"almost everyone on this thread seems to believe that the great depression is just around the corner"
Well, that may be stretching it a bit, but we're certainly not alone thinking rougher times may yet be ahead. I really think the world is in much worse shape than most realize and that a US recession next year is certainly not out of the question.
__________________________________________________________________
Wednesday September 30, 9:49 pm Eastern Time
U.S. stocks face chilly 4th quarter, analysts say
By John Hanley
NEW YORK, Sept 30 (Reuters) - U.S. stocks may fall another 5 to 10 percent in a volatile fourth quarter amid what some analysts
are calling the world's worst financial crisis in decades.
That would snap the Dow Jones Industrial Average's three straight years of gains of more than 20 percent -- the most powerful run
in its 101-year history.
Investors are concerned about the worst third quarter for earnings in seven years, Asia's economic turmoil and the growing crises in Latin America and Russia, and the
exposure of U.S. banks and trading groups to those fragile markets.
''I'm half frightened and half bearish,'' Barton Biggs, the influential chief global strategist at Morgan Stanley Dean Witter, told CNBC cable television on Wednesday
afternoon.
''I think we are still in a bear market,'' he said. ''There is still a chance we'll have a rally that is going to last couple weeks and take us up another 5 to 10 percent before
we plunge into the abyss.''
He expects the Dow industrials to eventually drop back below 7000, unless there is a ''massive, coordinated interest rate cut around the world'' and a new type of
financial architecture is formed to address global economic problems.
On Wednesday, the Dow lost 237.90 points, or 2.9 percent, to close at 7842.62, ending its worst third quarter in eight years with a 12 percent decline.
The blue-chip index is down about 1 percent since the beginning of the year, and 16 percent below its record high of 9367.84, touched in July.
The gloomy outlook comes despite the superlatives used to describe the U.S. economy, now in its eighth year of continuous expansion. Unemployment of 4.5 percent is
near its lowest level in a generation, and the yield on long-term interest rates on Wednesday touched a record low below 5 percent.
Still, a cut in short-term interest rates this week by the Federal Reserve and hopes for a further loosening of monetary policy may not be enough to prop up the market
right away, these sources said.
''I think investor attention will be riveted on earnings reports of companies with exposure to Asia and other areas of international slowdown, and it will likely take its toll
on the market,'' said A.C. Moore, chief investment strategist at Dunvegan Associates, a California-based consulting group.
He expects stocks to fall another 10 percent from current levels.
For many investors, the story is earnings -- or the lack of -- as many multinationals have already announced big job cuts and scaled back capital spending to combat
slower demand for their products overseas.
The nation's 500 largest companies are expected to report earnings from continuing operations in the third quarter that are 2.1 percent below a year ago -- the worst
since 1991, according to First Call, which tracks such forecasts.
Fourth-quarter forecasts are still rosy at a positive 9.4 percent comparison with the year earlier, but that is likely to be trimmed back. Earnings for the year are expected
to be up 3.8 percent.
For 1999, first-quarter estimates are optimistic at a positive 14.4 percent and second quarter at 18.5 percent, according to First Call.
And, of course, October has a bad reputation.
With the biggest point loss in history in October 1997, the record 22.6 percent sell-off in 1987, and the 12.8 percent tumble in 1929, October is one of the worst months
of the year.
In point losses, the month is at the bottom of the rankings, according to Yale Hirsch, publisher of The Stock Trader's Almanac, a bible of facts and figures on stocks.
Hirsch expects the Dow to break below 7400 and eventually 7000, with the final straw coming from individual investors.
''Most troublesome is the attitude of people who have been so bullish buying on any dip,'' he said. ''Suddenly when they turn and things drop it almost becomes
self-fulfilling.''
Indeed, new data show that Main Street, accustomed to stocks only going up in recent years, may be cozying up with some of Wall Street's bears.
The Investment Company Institute, a trade group, said investors pulled out a net withdrawal of money from U.S. stock funds in August -- the first time in eight years.
An estimated $11.2 billion net outflow contrasted with the record inflow of $50.9 billion into money market mutual funds.
________________________________________________________________
"The Dow has not come down a lot, but almost all the telecom/networking stocks I follow (except CSCo, LU and perhaps NOKA) are either fairly valued or grossly undervalued."
Maybe that's trying to tell you something. Fairly valued based on what??? This years earnings and exuberant PE's? What if their earnings are cut in half and growth cut to zero next year in a global recession and PE's return to more normal PE's?
"What if this is a buying opportunity of massive proportion and
we are not seeing it?"
Or what if WinStar is at 10 and the Dow at 6000 by Thanksgiving. Possible, probably not probable, but I just don't see the risk/reward ratio being favorable at this point. |
