Is this bearish for you ????

"Don't buy stocks until you start seeing REVERSE SPLITS becomming the norm. Well if Disney gets down to $10 I am certain they will reverse split to increase the stock value and at the same time begin the task of BEGINNING TO MAKE THE DOW DIVISOR LARGER INSTEAD OF SMALLER. Remember, the DOW could go to infinity on stock splits alone simply by lowering the divisor that affected the point amount that ALL DOW COMPONENTS would add to the average - its not a valid mathematical formula in that the equation does not have a constant. Thats why long term charts are just nonesence - every time a stock would split or one was replaced, you can no longer compare the previous days value to the new value. Its a new formula. Name a DOW component that was on the DOW 50 years ago and is still there today.


Getting back to debt - with all the equity losses in the markets - a few trillion now since last spsring - thats a few trillion that can no longer be used to service debt much less retire it. Next, what will happen is companies like GE, Xerox, etc., will have to sell bonds to raise cash to service debt as will individuals - provided that they own bonds. That will drive interest rates up while further depressing the markets. This was a debt implosion that had to happen and was happening before the tragedy - and now exacerbated by it. Mortgage delequencies are now in percentage terms at the highest rate than since the GREAT DEPRESSION. Next will be credit cards going belly up, then corporate debt which is held by major banks and brokerage houses. DEFAULT, DEFLATION, AND DEPRESSION - the three D's, are here. Oh yes, the biggest component of GDP will fall next - medical care costs. If people in their 50's are losing money at a rapid rate in this market - believe me they are not going to pay $700-$800 per month for a health insurance plan - and neither are their employers. Doctors may have to deliver babies for a chicken down the road. Same with drug manufacturers - the prices will have to come down or they will be resonsible for practicing human euthanasia on a massive scale as people simply wont' have the money for their medicines."

Your lack of intelligence and common sense is appalling, I hope you aren't convincing anyone of this.


First off your premise starts with a BIG FAT MISTAKE! Equity losses in stock prices have nothing, zip, zero to do with debt service. That is money investors lost, not the company. Some companies are losing money indeed, but it is nowhere near as bad as it seems. As the economy has gone bad many are forced to take non-cash writedowns which basically have no real cash effect. They are for accounting and tax purposes only and in no way are real money losses. The biggest irony is that a loss can actually be a gain in cash, a gain from income being sheltered from tax which improves cash flow. To illustrate, just think of this. JDS Uniphase said they lost $51 billion last year. Do you really think that a company could sell such a limited product like they do and literally have that much money leave their bank accounts? There isn't a chance in hell. McDonalds could give hamburgers away to everyone and still not lose $51 billion in a year. Don't believe losses on Wall Street, they are really in no way a reflection of what really happens, both in accounting and in stock prices. In JDSU's case and in most all others this year losses only reflect a writedown of goodwill that was based on inflated stock prices that were used to acquire companies.


This is extremely important and obviously you are not an astute enough investor to realize that cash flow is what you should be valuing companies on. There are some companies out there with high burdens of debt, but very very few of them are in a position where they can't make their payments. To try to insinuate that because stock prices plunged shows your lack of any true sense of how the business world runs.


Further you talk of deflation and high interest rates, well in a deflationary environment interest rates go DOWN, way DOWN. Anyone with half a financial brain knows this, how about you? Deflation is a very clearly defined situation, one where prices are declining and because of it people don't spend money. After all why buy something today that will be cheaper tomorrow. So they save their money to buy things later, and savings drives interest rates DOWN due to the laws of supply and demand. After all when no one is buying anything the demand for loans goes down and the opposite side, the money looking to loan goes up, hence interest rates don't increase, they crash! If you don't believe me, look at what rates are in Japan, a country that has been in a debilitating deflationary spiral for years.


Lastly, and I could take more issue with your claims, is that Disney and others are not about to reverse split their stock. Reverse split is a very rarely used tactic, done by companies with stocks in the dollar range, not a tactic used to try to fool investors looking at charts. After all anyone could figure out what would happen because you seem to miss the fact that most charts clearly are drawn with splits taken into account. Disney may not be doing well for now, but a lot of it was driven by a forced sale of stock by the Bass brothers on a margin call. For Disney or any other Dow stock to fall in a range where they would even think of doing a reverse split would set off two things. First of all they would be booted from the Dow so it would make your argument moot. Secondly it isn't going to happen. Falling from say $12 to $2 is like falling from $120 to $20. Disney has not had that sort of loss and will not with their quality assets and cash flow. None of the Dow companies will do that. Losses like that are the domain of tech companies that were inflated to begin with due to speculation. Companies with true assets and established brands have intrinsic value that prevents them becoming penny stocks. After all if Disney was say $3/share, wouldn't someone just buy it up for its real estate in its studios and theme parks?


Your comments are scary in that so many Americans might just believe you in a time like this. The lack of economic education in this country is appaling. If enough people at the wrong time make such statements that are so patently false, damage could be done to our financial system. Would that make you happy?

just to shove your head up in your ass - will make these

problems go away ? Debt service has everything to do with the

american publics insolvency. If the public is insolvent en masse

credit card companies, mortgage companies will fall. The US can't

possibly bail out every single company in the US. No it does not

make me happy. It's an unfortunate situation but your reaction is

quite typical, beat your chest and wave the flag.

Wave the flag, are you kidding? All I did was point out your total inaccuracies. If you thought it was just about insolvency then write about insolvency. Yes there are potential problems there, but almost everything you wrote is completely wrong. Anyone who brings up higher interest rates and deflation in the same set of problems obviously has no clue what they are talking about. Further anyone that thinks that stock market losses equal debt defaults obviously hasn't worked in any public business to know or understand what causes debt defaults. For your scenario to play out you missed the most obvious problems that could cause a deflationary spiral, a massive reduction in value of the nation's housing stock or a heavy devaluation of the dollar. They don't work in tandem so you have to pick one. Both have very different results should they happen, but surely no one expects a clueless person like yourself to understand the economic implications of either.

mouth is. Monday buy stocks, in fact buy as much as you can, better borrow to do this ! I am not interested in your opinion,

I have mine and you have yours. next case.

People are entitled to their opinions, but when they are full of lies and misleading statements then we all have to point that out. Put out an opinion based on fact and you will be respected. Put out an opinion based on fallacy and lies and I will continue to point out the truth. Things are bad in the market, but many people may fail to see that the market is NOT the economy. If you want to avoid losing money in the market fine, go ahead and sell. I have not taken any of my money out of the market, I continue to use the country's airplanes, and I continue to have faith things will turn in time. Others may think less, but still to try to spread general panic about the economy by passing off lies as eventual truths is a horrendous mistake and I hope you realize that.

Well, whatever - sure, you are right of course. You are a great patriotic man ! Whatever you say billy boy.

..you are in the market - how well are you sleeping at nights ?

I sleep just fine. I am one that ALWAYS remembers that investing a long term proposition. This is the strongest economy by far, the whole world has faith in our economy beyond your imagination. Go to Afghanistan and you will find those that hate America still hold onto OUR CURRENCY! That says it all to me...

I agree with everything wildbill wrote and I'd add a few things:


"Getting back to debt - with all the equity losses in the markets - a few trillion now since last spsring - thats a few trillion that can no longer be used to service debt much less retire it."


I'm not sure if your talking about corporate debt or debt held by consummers.


" Next, what will happen is companies like GE, Xerox, etc., will have to sell bonds to raise cash to service debt as will individuals - provided that they own bonds."


Ok it seems like corporations because it's unclear what you mean about individuals selling bonds. Doubtful that this would happen. It's much more likely that and I think the past 20 years have born this out is that corporations will cut costs significantly instead of leveraging their operations. In fact there's a definite trend in increasing unemployment now. What this endangers is consummer spending. Which is 2/3 of GDP.


"That will drive interest rates up while further depressing the markets."


If corporations leveraged themselves a great deal I would believe this to be inflationary.


"This was a debt implosion that had to happen and was happening before the tragedy - and now exacerbated by it. Mortgage delequencies are now in percentage terms at the highest rate than since the GREAT DEPRESSION."


The 'D' word being thrown about that's a bullish sign.


"Next will be credit cards going belly up, then corporate debt which is held by major banks and brokerage houses. DEFAULT, DEFLATION, AND DEPRESSION - the three D's, are here. Oh yes, the biggest component of GDP will fall next - medical care costs."


There are 4 components to GDP consummer spending, government spending, investment spending, and net exports. The biggest component of GDP is consummer spending. As I've written before government spending is on the rise; our net exports are on the rise witness our recent decline in balance of trade deficits and decline in the dollar; investment spending has been in a depression for about a year now and really has nowhere to go but up especially given the current interest rate environment; and consummer spending is softening. Consummer spending is the big economic risk right now IMO and certainly this tragedy hasn't helped consummer confidence. However, there are a lot of incentives for the consummer right now so we'll see how things play out. The markets will be watching the consummer sector very closely.


"If people in their 50's are losing money at a rapid rate in this market - believe me they are not going to pay $700-$800 per month for a health insurance plan - and neither are their employers."


They'll probably be trimmed from the work force in a declining economy.


" Doctors may have to deliver babies for a chicken down the road. Same with drug manufacturers - the prices will have to come down or they will be resonsible for practicing human euthanasia on a massive scale as people simply wont' have the money for their medicines."


Lot's of doom and gloom. True or false, there is seldom euphoria near a market bottom?

To make it simple enough, without dispensing a lot more economic theory, there is no risk of a recession for one simple reason. At this time the US government is running a surplus. All the semantics about social security aside, its is a virtual impossibility for a serious financial meltdown when an economy of this size and sophistication is running a surplus. The surplus in this day and age is a great equalizer and the reason why most of the world will continue to send their money to this safe haven. Other governments can't get their houses in order so even if their fundamentals might be better on the whole, they suffer because you can't run deficits and compete effectively. European countries just don't seem to get this concept and Japan flat out ignores it. As long as our government continues to pay down its debt, or even just leaves it flat, there will be a bonus in lower interest rates to our economy and strong currency which despite its bad press at times is in almost all cases a positive for our economy. Right now we are in the mildest of recessions, just a bit of a balancing from overblown growth of recent years. Things will get quickly in balance because fundamentally speaking this economy is still incredibly solid. We have rarely had under 5% unemployment in our history, we have not had significant debt reduction before, our inflation is well below historical levels, interest rates are also at historical lows...its a dream situation. The only way things go bad is if these things turn around and as long as the government keeps running surpluses these factors should only tend to improve.