on to a well paid job for as long as possible.
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Old 03-02-2009, 09:03 PM   #8
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Hold overheads down and hang on to a well paid job for as long as possible.

Yep...exactly what I've been think'n.

How low can we go?????

http://finance.yahoo.com/tech-ticker/artic...%5Egspc,%5Eixic

Based on Professor Shiller's latest numbers, we're at about a 12X P/E. (Prof. Shiller's last update was at 805 on the S&P 500, which produced a 14X P/E. Plugging in today's 700 on the same earnings number, we get about a 12X P/E). The 12X PE compares favorably to the long-term arithmetic average of 16X, but it's still way above the historical troughs of 5X-8X.

So where would the S&P bottom if we hit the previous trough PE lows? It depends how we get there.

If the stock market stops falling and earnings eventually begin to grow again, we would be close to the bottom: The market could simply move sideways for 5-10 years while earnings growth gradually reduced the PE to the 5X-8X range. This is what happened in the 1970s.

Alternatively, the market could just keep dropping, as it did in the early 1930s.

Using Professor Shiller's latest earnings data, here's where the numbers would fall out if the market just kept dropping and 10-year average earnings didn't grow from today's level:

P/E S&P 500 Level

10X 575

8X 460 (highest previous trough low)

7X 400 (average previous trough low)

6X 350

5X 300 (lowest previous trough low)

In short, if the S&P fell straight to the high-end of its previous trough range (8X PE, or 460), it would fall another 35% from today's level (700)

If the S&P fell straight to the low-end of its previous trough range (5X PE, or 300), it would fall another 55+% from today's level.
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Old 03-02-2009, 09:20 PM   #9
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Just spent the day talking with an Icelandic economist. PHd and all, but from Iceland and the University of Reykjavik which, considering Iceland's recent performance, may not be the best recommendation.

Nonetheless, the good professor believes we might well be in an economic down-swing of the same caliber as that of the Great Depression.

My take on this is that, as long as you have a well paid job a downturn with resultant deflation is to your advantage but when the little brown envelope comes with the paper saying that you are no longer requires to turn up for work then it is time to heave the anchor and sever the last connection with land. This maybe the opportunity and driving force many of us have been waiting for. As they say, "It is an ill wind that blows nobody any good."
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Old 03-02-2009, 09:50 PM   #10
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I'm not as much concerned about the bottom as I am about the affect of dumping trillions of borrowed dollars into the economy.
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Old 03-02-2009, 10:05 PM   #11
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When the economy is on a downturn, most countries around the world appear to lower interest rates. We are different here in SA. Our interest rates go UP - to slow down credit. If you own everything and don't owe, this is great for credit balances.

Our bank prime interest rate is somewhere around 14% at the moment. This has a hell of an effect on real estate, car, furniture, etc., sales but it does stop people buying things with the bank's money. It does slow down job creation but the banks are stable.

What does this mean to you and me? I don't know.
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Old 03-02-2009, 11:31 PM   #12
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I believe the 70s was an inflationary cycle with Carter in command...a completely different set of circumstances. I am sure we will eventually get to inflation, but not till a new world banking order is in place and the damages of astonomical bail-outs begins to be realized.

I'm not an economist...so I could be totally wrong about everything. My real concern is how to cover and protect the Kitty!
Carter was elected in '76. I think the problems started in ...the 70-72 timeframe...hummm...another crazy republican president who thought he was god.and didn't have to abide by the law..Yes, Nixon. The big oil crisis of the 70's started in 72 and seemed dismal by 74 it seems. They had a lot of similar things going on to what we have now--an unpopular and expensive war, high oil prices and an unstable middle east, problems in heavy industry as jobs were getting exported...

Carter inherited problems similar to the problems that it seems Obama inherited...Carter didn't manage to pull us out of them--it took Reagan and massive military build-up, a bit of protectionism, and some good luck in the international economic scene post '82 for things to sort themselves out.

We had Stagflation at the end of the Carter administration and it carried into the Reagan years--that's what happens when you keep interest rates up but everyone is losing their jobs...

you'all probably know this:

The S&P 500, the Dow, etc, all reflect the valuations of the companies in the particular index. While Price to earnings (looking backwards and historical returns and forward "a bit" but without worry...) looks ok in stable times, with high growth companies (like tech) or declining revenue situations (like GM and the oil companies right now...) the fundamental analysis that is performed to price a company and therefore their stock is a forward looking model of discounted cash flows. When you do that for a tech company that is "booming" you get those 100X price to earnings ratios because of the high growth potential of the company and you're price is all rosy forward looking but the earnings are historical. When you do take a look forward for DOW constituents or S&P constituents in a down-trending economy...you get something that looks like 3, 5, 6 x prior year earnings because the forward look is pretty dismal.

In terms of cruising, this economy is sucking the life right out of that kitty, for sure. Preservation of capital and hedging is about the best one can do. We can keep our fingers crossed for a bounce in the markets---but I'll have to hope that my money is in the market when the bounce starts
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Old 03-03-2009, 03:56 PM   #13
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In terms of cruising, this economy is sucking the life right out of that kitty, for sure. Preservation of capital and hedging is about the best one can do. We can keep our fingers crossed for a bounce in the markets---but I'll have to hope that my money is in the market when the bounce starts
Yes, you are correct...it probably was stagflation. I was too young to fully appreciate the economic times, but I do remember my parents complaining about 18-20% interest rates on business loans.

Like I said, economics and investing aren't my strong suit for sure. I wish I knew much much more. I do believe we can learn a lot from history and the one sure thing we can learn from history is that capitulation is not an investment strategy...falls are always followed by a rebound. Besides, if this did not hold true, no amount of money you pulled from the market would ever be enough.
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Old 03-10-2009, 10:00 PM   #14
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BOING...was that a bounce today or what? +379pts...Now we need another 10 just like it
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