1. there was no predicting on my part. I merely said that I have a long term time frame, and under a long term time frame, there is currently only one sector (much like the railroads in the 1800's) that makes any sense post collapse - tech. The survivors will make out like bandits. If that is a prediction, so be it. As far as I can tell, I am using history as a guide, not a predictor. The odds are still very much 50-50 that it could go either way. Predictions would be me saying "the market is going to crash" which I don't say, or "ORCL is going to fly" which I haven't said either. I have merely said that it is the leader in a market that is still growing (despite a current setback). And LE didn't say sell, BTW...not even intimated.
2. You CLAIM we all have the same information, but choose to ignore or not act on it. That is perhaps the biggest lie that everyone perpetuates. I have a graduate degree in Economics, and the one thing I am 100% sure of is that information is not consistently spread across markets. In fact, it is inconsistent - which is why some people make money on the market and others don't. Should information be perfect, people could still make money based on those who misunderstood it and acted improperly. Should information and understanding be perfect, gains in the market wouldn't occur unless action taken was mistaken or misplaced.
So, the very basis of that claim is clearly wrong. I could point out examples right now of friends who have connections and made money as a result of information unavailable to the common person. Yet every time I've asked to just "get a piece" of that action I've been told that the information, if given to me, would be illegal.......ignoring the questionable status of their own position.
3. It's nice when somebody makes money and is correct with their "calls". A friend of mine recently pointed out how I called the market all the way up to 11,000 on the Dow and 5,000 on the NAZ. Thing is, I didn't do much about it in the beginning because I didn't have cash, so I lost a huge amount of potential upside. I still did very well, despite a late start and a few dodgy experiments with timing. The main point my friend made is that I made most of these calls 2-5 years before the market really made the move. I have a better long term vision than short. I know of nobody who actually made money consistently on the short term. Those who did, all lost remarkable sums as the market turned. And not just "house money", but actual initial capital. I consider THAT foolish. If you are someone who has honestly called the market correctly on short term time frames, congrats. You are a one in a million guy. I would say there is a group of people not more than 2,000 strong in the whole world who do that well. Half of them do it with information inaccessible to the average person, however.
4. The US economy. Just finished the Economist's review of the US crash and future. Still dodgy, absolutely. However, the comparison to Japan appears false. Here's why: the general market never bubbled in the US, as opposed to Japan...at least not to comparable levels. The Economist shows comparative stats. The US's bubble was large, but not large on a historical or comparative standard. Only the tech bubble was absurd.
US real estate has been moribund, in general. Aside from pockets of absurd growth (SF, San Jose, etc), the general US real estate market hasn't grown remarkably expensive. There is little room for downside here. Mortgages HAVE grown, but there hasn't been a growth in commensurate servicing. Should that occur, the first leg of your script may prove correct. However, lower interest rates will spur lower adjustments on payments...and refinancings.....so it's not likely to have an overly deleterious effect.
WHAT IS distressing is the savings rate. The question of how long the economy will be moribund is based more on how quickly the savings rate can go from a negative situation to a positive one. The first big step to fixing that is likely a tax cut. I agree with the current tax cut plan, but I would eliminate the bottom bracket entirely....that's just me. It's still a good plan and would save me enough each year to boost my savings by 2% points. That is substantial.
I don't go in for predicting much....but here's my call:
Interest rates fall by about 1 1/2% over the next year...possibly more. A retroactive tax cut is enacted.
Inventories are burned off, particularly in tech, as prices fall dramatically....leading to more falls in tech prices in the short term. Inventories stabilize by the fall.
About that point, I expect the bear market to end, perhaps with an August or October "panic"...the last one to clear out the laggards.
My odds on this occurring (remember, I don't like predictions, so I'm not going to get into the actual numbers)? 80%. I don't expect such devastation in the market as many do. Americans are remarkably resilient. Current layoff rates have already altered people's perceptions of their needs. Savings rates will begin to climb slowly soon, rapidly by mid summer.
After all is said and done, I would expect the next leg of a bull to reappear by January...this one with a longer term growth trend. |
