The markets are tanking...

SELL! SELL! SELL!

Not now silly, the market's tanked. Maybe some time in the next 20 years.

Some big downgrades today, GM & Citigroup among them and oil went past $140 in electronic trading.  Not the only catalysts out there, but big ones.

Definitely not a pretty day out there. 

Part Deux of the credit market implosion is starting.

It is  a great day to buy. I always dollar cost average money in at certain down points and percentage inflections. We have oil at an alltime high, credit risk at a high, credit availability is pretty decent, but banks are tight lending it out, and home prices are down, and the housing market is way way down. Home foreclosures were initially said to be because of rising interest rates on ARM's but we have had 16 months of rate reductions on the overnight rate which directly influences the prime lending rate therefor reducing the rates on ARM's, yet we have not seen the reduction in foreclosures leading one to believe that these were porr investment choices, by people, or speculation, or people jsut plain biting off more of a house than they could handle.

In all modern history regarding the markets, it is all doom and gloom at some point, but the markets and economies have a tendency to absorb, overcome, and proceed. Oil will not be this high forever, credit and debt will come under control, and the housing issue will be fixed only in time, as people and money will sort through the rubble and once that happens, it will go on its path.

There is not single fix fo rit all. If you believed that Oil was going to be easy forever, you were misled. We got a taste in the 70's and it seems not many people learned their lesson. Ethanol is a waste on too many levels. It has to be a combination of higher efficiency vehicles, domestic  oil production, nuclear energy, wind energy, and what else the market can put togethe ren totem to help us move along. We can't all drive priuses.

tcovert - 2008-06-27 2:36 PM

erin116 - 2008-06-27 6:26 AM

tlnewman30 - 2008-06-26 2:21 PM Luckily I am young enough that I should beable to survive this market crisis.  At my financial advisors advice, I have been investing money at these reduced rates, hoping that they recover.  The theory is that though I am losing money currently, I am buying more shares for the same dollar.  I just hope that he is right.  But like I said, I am young enough that I will survive this.  I fell bad for people that do not have as much time to recovery what they have lost.

That is absolutely great advise. For all us young ones, we need to buy as much as possible now and wait it out. It's like buying on sale - you get more for your money

I wouldn't jump in just yet, if that's your strategy (and there's nothing wrong with it)...the market is not at the bottom yet, IMO...hasn't quite given back all of the bubble of massive overvaluation that really started in mid-2006. It'll probably either keep tanking beyond that for a bit longer or start growing at the somewhat more sane rate it was at prior to that point.

I believe the analogy often used here refers to "catching a falling knife"...

Buying at this point is russian roulette.  You may or may not get killed however your ability to predict is quite limited.  It's likely that a bank will fail... who?  No one knows that the magic.  Another broker might go the way of Bear Sterns... who?  No one knows.  However this time the fed might stay out of it and let it blow up completely.  All this talk about no inflation was foolish- sure the core rate wasn't showing it however add in food and energy and clearly there was some inflation.  There are a lot of things occuring here and things will likely get wayyyyyyyyyyy worse before they get better.  There are no warranties when you buy at a going out of business sale.  The idea of catching a falling knife is a good one but currently it's like catching a falling chainsaw. 

What's going to happen with oil?  I for one don't believe that it will keep rising at it's current rate without a dramatic pullback due to change in demand.  If someone set the room you are sitting in on fire you'd run screaming.  However if they slowly turned up the heat you'd sit there a lot longer.  The end result might be the same but not the behavior.  Currently the room is on fire.  I don't see the average American consumer paying $4-5 a gallon for home heating oil behaving in a similar fashion to previous years.  Once those first bills hit what happens?  People freak.  Consumer confidence becomes non existent.  What happens to retailers around Christmas?  They get slaughtered due to people spending what was previously discretionary income on non discretionary items.  As retailers get killed people get laid off as people get laid off things get worse.  Eventually you reach bottom but I don't think we are even close to that at this point.  Sure this is quite a mess but does anyone think that the next president has some sort of magic wand to fix all of this?  I seriously doubt it.

Buying now might be ok but I'd be buying something broad like an index because it limits your exposure to the company who won't be in business later.  Just because the price is down certainly doesn't mean that it can't go lower.  The bottom is the bottom but it's impossible to predict where that might be.  Things could turn around but I don't see the evidence of such things in the near future.  Earnings season starts soon look out below.   

at least with a chainsaw, I can let it hit the ground, pick it up, turn it off, siphon the gas out and make some money...

I like your analogy about set fire to a room, the problem is that I think the average consumer feels completely trapped.  You can't afford to buy a more fuel efficient car because you don't want to take a bath on my existing car.  You can't afford to drive anywhere, so you go shopping once a week and no longer buy anything beyond the basic neccessities. 

Not only does everyone feel poorer with the housing downturn, there is a huge sense of loss of control on gas prices.  We're finally realizing how beholden our economy is to a single number - the cost of oil - and realizing how little we can actually do about it.

To maintain the room analogy, I think we feel like this is our room, we have no control of our legs and we're waiting on someone to find a way to come get us out of the room.  All the while, we're making s'mores...

Monday was the highest my stocks have been in a long time.  I sold.  Perhaps its time to come back in!