Dow 4000?

[Nepa]

Does anyone on here think that Dow 4000 is possible in the 12 month's?

I know I'm opening myself up to some flames here and I don't believe it is very possible but I do think there is a slight chance of the market crashing.

[PokerBabe(aka)]

No, I don't think it's possible that the DJIA will go to 4K in the next 12 months. While the economic situation is not perfect by any means, we should see some "recovery" in '03. /forums/images/icons/laugh.gif Of course, the "terrorism" wildcard could cause a retest of the July and Oct lows, but I suspect that even this variable is somewhat "discounted" in the current environment. Robert Prector wrote an article for Barron's a few weeks ago where he predicted a free-fall of the type you describe. I think that this is raw fear vs. raw logic. For the DJIA to plummet to 4k, the US would have to be in a depression, not a simple recession. /forums/images/icons/ooo.gif I think it's possible to test the 7K level in the first quarter of next year, but not much lower. LGPG and Buy Low, Babe /forums/images/icons/heart.gif

[Nepa]

Some of the things that concern me about this market.

1. The fed is running out of ammo
2. possible war
3. this is a gimme, oil prices
4. high P/E's and P/S's for many large cap stocks
5. high debt levels at many companies
6. no tech rebound in site
7. what happens if inflation rears it ugly head
8. worse yet Deflation


I could go on and on. I'v been layed off for a few months and may have read one or two too many stories from www.thestreet.com (http://www.thestreet.com) or the ticker from CNBC has scambled my brain.

[PokerBabe(aka)]

Remember, markets climb a wall of worry. The issues you describe are already priced into the current environment. This is why we have been in a bear market for several years now. Don't ever give up on the U.S. economy. Buy low and LGPG, Babe

[Ray Zee]

Babes right on this one for sure. the economy for some reason has stayed strong and recovered some. it looks good for the next year. prector is a total fear freak. the bigf worry could be a string of terrorist attacks that we cant defend against. but its too hard to make economic decisions bsaed on things like that. all you can do is factor in a % that may hurt you.
still i dont see much upside in earnings right now, so that should keep the market in a range. that means to me anyway it doesnt make alot of sense to be too far in the market now.

[brad]

the accounting scandals in the news.

if there are similiar things in the banking/ megabank industry its up for grabs.

derivatives, wild spec,

brazil may default on all loans, etc.

some feel real reason police state coming is to handle xcrewed people when things sour.

[Wildbill]

For this to happen I think we would have to have a serious liquidity crisis, nothing else would do it. While the Fed is out of ammo from interest rates, they can print money all they want and avoid liquidity shocks from gaining any traction. I think deflation is almost out of the picture now, precursors of slight inflation are coming onto the radar and the fact that the economy has been out of recession for almost a year now makes bad deflation an even more unlikely scenario. Unless its a major nuclear attack or a war in Iraq that just goes haywire, I don't think these outside scenarios will cripple the market this much. With such a diverse economy covering so much ground and with outposts in just about every part of the world, single issues and attacks just can't hit everything all that drastically. What causes valuation drops only is fear and I think in many ways as a nation we have slowly grown to be less fearful because so many things have happened in the last 15 months. Other countries have much worse day-to-day terrorist type activities to deal with and yet run good economies, this one surely could do the same as long as everyone doesn't freeze up and decide they aren't going to leave the house anymore. I'd bet against that scenario for sure.

[Mark Heide]

I think we will retest September lows again in the new year. So, I expect it to bottom out around 6800.

There are some unique circumstances with this bear market than previous ones. The most unique is I was expecting P/E ratios to go to around 10, because this has happened in previous bear markets. I'll speculate and say that there are several reasons why this has not happened. First, there are alot more investors in 401K funds than ever before. Secondly, forcasting has become more sophisticated. Thirdly, internet trading.

Isn't if funny that the technology stocks are the first ones to go up in price and overvalue themselves?

There are many things to think about. Even though the GDP was higher than expected, I believe that is due to government spending. I think 2003 will not be much different than 2002.

GL

Mark

[Fishy]

I'm all back in the market(:, the trend is up from now.

[brad]

look at jp morgan's stock

[Wildbill]

Those are good points there Mark about the PEs. Even though we trade more in general now, maybe due to lower commissions, we still trade one for another in most cases. Also I think the undercurrent suggests that the big will get bigger right now and the smaller won't go anywhere. Credit is tight for anything speculative and of course IPOs are on the sidelines for now. Add to that bigger companies have easier ways to inspire confidence due to long track records, things people seem to be overly focused on right now. The general market sentiment seems to be "things are cheap, yet I don't want any risk". Market could go down a little, but not much IMO. This time of year is almost always a good time to be in the market as history has shown and when everyone is thinking along those lines its likely that it becomes a self-fulfilling prophecy. I could see some downdraft in March or so. As for the GDP, if we have another close to 3% up year in light of what most of the rest of the world is seeing, then we should consider ourselves fortunate. With inflation likely to be well under 3% we will as a whole all be better off.

[Mark Heide]

Wildbill,

As far as the economy goes, I think next year may be slightly better but still sluggish. I pretty much agree with what you say. Lastly, I always see these analysts saying things are cheap, but I guess it depends on what you look at.

Good Luck

Mark

[adios]

Not an expert on JPM but there are persistent rumors about 3rd world loan problems (especially Brazil), lingering problems and liability risk with Enron, and derivative exposure. I believe they also had a real crummy qtr and management has some credibility problems. Citicorp has many of these same rumors associated with it and it's stock although down has recovered much more robustly.

[Wildbill]

Banks and investors don't have as much at stake in Brazil as people seem to think. Most of the debt that is at risk is locally owned. Brazil has long had a very internal looking culture and that has always carried over to their financial dealings as well. That is why even though its a huge economy, there are very few ways to invest in it outside of Brazil itself. They privatized their banks and many financial industries, yet it was mostly local investors that took charge and then consolidated amongst themselves. These are the main buyers of the government paper, not worldwide investors as was the case in Argentina. Further Argentina's banks are mostly under foreign control, with a majority of money from Spain. This outside presence made for the disaster as it created unstable/unsustainable flows of capital and made it even worse afterwards as the locals blamed the foreigners as easy scapegoats when it was the foreigners that were getting fleeced as bad as anyone. I think there are a lot of these types of distinctions that the financial media isn't really paying attention to. Brazil is a huge country with a huge internal market. Most companies that sell there see 200 million people to sell to and think they really don't need to sell anywhere else. By nature they are not international savvy at all. Its compounded by a sense of isolation being the only country around their parts that speaks their language and the fact that its a language with little worldwide use. In all it makes for Brazil's problems to really be their problems. If they default on their paper its something that will almost completely affect themselves. There should be very little contagion, but international investors are so gunshy that they fear a default even if they have little or no exposure to it. The country doesn't face problems with structure as much as it faces problems with confidence and if Lula can find a way to even start up confidence the country will do better than expected. In any event I think what happens there will have absolutely minimal effects on US investors. To have exposure to Brazil you really have to go out of your way to do it.

[brad]

yeah i just read the news im a total schmuck but you know after enron/a.a. you have to admit there is a possibility (not to mention s and l thing) that the whole financial sector is completely rotten to the core.

a related question is that assuming this is the case, how long until the real economy is affected? and how? it seems to me just on the way people are grounds everything would be put off as long as possible and then everything would just kind of blow up.

interesting regarding argentina by the way is joseph stiglitz who was head economist of imf/world bank who basically said the country was plundered. (by design)

on a back to reality level, it was obvious a couple years ago the euro would really take off, so it was possible for someone with some minor wealth to make some money.

[adios]

Oh I agree that JPM could be an accident waiting to happen and it could have a wide ranging impact on the financial system.

[adios]

Lula does seem to be off to a good start.

[Wildbill]

I highly doubt it. I still see a fairly profitable company going forward for a key reason. While bankers aren't exactly a loved group, there is extremely high barriers to competition there. After all who has a couple billion spare dollars laying around to go toe to toe? The banking side of the business is high margin and will always contribute. Right now business is slow, but there are always slow times in a cycle. The only thing that could happen is if some bleeding-heart jury gave some outrageous award related to Enron or WorldCom or whoever else you want to name. Otherwise these are mostly write-offs, not real cash losses. Write-offs are something that the market will already have priced in when the charge comes. JPM isn't going under, they just might have some bad years of no growth, but in the end the business is too good with too little outside competition not to be sustainable. Only issue now might be that a rival would try a takeover, but even then a shareholder will see some returns.