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Carld
10-10-2008, 06:00 PM
It is a puzzle to me why the value of a company is controled by the stock market. As I see it the stock market is gambling on whether a stock will go up or down by how many people want the stock, not the real value of the company.

After a company has sold stock to buy equipment and a building and they have their building, equipment and employees and selling a product they are at the mercy of a public buying their product. I can see the value of the stock going down if no one buys the product but the company still has value.

When the stock is in the stock market the value of the stock goes up or down in relation to the volume of buying or selling of the stock.

If the stock goes down and the company still has it's building and equipment and employees it still has it's appraised value and is still selling a product then why does the value of the stock have anything to do with the value of the company?

DR
10-10-2008, 06:14 PM
Yep, good observations.

I've been debating with our broker over whether to dump a good portion of the portfolio because of big losses. She counters with historic data indicating things will turn around at some point and surpass previous highs.

Just minutes ago I read the last ten days are approaching an all time record for percentage loss in the 112 year history of the DOW. So much for historical data!!!!

I can only imagine how this loss is affecting people who are counting on their market-invested savings for retirement.

goose
10-10-2008, 07:11 PM
I'm fascinated why a company like General Motors has a market capitalization of over 3 billion dollars, (seems like alot), and employs countless thousands of employees world wide, While a company like Google has an enormous mark cap like a hundred times greater than GM, but only employs about 10,000 people globally.


Gary

Is it all smoke and mirrors?

Paul_NJ
10-10-2008, 08:05 PM
Interesting Wall Street Journal article:

Buy.

Worldwide stock markets are ending the week in complete collapse. Yes, it's terrifying.

And that means great, top-quality shares are being thrown on the bonfire along with everything else.

Johnson & Johnson's collapsed about 25% in a few weeks. It's down to a price to earnings ratio of 11, yielding about 3.2%. The crash leaves British Petroleum yielding more than 8%. It's the same with Vodafone, the global cellular operator. Kraft's down to levels below than those Warren Buffett paid last winter. Yield: 4.1%. Novartis is down too. The yield's over 3%. Ditto Nestle. Japan's Nippon Telegraph & Telephone is going for a mere 10 times forecast earnings.

Even the solid, safe stuff is going cheap.

"Why would I buy a bank when I can buy BP with an 8% yield," a fund manager asked me this morning.

Indeed.

Those stretching a little more can look at Procter & Gamble, Microsoft, Exxon, IBM, Coca-Cola, PepsiCo, Merck, Pfizer, Wal-Mart, AT&T… the list goes on. Blue chips. Cash machines. Top quality companies that won't need to be dependent on their (bankrupt) bankers in the years ahead.

For anyone with spare cash, this is like shooting fish in a barrel.

Closed-end funds are simply being given away.

Japan has fallen about a fifth in two days. Credit crisis? Japan has a cheap stock market and huge piles of cash. It isn't helping the Nikkei.

Emerging markets: Their economies look like ours 50 years ago – young workers, productive factories, and a high savings rate. It's a sound recipe for growth. And it isn't helping their share prices either. They've collapsed about 40% just since the start of September. Their markets are cheap too – if you can hang on.

This isn't a bear market. It's a bucking bronco. It's trying to throw everybody off. And it's succeeding.

I can tell from my conversations that so many people have given up on the stock market altogether. And that includes a lot of people on Wall Street. They've been beaten into submission, too.

The American Heritage Dictionary defines capitulation as "the act of surrender or giving up." Famous last words, perhaps: But are we there yet?

chief
10-10-2008, 08:20 PM
It is the perceived value that is controlling the price. If you have money to invest in a auto company for example. Both make cars but who is selling more , who has more efficiency in operations etc.
Why buy GM when they must fork out $1635 for health care for each active and retired employee, when Toyota pays out now. GM is not the best deal for a stock holder.
The market and the economy will find it's own level and make corrections if left alone because indiividual investors watch their money in order to get the best value. The danger is in these government controls and artifical props which only ends up building a house of cards.

lazlo
10-10-2008, 08:47 PM
Buy.

Worldwide stock markets are ending the week in complete collapse. Yes, it's terrifying.

And that means great, top-quality shares are being thrown on the bonfire along with everything else.

For anyone with spare cash, this is like shooting fish in a barrel.

That's what Chief said two weeks ago, and the Dow has dropped another 2,000 points since then.
It's panic selling, and no one, including Wall Street, knows how much lower it's going to go.

According to most economists, the worse is yet to come: because of the world-wide credit log-jam, cities can't issue bonds for public works projects, small companies can't make payroll, people can't buy houses or cars (even if you have perfect credit), so there is going to be some seriously bad news in the next couple of weeks about unemployment, and that's going to cause the market to crash even more.

On the Bright Side, an economist on MarketPlace just pointed out that at the rate the Dow has fallen this week, it will be at 0 in 18 more trading days :D

Evan
10-10-2008, 09:25 PM
According to most economists, the worse is yet to come: because of the world-wide credit log-jam, cities can't issue bonds for public works projects, small companies can't make payroll, people can't buy houses or cars (even if you have perfect credit), so there is going to be some seriously bad news in the next couple of weeks about unemployment, and that's going to cause the market to crash even more.


Not here. I have a secured line of credit instead of a conventional mortgage and I can "borrow" from it any time according to the contract. Just to make sure I transfered 5k to another account from it yesterday and there were no problems. Better yet, the interest rate, which is at prime, is going down.

andy_b
10-10-2008, 11:05 PM
i'm no financial whiz, stock market guru, or economics major, so i really have no idea what's going on. i do have a question though, years ago i remember reading about stocks and it seemed that what investors wanted was a stock that paid a dividend that yielded more than they could earn in some generic interest-bearing investment like a savings account or bond. today it seems like all anyone cares about is how cheap they can purchase the stock for and how much they can sell it for at some time in the future. are my observations correct, or exactly why would someone buy a stock today (meaning recent history, not today specifically when the market is tanking)?

andy b.

bruto
10-10-2008, 11:31 PM
i'm no financial whiz, stock market guru, or economics major, so i really have no idea what's going on. i do have a question though, years ago i remember reading about stocks and it seemed that what investors wanted was a stock that paid a dividend that yielded more than they could earn in some generic interest-bearing investment like a savings account or bond. today it seems like all anyone cares about is how cheap they can purchase the stock for and how much they can sell it for at some time in the future. are my observations correct, or exactly why would someone buy a stock today (meaning recent history, not today specifically when the market is tanking)?

andy b.There certainly are different ways of viewing investment in stocks, and I think your observation points to one of the reasons the market is so volatile and so troubled now. Stocks whose value is seen as the possibility of future gain are very volatile, and people who speculate on them often lose their shirts. Much of the market even in stocks that have other value is driven by the same need for gain, and this is why some quality stocks become undervalued, if investors don't see enough capital growth. There are, however, still many investors who look at the dividend return and think on a longer time scale, and if dividends are reliable enough, you may be wise to disregard the fluctuations in price, as long as the stock retains its value, or rises at a reasonable rate, between the time you buy and the time you sell (or die).

J Tiers
10-10-2008, 11:31 PM
The problem is that MOST stock buyers have NO interest whatever in the company, what it does, how it does it, etc. Nothing past the probability that it will go up or down.

if it is likely to go down, sell short. If likely to go up, buy from a short seller.

The typical issue is illustrated by the fact that if a company reports BETTER earnings than expected, THE STOCK GOES DOWN in many cases........

Now, that is counter-intuitive, if you assume people are buying for value.

Nope, they figure that NEXT report will be that much WORSE, because the possible earnings are now "used up"...... So they downgrade it.

Stock is just a commodity to them.

Mcgyver
10-10-2008, 11:33 PM
It is a puzzle to me why the value of a company is controlled by the stock market.

There are lots of theoretical ways to value, but what better way than a liquid market?


As I see it the stock market is gambling on whether a stock will go up or down by how many people want the stock, not the real value of the company.

The value of a company is in essence its future earnings, discount for time value of money. what do you mean when you say 'the real value of the company?" The stock price is the aggregate expression of everyone's view on the future discounted earnings, that is the real value


After a company has sold stock to buy equipment and a building and they have their building, equipment and employees and selling a product they are at the mercy of a public buying their product. I can see the value of the stock going down if no one buys the product but the company still has value.

Yes it does still have value, but it declines, or depreciates as things are used up. This value is book value, or Assets - Liabilities or Equity. Its a sorry state of affairs when the market value (stock price) is less than the book value (what i think you are calling real value??). If the market doesn't think that the discounted future value of earnings is greater than the current book value, what they are saying is that prospects are so poor that shareholder value would be better served by liquidation


When the stock is in the stock market the value of the stock goes up or down in relation to the volume of buying or selling of the stock.

yes, the change in supply and demand is market passing judgment on the discounted future earnings - at any given price each investor (funds, etc not day trader bs) in the market has a view on whether or not the future earnings justify the price, so at a given price they go long or short.....and when the price moves their position changes. Viewed another, its not that market likes or doesn't a Co, its whether they like at the price or not.


If the stock goes down and the company still has it's building and equipment and employees it still has it's appraised value and is still selling a product then why does the value of the stock have anything to do with the value of the company?

i think you're confused on what value means. warning, accounting lesson coming up.... Lets make up a balance sheet.....simple business...own a $100 building with an $80 mortgage, book value of equity is $20.

Assets $100

Liabilities$80
Equity $20

The stock price is nothing to do (in simplistic terms) with the balance sheet, its the sustainable earnings power of the company. The company is making money, say there are 100 shares and earnings are $0.13 per share and the earnings multiple is 10x, the market cap would be $130 dollars. That $130 is no way connected to the balance sheet and doesn't recorded on the balance sheet. Incidentally, if the business is sold to, like as in an M&A deal, the difference between what the acquirer pays, say 130, and book, say 20 gets recorded as good will - $90 good will...otherwise you won't every see the market price of the stock show up on the balance sheet

Now, if the earnings drop to $.01, you might think the stock price would go to $13. However as price gets down around book, it finds support...unless investors think its going belly up and that liquidation won't realize the $20. Its uncommon for companies market cap to less than the book value (assets - liabilities)

Why does market value depend on the future discounted earnings? look at it this way....lets say all companies trade at a 10x earnings multiple. I say, look, invest $100 with me and I expect to make a $10 profit each year. You say to yourself, or out loud to me, I'd be crazy to do that, if you make $10 and multiples are 10x, if you execute your plan to perfection, my investment is only worth $100, why would invest in you, be exposed to risk, for zero return (best case)

BUT if I tell you I'll make $15 profit with that $100, the stock (at 10x) becomes worth $150 (see its value on discounted earnings). A $50 profit. That profit came from management's ability to create a higher value through earnings ($150) than the cost or book value ($100).

The way stocks are value literally is a discount cash flow; present valuing a projected free cash flow steam. The value of the DCF is tied to what those future earnings are the what discount rate is used; the later varying according to sustainability of cash flows or in other words risk.

Sorry if that went too far, the important thing is someone buying the stock is thinking how much money will this company make in the future and that has little to do with the balance sheet or how the company is capitalized

Gary’s point…..
I'm fascinated why a company like General Motors has a market capitalization of over 3 billion dollars, (seems like alot), and employs countless thousands of employees world wide, While a company like Google has an enormous mark cap like a hundred times greater than GM, but only employs about 10,000 people globally.
GM’s (2007) balance sheet (billions)
Assets: 149

Liabilities: 184
Equity: -37

GM has a negative -37b equity (book value). Last year they lost 68B.

That’s why the market cap is sooooo low, sure they have 149 billion in assets, but they owe 184b!! plus they’re hemorrhaging.

Now Goggle:

Assets : 25

Liabilities: 3
Equity: 22
Here, there is positive book value of 22B. ....but the current market cap of about 100b isn’t driven by this though, its driven by 4.2B in earnings last year and like 50% year over year growth!

Mcgyver
10-10-2008, 11:46 PM
For anyone with spare cash, this is like shooting fish in a barrel.


maybe, the other cliche that it could be is 'catching a falling knife.'

what's Christmas sales going to be like this year? I heard prediction yesterday for 09 to be the worst year for the global automotive business ever. All this crap cascades through the economy and could beat up earnings for quite a while across the board - just don't get caught thinking that the brain trust is all on one side of the market....there's an equilibrium between short and long or price moves to create one right, right? In other words what ever price you think is a great buying opportunity today, there's someone else thinking they should sell and its just not realistic to think its only stupid people on the side opposite yours :D

Rob Peterson
10-10-2008, 11:59 PM
Carld asked:

“If (...) the company still has it's building and equipment and employees (...) and is still selling a product then why does the value of the stock have anything to do with the value of the company? “


I'm no stock broker, but here are some thought that might help.

The value of any asset (a building, a company, a piece of equipment, a patent, etc.) is in it's utility. For you house, the utility is you get to live in it. In business, the only utility of an asset is it's ability to generate future profits for the owner(s). In an extreme example, if a company becomes unable to earn money at all then the company is worth exactly nothing. For an owner of a company, the value of an asset owned by that company is worth what that asset does for the company's ability to earn money.

But, companies can always sell their assets, so the minimum value of the company must be what the net assets are worth, right? Nope. Why? Well, here's an example.

Say you want to buy a building, but part of the deal was that once per year you had to gamble the whole thing against a 1 in 10,000 change that it would be taken away from you. Would you do it? Would you do it if the seller knocked 1% off the price? How about 10% off? What if there was a 50% chance that you would lose it? What would you be willing to pay for the building in that case? What if there was a 99% change you would lose it, what price would you be willing to pay at that point? Not much, I would imagine, even thought the building is "worth" a lot more.

The above is an example of risk. As soon as there is risk attached, the value of an asset is less than it looks. In the case of a company, there is alway the possiblity of the company failing. As a shareholder in a company, you are the last creditor. If the company fails, every other creditor will get their cut before you, and there could be nothing left.

So, shareholders are always taking the chance that the stock will be worth nothing and there will be times where that risk is high enough that the value of the stock is less than the value of the companies assets.

The reverse is also true. In addition to the risk of failure there is a probability that the company will make money. If something causes the company to look like it will make a lot of money then the utility of that asset will increase and so will demand for it, raising the price of the a share in the company. Or at least that is how it is supposed to work.

Rob

JRouche
10-11-2008, 12:00 AM
Not here. I have a secured line of credit instead of a conventional mortgage and I can "borrow" from it any time according to the contract. Just to make sure I transfered 5k to another account from it yesterday and there were no problems. Better yet, the interest rate, which is at prime, is going down.

I think you are looking at the credit issue differently.. The credit freeze isnt on you, or me, as a personal borrower with a good rating. Thats not the issue.

Its with banks wanting to borrow and their credit rating is in the bucket. So other banks wont lend to them.

Same as you having a good credit rating but your neighbor doesn't cause he had poor financial management. But on a larger scale with banks.

So if many banks have such a poor rating then it becomes a global issue. Banks dont operate on deposits. They work on money transactions. Futures.. They see a market for borrowers. So they take a loan for money. To disburse to their customers, at a higher rate, profit.

When they have borrowed to the hilt but cant make the payback with income they become a bad risk. Then they cant borrow cause no one will lend them money. They fail... The central banks wont lend..

That is the credit shortage they are talking about...

It isnt about your or my credit availability.. The banks are still PUSHING very inexpensive money at us, the small borrower. Heck yeah!! They need the income in the way of interest.. JR

JRouche
10-11-2008, 12:18 AM
Ok.. I read all the posts here about the stock market.. Im impressed!!! Some of you guys really know yer stuff. Im impressed cause Ive also seen you post some very good machining post.

Ask the guy on the street if he thought a home shop machinist would know anything about finances and they may say no..

Thats why I love this site. There are some very educated folks here. Diverse.. I guess it goes with the nature. We all are kinda in search of knowledge. Any type of knowledge.. So I learn more than just machining stuff here. I get a world of knowledge here.. Thanks guys..

Ok, my input... On the declining market...

I really feel bad for the retired folks. The ones who have relied on their 401k or mutual fund to carry them through retirement. SS is a nice lil piece of change, but for many it was the 401k that they were relying on.

They are being hurt big time right now.. And afraid of the future Im sure. They can actually see their retirement money slipping past, GONE!!..

So sorry for those folks... They rely on that as income to feed themselves.. They are afraid... JR

Evan
10-11-2008, 12:41 AM
There are other factors at work here than normal economics. Some of the companies on the exchanges have had their stock fall all the way to as low as ten times earnings instead of 30, 40 or 50 or more. That isn't a disaster except for those who directly or indirectly thought 40 times earnings was a reasonable value.

Also, what is driving stock prices right now is panic. Everyone from fund managers to the small investor are bailing out because they perceive their investment will vanish completely. This becomes a self fullfilling prophecy as they leave good quality companies without sufficent operating capital which then may cause them to fail.

The amount of actual cash in the economy hasn't changed. All that happens in a recession or depression is it stops moving. That's the problem the banks are having right now. They aren't willing to lend to each other until they see for sure who had made the really bad mistakes that will possibly kill the corporation and take those interbank loans down with them.

According to the financial sector news Canada is in the enviable position right now of having the "sturdiest" banking system in the world, even stronger than Sweden and Switzerland. I am not entirely sure why but I do know that the management of most Canadian banks is generally very conservative with preservation of capital as the top priority. Banks such as The Royal Bank of Canada have been very slow to invest in foreign markets, especially the US. They do have holdings there but are very careful about where they put their money.

Mcgyver
10-11-2008, 12:50 AM
There are other factors at work here than normal economics

its always normal economics. things can over react, but its still economics. whats causing the tremors is how leveraged everything was - that leverage creates a multiplier effect that can go in both directions. the idiocy of those sub prime underwriters, no not idiocy because they are smart and made tons....rather the criminal negligence of fiduciary duty was only the catalyst



I am not entirely sure why

because its an oligopoly. we have 6 banks walking hand in hand, the US has 8000 who compete (now why this mess came about is another, semi related story, but that's why our banks are so wealthy)

rbc lost billions on Enron et al just like all the others, they just have oligopoly going for them so than make it up by increasing granny's fees by a nickle

cybor462
10-11-2008, 01:18 AM
That is the credit shortage they are talking about...

It isnt about your or my credit availability.. The banks are still PUSHING very inexpensive money at us, the small borrower. Heck yeah!! They need the income in the way of interest.. JR

Yes but it effects even the little guy. If the banks do not have the funds to lend then even if you have super credit your not getting a loan. Again with houses it is all about value. With so many houses on the market and the sub prime crash starting the domino effect no investors will touch mortgage lending. I did that full time until the bottom fell out. I closed the loans. Now even if you have super credit good luck getting someone to lend to you. Your better off using something else than a house or real estate for collateral.
If the banks can't sell the paper they are in tuff shape. Most investors run from real estate secured products now.

I took my small shop full time because of this financial failure. I went from closing 25-30 loans a week as a sub contractor NSA or (Notary Signing Agent) to 25 loans all year so far in 2008.

I still get called once in a blue moon but it is always way upper middle class using companies or extravagant property as collateral. I have not seen a regular loan in months.

Just my 3.9 cents.:)

winchman
10-11-2008, 02:09 AM
The common taters on the business channel have been talking about the selling of stocks by various funds being driven by redemptions by people who just got their statements for September. Wow, just wait till they get their statements for October!!

There's something immoral about selling something you've borrowed with the hope that it's value will go down so you can buy it back, keep the difference, and return it in worse shape than when you got it. It's even worse when you return it, and it's worth nothing at all.

I never have figured out why anybody lends stock to short sellers. Would you loan your tools to somebody if you knew they were trying to make money by purposefully ruining them before you got them back?

Roger

Evan
10-11-2008, 03:57 AM
I never have figured out why anybody lends stock to short sellers.

Because they are making the opposite bet the short seller is. They hope the stock goes up and the short seller must replace X number of shares that are now worth more. One thing to realize is that a lot of this trading is happening on a minute by minute basis. The time frame for the entire trading sequence might only be 30 minutes. With the kind of volatility the markets have displayed in the last 10 years and especially recently there is a lot of money to be made (or lost) in the difference in value from one minute to the next. It's called "Day Trading". Most day traders try to close out their positions by the end of each day. Day trading isn't a hobby though, it's a full time job and you need very good information and a fast, reliable internet connection.

Depending on how deep your pockets are there is computer software available that will help you decide what and when to buy or sell. These aren't cheap programs. The better ones are licenced for 6 or even 7 figures. The programs collect information like Google collects websites and put it all together using very proprietary internal rules to produce time critical recommendations to buy and sell. They may use data that seems totally unrelated to the market from hundreds or even thousands of sources such as weather, sports scores, the phase of the moon (not kidding! It affects tides and therefor shipping) as well as all the usual information such as stock tickers etc.

Day trading is in large part responsible for the extreme volatility in the market now. A broker no longer has to physically visit the floor and scream his lungs out to be heard when he tries to outbid other traders. All he has to do is press the Enter Key at the moment he chooses. Computer programs can also trade automatically although that was somewhat restricted after the crash in 1987. Back then there was no delay or required human review of computer mediated trades and the programs went nuts in a positive feedback loop that nearly collapsed the entire trading system.

Since that day trades of certain types and over a certain value must be reviewed by a person before proceeding and there is a small but very important time delay on the order of 30 seconds (or so) that is imposed on many such trades.

ptjw7uk
10-11-2008, 05:13 AM
My view is that the whole sheebang could do with a modicum of ratioanal.
How they can allow companies to take over another and then pay for it by saddling the taken over company with several buckets full of debt is amazing.
In the Uk thats how several seemingly viable football clubs have been taken over and now just have debt!!

Its time the whole thing got a reality check.

My 2p worth.

peter

Timo
10-11-2008, 07:17 AM
I can only imagine how this loss is affecting people who are counting on their market-invested savings for retirement.

We are retried, and it’s scary as hell watching our ‘portfolio’ take a nose dive. There is no doubt in my mind that at some point in time the market will turn around. The big question is ‘when’. Depending on which ‘guru’ you listen too it could be as little as a year or so; others are predicting it will be more in the neighborhood of ten years. For a few of us older guys ten years might be to far away.

davidh
10-11-2008, 08:37 AM
how's this for an idea ?

"It has now occurred to me to advise anyone with a mortgage to immediately stop making your payments.
Put them in a savings account and wait to see what happens.
Why should millions of people be allowed to default and be bailed out and you not get in on the deal.
The worst that might happen is you owe a late fee. More likely your interest rate will be reduced along with all the others and you will make out like a bandit just like all the others.
This is what the government is telling you today."

J Tiers
10-11-2008, 09:05 AM
There is a substantial chance that the decline is "permanent".

That means people (for a while, at least) will not over-value companies, as alluded to previously.

Traditionally, owning stock WAS about owning the rights to dividends; since you were an "owner", you got part of the profits of the business. After all, that IS the point of owning a company, you make a profit, you take out some of it and leave the rest for working capital.

As with most other things these days, the original system has become "sophisticated" (according to the BAD definition of that word, lacking simplicity, affected by sophistry).

People now do not own stocks in order to reap dividends, unless they are "stodgy people willing to accept minimal return". Instead, they buy and trade stocks and hope to make a profit on the deal. Short sellers are an example, but certainly not the only one. Others buy stocks which have "upward velocity", betting that they will simply be worth more later and be sold for a profit.

Some of these folks "leverage" the deal by BORROWING the money to buy the stocks, hoping to net more profit than they spend in interest. Sometimes they lose, in which case they are out some of their borrowed money, and must repay. Clearly a person buying stock with borrowed money is probably NOT a long-term stockholder, they want a short term profit.

And, there you have it.... Short term profits. That is one of the main things dumping the market these days. people who see their SHORT TERM profits vanishing, and who have NO interest in holding long term for value or dividends.

Obviously, there is little to be made on a fast-falling market, because short selling nets fewer buyers. Why buy NOW, when in a day or so you can get a real bargain. Then next day, same deal..... tomorrow is time enough to buy. So buyers are fewer.

Short selling actually probably HELPS the market overall, since it provides buyers when the price of a stock is declining. But obviously if people "gang up" on a particular stock, it can be driven to penny status unless it is known to be strong. Short selling may not help much when the bottom drops out.

If you are holding stock bought with borrowed money, you will be able to sell only for a loss in a falling market, which means you probably will sell and cut losses. better to lose a little than to get cleaned out. Naturally that accelerates the fall.

Of course, there are always people who call their broker in times like this and scream "I can't take it, cash me out"..... I love those people, they ensure my profits.

Why does the stock rise or fall?

These days, on profit potential, not for the company necessarily, but the trader.

Traditionally, it was based on the strength of the company...... a strong company would continue in business, preserving your investment, and make a profit, providing increase through dividends.

When a company looked good, people wanted to buy it, and price went up. That in turn made the company look better, and they would get favorable terms for loans, etc.

Conversely, if the company was moribund, like Durban Roodepoort Deep LTD, the stock would fall, fewer people would want to buy, stock might fall further, and loans would be more expensive.

I think what is being seen is probably very similar to the oil price thing recently...... Speculators have been playing the market, buying and selling stocks NOT for value, but on short term profit potential. Very much like oil trading.

The result is that the Dow, which is a small slice of the market, has gone from 2700, to 14,000 while I have been watching it. Much like oil, which went up by a factor of four in a very short time.

The true value of the Dow, based on profitability and value, is probably a little BELOW what it is at now. Maybe 6500 or so, possibly as high as 8500, depending. Just as the true value of oil is probably between $80 and $105.

People don't want to hear that, but they might need to get used to it.

Dawai
10-11-2008, 11:00 AM
Don't worry guys.. it will all be solved by 2010. Just as soon as the North American Trade Union is established and working, preliminaries signed into effect 2005.

SOON, people will be crying to make all this happen to "get out of trouble" and allow the flow of gasoline and food to resume.. again.. Control the food, control the masses.. Remember reading that somewhere?

Need some research links? NOW, will England be part of OUR union, part of the Euro Union, or part of the Asian, or African union? What about Australia, where will they fit in?

Even the Dumbing down of our schools makes sense now.. none of them have made the grade since the 50s.. Hard to get educated "slaves" to function correctly.

New world Order, the way to prosperity.. for some. Personally I think I am on the wrong end of the stick. Add in the Identity chip and all is going to suit the conspiracy nut-jobs.. who might have been right all the time.

Hell, I'm gonna have a good breakfast, eat a good lunch, I'm old, sick and don't give a rats ass either way.

lazlo
10-11-2008, 11:52 AM
"Why should millions of people be allowed to default and be bailed out and you not get in on the deal. "

The Fed didn't bailout the mortgage borrowers, they bailed out Wall Street, who then paid themselves Billions in executive bonuses.

As just one example, the AIG executives went on a half million dollar spa trip last week, after they had been bailed out by the Fed. In other words, we (the taxpayers) paid half a million dollars for the AIG executives to go to a spa:

AIG defends treating execs to $440,000 spa retreat as 'business event'
http://www.newsday.com/business/local/ny-usaigloan1009,0,3202129.story

By the way, this year's tax refunds (the "economic stimulus package") was unfunded, the war in Iraq is unfunded, and the bailout are unfunded. So we've put all of these expenses on the national credit card.

This week, they took down the National Debt Clock in Time Square, because they ran out of digits -- it only went up to $9.9 Trillion Dollars (!)

Sign of the Times: National Debt Clock Runs Out of Digits

http://blogs.wsj.com/economics/2008/10/09/sign-of-the-times-2/?mod=googlenews_wsj

Mad Scientist
10-11-2008, 12:23 PM
New world Order, the way to prosperity.. for some. Personally I think I am on the wrong end of the stick. Add in the Identity chip and all is going to suit the conspiracy nut-jobs.. who might have been right all the time.
.

I think you are a lot closer to the truth then many would believe.
I’ve listened to people predicting this meltdown over a year ago.
Of course back then they were considered fear mongers or worse conspiratorialist.

In the news yesterday.

Oct. 10 (Bloomberg) -- Italian Prime Minister Silvio Berlusconi said political leaders are discussing the idea of closing the world's financial markets while they ``rewrite the rules of international finance.''
``The idea of suspending the markets for the time it takes to rewrite the rules is being discussed,'' Berlusconi said today after a Cabinet meeting in Naples, Italy.
A solution to the financial crisis ``can't just be for one country, or even just for Europe, but global.''

Could we looking at the start of the beginning for a new One World Order?

[Trust us! We are from your “new government” and we’re here to help you.]:mad:

JRouche
10-11-2008, 01:26 PM
how's this for an idea ? "

Ummm??? Not a very good one :)


"It has now occurred to me to advise anyone with a mortgage to immediately stop making your payments.
Put them in a savings account and wait to see what happens.
Why should millions of people be allowed to default and be bailed out and you not get in on the deal.

The folks who have defaulted on their loan are already kicked out of their house. They have no rights to the house. Its called an eviction. People weren't or aren't gonna be bailed out. They "may" get a better interest rate but no free money..




More likely your interest rate will be reduced along with all the others and you will make out like a bandit just like all the others.
This is what the government is telling you today."

So now we need a country full of bandits LOL Oh.. And I'll live with my 30 year fixed 5% loan,, thanks :) Helps to pay your bills. You have good credit and you get good loans. Something I learned when I was 16 and got my first credit card.

JoeFin
10-11-2008, 01:43 PM
How is that "Trickle Down Economic Theory" working out for you all?

Geez - 11 major Lending Institutions controlling 95% of America's lending capitol. You would have thought they would have had legislation like the "Sherman Anti-Trust Laws" to prevent monopolies like that.

All them Wall St. Banking Institutions saturated with worthless derivatives too. You would have thought we would have had regulations like the Stegal - Glassman Act" to prevent that as well

Best of all the American Tax payer has handed over more then $1Trillion Dollars to the "Wealthy Elite" running Wall St. and the Failed Banking Institutions so they can "pay-off" their "Foreign Creditors"

And we don’t even get a $23,000.00 Hot Tub session

David S Newman
10-11-2008, 04:25 PM
My wife and I for example have been pretty prudent and saved hard for our retirement and invested a considerable sum in high yield equities to keep us fairly comfortable in retirement (we are both now 70) We are not worried as to the value of our shares as we would never have sold them, they would have been sold on our deaths by our administrators to pay the benificiaries in our wills.
Well a lot of the shares are now paying no dividend (we have a lot in banks) which I thought foolproof. Was prudence sensible? our hard earned savings gone down the drain. Wished we'd have lived the high life and spent the lot as it came in, rather than losing our income and our benificiares nest egg. We're gutted.

JoeFin
10-11-2008, 04:59 PM
Yep - a friend of ours came back from the Philippines where him and his wife bought their 2nd "Working Farm"

He asked me if I would be interested in a good deal he looked at, but opted to buy another farm closer to his wife's family. It was 12 hectars (about 25 acers) in production, Mango trees, Guava Fruit trees, Bannana trees, with a small but well built house on it, for $35,000.

20-20 vision in hindsight sucks

I thought he was crazy drawing out of his 401K to make those purchases. I lost at least enough to buy that farm

chief
10-11-2008, 07:30 PM
As I have suggested before, everyone needs to vote, sometimes it's voting for the lesser of two evils. One must also inform their elected officals exactly
what you expect of them. Socialism and government programs isn't going to help anyone, you can't tax your way into prosperity. I also disagree with those that give up and say nothing can be don't about the problems we face, this is just laziness, hope is an exuse for doing nothing.
Accountabilty is the watch word. The link below is a perfect example of socialism, I challenge any socialist to provide me with a intelligent reason
why the taxpayer/working man should fund this type of BS.
BTW, THE 170,000 POUNDS IN THE ARTICLE IS ABOUT $340,000


http://www.dailymail.co.uk/news/article-1074429/RICHARD-LITTLEJOHN--170-000-spent-Afghan-single-mother--A-story-sums-howling-insanity-modern-Britain.html

Timo
10-11-2008, 07:45 PM
our hard earned savings gone down the drain. Wished we'd have lived the high life and spent the lot as it came in, rather than losing our income and our benificiares nest egg. We're gutted.
David, we are in about the same kind of boat you are, and what really piss's me off is that the majority of the people (crooks/politicians) who caused this problem will walk away smelling like a rose with their pockets full.

ptjw7uk
10-11-2008, 07:51 PM
Thanks for the heads up chief, I know I live in a stupid country run by morons but how they let this happen and at the same time allow pensioners who have worked all their lives try to live on apension of £124 (250$) a week is beyond my comprehension and woe betide yo uif you happen to have saved a little for an extra pension.
Socialism definately gone mad.

Peter

clutch
10-12-2008, 05:52 AM
Last week, I did my 401K, I'd lost 20+ percent from last year, tonight I'm at 51% percent lost from a year ago.

Most of everything is in S&P500 indexes. I rode things down and back up after 9/11. At 51, I'm riding this beast again and don't plan to be thrown off. Anyone pulling out now is just locking in their losses. Let the fools do that.

The upside is if you are putting money in now, like as a periodic payroll contribution to your 401K, that money is likely to have big gains when we recover.

One thing for those that are close to retiring should consider, is when you are getting close, you just have to give up on making great returns in favor of having a few years draw in secure investments. For those that remember, 9/11 changed a lot of retirement plans.

Clutch

nheng
10-12-2008, 06:41 AM
Somewhat related to the OP ...

http://www.foxnews.com/story/0,2933,436435,00.html

JoeFin
10-12-2008, 09:22 AM
The upside is if you are putting money in now, like as a periodic payroll contribution to your 401K, that money is likely to have big gains when we recover.

Clutch

The last time we had Global Depression it took 23 yrs and a World War to recover. At 51 myself – I’m wondering what would be the correct strategy.

Wish I had bought the Mango farm

lazlo
10-12-2008, 09:46 AM
Somewhat related to the OP ...

http://www.foxnews.com/story/0,2933,436435,00.html

Good article. The key message, not surprisingly, is that you haven't lost any money unless you sell now, where we're (hopefully?) near the bottom of the market.

I know that's not much help to retiree's who are living off their retirement fund, but if you take your money out now and put it under a mattress, you truly are losing money...

andy_b
10-12-2008, 10:04 AM
I think what is being seen is probably very similar to the oil price thing recently...... Speculators have been playing the market, buying and selling stocks NOT for value, but on short term profit potential. Very much like oil trading.

The result is that the Dow, which is a small slice of the market, has gone from 2700, to 14,000 while I have been watching it. Much like oil, which went up by a factor of four in a very short time.

The true value of the Dow, based on profitability and value, is probably a little BELOW what it is at now. Maybe 6500 or so, possibly as high as 8500, depending. Just as the true value of oil is probably between $80 and $105.

People don't want to hear that, but they might need to get used to it.

this is what i've been hearing from some friends as well. sort of like the real estate market, the houses in many areas were WAY over-priced, and eventually a drop had to occur.


Don't worry guys.. it will all be solved by 2010. Just as soon as the North American Trade Union is established and working, preliminaries signed into effect 2005.

SOON, people will be crying to make all this happen to "get out of trouble" and allow the flow of gasoline and food to resume.. again.. Control the food, control the masses.. Remember reading that somewhere?

Need some research links? NOW, will England be part of OUR union, part of the Euro Union, or part of the Asian, or African union? What about Australia, where will they fit in?


i have been waiting for the North American Union to be proposed, and i figured it would be a stepping stone to a World Union. with several national leaders coming out in recent days and actually PROPOSING a global solution to the crisis, the New World Order may be closer than we think, at least on paper.


I think you are a lot closer to the truth then many would believe.
I’ve listened to people predicting this meltdown over a year ago.
Of course back then they were considered fear mongers or worse conspiratorialist.

In the news yesterday.

Could we looking at the start of the beginning for a new One World Order?

[Trust us! We are from your “new government” and we’re here to help you.]:mad:

actually, Ron Paul has been predicting it for about ten years, but what would he know, he's just a fringe-candidate nutcase, right? :)


Ummm??? Not a very good one :)
The folks who have defaulted on their loan are already kicked out of their house. They have no rights to the house. Its called an eviction. People weren't or aren't gonna be bailed out. They "may" get a better interest rate but no free money..


the Sheriff in Chicago, as well as law enforcement in several other large urban areas, has already stated he will no longer evict people if a residence goes into foreclosure. granted, this was brought about due to renters not knowing that property owners weren't paying their mortgages, but the new rule is don't evict ANYONE, renter or not. how long until this plan becomes national? i'm betting sooner than later.

andy b.

Carld
10-12-2008, 11:34 AM
Thanks Mcgyver and others for good explanations of the stock market. I understand it much better now. I never made enough to invest in the market. I did buy a $10,000 insurance policy in 1974 that was a form of retirement deal. My investment was the $10,000 in payments untill maturity and it was then worth $50,000+ dollars. I rolled it into a monthly payment for 15 years and that and social socurity is all I have coming in other than what I can earn with my small machine shop. I know I will have to work untill I die or can no longer work. I now wish I had gotten a larger policy as it turned out to be a very good deal. Of course the company was investing the capital for gain and did well. It was a Fraternal organization insurance company so they were looking out for us rather than fat cat CEO's. Since all the earnings went back into the company as dividends to the policy holders it was a win win deal.

I always looked at the stock market as having a bank account or CD's. You buy stock and hold it and it earns and grows. The traders don't see it that way. It looks like they buy and sell as the stock goes up and down and how the future of it looks. They are in the deal on a day to day business and are not interested in the long term, only can I buy it cheap today and sell high tomorrow.

With that kind of thinking it's no wonder the market has problems. If there was a rule that a stock had to be held for at least 365 days before selling I think the market would stablize. At least there would be no day trading where you buy one day and sell the next.

Any time stuff is bought and sold for fast profit things get out of control. Buying stock without money, just a promise is what caused the crash of '29 as I remember. Isn't that what many traders are doing now and how did that start happening again? I thought they made laws to control that.

ptjw7uk
10-12-2008, 12:36 PM
Carld
The fact that in the old days if you were a private investor (in UK) you had to deposit the money to buy the stock and could only sell when you had the certificate but the fly by nights have it all screwed up in their favour now with instant buying and selling and seeming selling without proper title etc

I reckon that making ownership and full payment will stop the greedy to$$ers
from selling us all short as we are the ones having to pay while they no doubt are off to the sunshine!

peter

J Tiers
10-12-2008, 05:43 PM
How is that "Trickle Down Economic Theory" working out for you all?


It is working great, and giving gainful employment, and a very substantial raise, to a lot of people.

A very beneficial system, with huge returns for the common people.
.
.
.
.
.
.

.

So long as they are in china.

lazlo
10-12-2008, 06:47 PM
A very beneficial system, with huge returns for the common people.

So long as they are in china.

Touché to Jerry! :D