ALL ABOUT THE CASH

[I Like Bottom Fishing]

Is This the Market Bottom?

By Ilan Moscovitz

March 6, 2009 | Comments (42)

http://www.fool.com/investing/value/2009/03/06/is-this-the-market-bottom.aspx?source=idesitit10000001

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The news isn't pretty: Earlier this week, the S&P 500 closed below 700 -- its lowest level since October 1996. Many former stalwarts are faring even worse: General Electric (NYSE: GE) hit an 18-year low yesterday. Bank of America (NYSE: BAC) hasn't traded at these levels in 25 years. Citigroup (NYSE: C) hit an all-time low of $0.97 at one point Thursday.

This hurts, there’s no doubt. And as we watch stocks fall to new lows day after day, it seems as if the market's slide will never end.

But while these sorts of apocalyptic figures make for exciting minute-by-minute updates on CNBC, they're not much use to you. They don't say anything about how stocks will behave in the future, which is what actually matters when you're deciding how to invest today. That's one reason investors always ask, "Is this the market bottom?"

Well, is it?
Opinions vary. Nouriel Roubini, one of the few economists who predicted this crisis, wrote a January piece masterfully titled "The Latest Bear Market Sucker's Rally Is Losing Its Steam as an Onslaught of Awful Macro and Earnings News Takes Its Toll," in which he predicted the S&P could fall as low as 500 -- more than 25% below where it stands right now.

But last fall, in a New York Times op-ed piece, superinvestor Warren Buffett compared today's overwhelming pessimism to 1932, 1942, and the 1980s -- all fantastic times to buy stocks. Lately he's been adding shares of Burlington Northern (NYSE: BNI) and Ingersoll-Rand (NYSE: IR). Although Buffett doesn't try to time market bottoms, his urge to "be fearful when others are greedy, and be greedy when others are fearful" has helped him to make eerily prescient moves in the past.

When he says it's time to buy, it pays to listen.

One approach to answering the question
My colleague Morgan Housel wrote an excellent piece examining historical market valuations. The one-sentence summary is as follows: When things get scary, investors frantically sell stocks down to incredibly low multiples.

Using historical data from Standard & Poor's, my research shows that the average of the lowest quarter-end price-to-earnings ratio (P/E) during all recessions since 1937 is 11.7. With the S&P trading at 11.9 times 2009 earnings, we've about hit that point.

However, looking at some of the lowest recession P/Es since 1937 also shows that if corporate earnings stay depressed, stocks could fall even further:

Recession


Lowest End-of-Quarter P/E

Today


11.9*

January 1980 - July 1980


6.7

November 1973 - March 1975


7.0

November 1948 - October 1949


5.9

Sources: National Bureau of Economic Research, Standard & Poor's, and Birinyi Associates. *Based on 2009 earnings estimates.

Applying these multiples to the S&P today means that the bottom could be anywhere between here and another 50% decline.

But what if the economy gets really bad?

Another Great Depression?
With comparisons between the Great Depression and the Great Wipeout of 2008 growing ever louder, a simple worst-case approach is to look at how Depression investors fared.

According to the National Bureau of Economic Research, we're 14 months into this recession, and thus far, the S&P 500 index has lost 52%. Fourteen months into the Great Depression (January 1931), investors were down only 46%.

But while the stock market was hit harder in 2008, economic conditions were far uglier in 1930. Back then GDP had fallen 8.6%, unemployment reached 8.9%, and deflation was running 6%. Our 6.2% GDP decline, 8.1% unemployment rate, and likely deflation almost appear mild compared to 1930.

So relative to 1931, if stocks today have been hit harder on less-dire economic news, does that mean we've already seen the bottom?

Not necessarily.

Even though stocks had already fallen dramatically since the October 1929 market crash, investors who bought in January 1931 were down another 71% by May 1932. This goes to show how difficult it is to time market bottoms, and it demonstrates that even though stocks have fallen considerably, they could still fall even more.

That's actually not so bad …
The good news is that it doesn't much matter whether you accurately time the bottom.

See, conventional wisdom holds that the Depression was a bad time to be an investor. Excitable market commentators like to cite the statistic that it took until 1954 -- 25 years! -- for the market to return to its 1929 levels.

That figure is true, but misleading. It assumes that investors put all of their money into stocks just before the market crash, stopped purchasing stocks thereafter, and never collected dividends.

Remember, we're now 14 months into this recession -- not at its starting point. So for the sake of symmetry, let's ask how long it actually took new money invested 14 months into the Depression (January 1931) to break even. According to number-crunching I've done using rare Ibbotson Associates data, the answer is less than five years. And an investor who continued to purchase stocks on a monthly basis would have broken even in little more than two years.

Take a look at how investors who bought stocks in 1931 fared after completely missing the bottom during the worst economic period of the 20th century:

http://www.fool.com/investing/value/2009/03/06/is-this-the-market-bottom.aspx?source=idesitit10000001

Returns


T-Bill Investment


Stock Investment

1-Year


2%


(43%)

3-Year


4%


(23%)

5-Year


5%


12%

Through Depression (June 1938)


6%


10%

Through October 1954


18%


678%

Sources: Ibbotson Associates, National Bureau of Economic Research, and author's calculations. According to NBER, the second 1930s recession ended in June 1938. Assumes reinvested dividends.

The Foolish bottom line
So, then, how can we use this data? There are three applications for investing today:

1. It's very difficult to time the market bottom. Just because stocks have fallen and valuations are low, does not mean they can't fall further. So if you're going to need the money in the next five years, there are safer places for it than stocks.

2. Market timing isn't necessary to achieve great returns. The Depression was a terrible time to be a speculator. But long-term investors who continued buying stocks did just fine.

3. Stick to a proven stock-buying strategy. As I mentioned before, Warren Buffett built his more than $50 billion fortune in large part by purchasing stable businesses in strong competitive positions -- at discount prices. That's what led him to American Express (NYSE: AXP) in the 1960s, Washington Post in the early 1970s, and Coca-Cola (NYSE: KO) soon after the Black Monday 1987 crash. He didn't try to time markets; he just bought stocks when they were cheap.

And he says they're cheap again today.

If Buffett's investing approach makes sense to you, now's a great time to begin bargain-hunting. Like Buffett, our Inside Value team is amazed by the bargains we're finding today. If you'd like some help getting started, click here to try the service free for 30 days.

Ilan Moscovitz is greedy with chocolate cake and fearful of heights. He doesn't own shares of any companies mentioned in this article. The Motley Fool owns shares of American Express. Coca-Cola and American Express are Inside Value recommendations. The Fool's disclosure policy is overly aphoristic.

Read/Post Comments (42) | Recommend This Article (119)

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Comments from our Foolish Readers

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Report this Comment On March 06, 2009, at 5:18 PM, FinancialFellow wrote:

I don't think we're quite at the bottom but I think it's safe to say that we've fallen most of the way already. I'd be surprised if we don't bottom sometime in 2009, though. In times like this it pays (literally) to look on the bright side. Years from now once the market fully recovers we may look back, marvel how cheap stocks were, and kick ourselves for not buying more: http://financialfellow.com/2009/03/02/tradeking-offering-up-...
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Report this Comment On March 06, 2009, at 5:47 PM, titanicdwn wrote:

I only agree that it may bob up and down a little. However, it will go much further down from where it is now. Obviously only one of us is right. Now, everyone place your bets.
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Report this Comment On March 06, 2009, at 5:59 PM, kpmom wrote:

I'm guessing when bac and c were in the 20's and teens last year, many thought they were "cheap", and we were at the "bottom". Of course things can go lower. Use whatever the market gives you, rather than trying to "time". Even Mr. Buffett can be wrong, as he proved by buying shares of conoco-phillips at its' peak last summer.
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Report this Comment On March 06, 2009, at 6:19 PM, watchemfall wrote:

At this point, if it is not the bottom, it is near enough but the trouble now is exactly HOW LONG the markets will STAY at the bottom, that's my worry.
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Report this Comment On March 06, 2009, at 6:26 PM, TMFBreakerRob wrote:

You wrote:

"But while the stock market was hit harder in 2008, economic conditions were far uglier in 1930. Back then GDP had fallen 8.6%, unemployment reached 8.9%, and deflation was running 6%. Our 6.2% GDP decline, 8.1% unemployment rate, and likely deflation almost appear mild compared to 1930." I had to laugh. The drops in GDP and the unemployment numbers are not substantially different and those current numbers are highly likely to be revised to be worse. Only the deflation number is different and I question the importance of that, especially given the collapse in housing and other RE prices. And....in a parallel to the GD, we are still gathering downward momentum on a global scale. I think you're taking too much encouragement from this dive off the economic cliff...concluding its "not so bad" even though we clearly haven't hit bottom in terms of the economy. That being said, I won't argue your point that this could be a good time to buy....but I won't necessarily join in and say "Come on in! The water's fine!". I've been buying some lately and getting pounded for the pleasure. Waiting some more won't hurt methinks....
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Report this Comment On March 06, 2009, at 6:26 PM, stan8331 wrote:

This article makes an excellent point. If someone had stood up and said, in 1931, that the next few years would be the best time to invest in stocks in the history of the country - and would remain so 80-odd years later! - he would have probably been lynched.

Stock markets are incredibly difficult to predict. Companies are not nearly so difficult. If a company is selling at a discount - low P/E ratio by historical standards, good cash flow, good management, low debt and significant advantages within its market, it's likely to eventually make you a lot of money. It doesn't really matter whether the explosive growth happens this year or five or ten years from now. If it takes longer, you just have a chance to buy more cheap shares in the meantime.

As long as you diversify amongst a number of good companies to cushion against any company-specific unforeseen negative events, have an extended time-horizon and avoid panic selling even when things look bleak, you'll do well. Or the earth gets hit by one of those asteroids and we go back to the stone age.

But if civilization does come to an end, one can't actually EAT cash anyway...
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Report this Comment On March 06, 2009, at 6:34 PM, pcm62 wrote:

Why would you guys put out a buy recomendation on Microsoft and now have an article that says the company and Gates are going down. Which is it, do you recommend to hold it or get out?
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Report this Comment On March 06, 2009, at 6:34 PM, CIGA wrote:

I think most people really haven't grasped the enormity of the current situation. Things will never be the same again and the only honest thing to admit is no one knows how this is going to turn out.

One of the stupidest things I've heard about the bottom was from the CNN guy Ali Velshi -- he said that we are closer to the bottom now than when the DOW was at 9,000. Thanks.

Anyway -- I think we should all watch CNBC for financial advice. Check out this clip (note -- it's 'R' rated so probably not good for work or with kids around)

http://dealbreaker.com/2009/03/cc-box-ahover-cc-homebackgrou...

or if you live in Canada this one:

http://watch.thecomedynetwork.ca/#clip145169
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Report this Comment On March 06, 2009, at 6:53 PM, labman106 wrote:

It seems that everyone with a post graduated degree

is trying to make a name for themselves by making

predictions of economic collapse. If someone made

an S&P prediction of 500 twelve months ago ,what would

we conclude? Insanity! No one would have had the data

12 months ago to make such a prediction.

It would be more beneficial if 'educated talking heads'

spent more time on predicting which companies are

going to lead the way out of this deep recession. That

could start a stampede on the floor of the stock exchange to be first to buy shares which just perhaps might be the event that ends this recession. Eventually far too many talking heads make one too many predictions that ends up destroying their credibility. I select IBM as a catalyst.
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Report this Comment On March 06, 2009, at 6:58 PM, dibble905 wrote:

Perhaps an interesting comparison would be what the economists were forecasting back at the beginning of the great depression. How long were they expecting the contraction to continue? When was growth suppose to return? What was the expected peak unemployment rate? How far off were they? How is that in comparison to today's forecasts and how far off they are between actual results?
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Report this Comment On March 06, 2009, at 7:04 PM, justputt2 wrote:

Both of the above comments are equally good guesses. Until the massive quantities of CDS and BMS are brought in HONEST clarity, there will not be a bottom,,, simply because there can be NO TRUST in the market. Even though the 'black hole' is mainly in the financial market, it spreads it's toxic spirit into every aspect of the world's markets. We could use a young Prosecuting Attorney Morganthau, to start cleaning out the fraud, and cleanse the system.
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Report this Comment On March 06, 2009, at 7:10 PM, OklaBoston wrote:

One needs to remember that financially sound stocks consistently bottom out before financially unsound stocks. Mr. Buffett may not try to time markets, but good markets or bad he pays little or no attention to financially unsound stocks, which I think is a bigger part of the reason for his success than even he himself realizes. The same could be said for his refusal to get involved in the IPO manias that too often characterize market tops. When was the last time he bought ANYTHING that had been public less than a year? If you can correctly answer that question you're one up on me.
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Report this Comment On March 06, 2009, at 8:32 PM, Darwood11 wrote:

So, using history and your table as my guide, I could get >600% return, but I would have to wait >20 years to get there. That's long term investing!
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Report this Comment On March 06, 2009, at 8:52 PM, GaryCCB wrote:

The fact that we are in such turbulent times tells me to keep my powder dry for a while longer. My strategy is a very well diversified portfolio across all spectrums (global geographic, mutiple broad sectors, large to micro caps, industrial to comsumer/service, etc.) and place, perhaps, 25% of my investable cash after a 10 to 20% broad growth.

My stops served me well last Fall and I exited rather quickly. (Deep sigh... (;o)

But I will surely miss the full impact of a long-term growth trend. But I will also miss some very choppy corrections that are sure to come over the next 6 - 12 months. I doubt I will be fully invested for years...

Buffett sustained unacceptable injury to his portfolio, IMO. He is back where he was 10 years ago. Even great companies are dangerous right now...
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Report this Comment On March 06, 2009, at 9:01 PM, scottgeiger wrote:

It seems everyone keeps asking, like kids on a long road trip, "are we there yet!?" And this has been a particularly difficult trip. The thing about a bottom is that you only know where the bottom is (or was) when you start climbing back up the other side. So if you're trying to time the bottom you'll just drive yourself insane. If you keep a consistent and steady buying policy you will "buy into" the bottom or very close to it. The other big key is diversification. That doesn't mean just buying stocks of different companies, you must diversify industries and sectors. Of course this does assume you have a long term investment horizon (i.e > 7 - 10 years).

Now on the other hand, if you don't have faith in the markets, then you might want to think about stocking up on guns, ammo and canned foods (don't forget the manual can opener). Or maybe stan8331 is right and one of those asteroids will hit the Earth and this will all be pointless anyway.
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Report this Comment On March 06, 2009, at 9:08 PM, xetn wrote:

You roll those statistics off your tongue like they are some kind of law of stocks. What ever happened to the phrase "past performance does not guarantee future performance"? Just because something happened in 1930's does not mean that it is applicable to today environment. I don't trust the American economy at this point, there is too much government intervention, too much spending for non-productive (an oxymoron, because nothing the government does is productive) processes, and too much money being spent trying to breath life into dead enterprises. Socialism does not breed a good stock market, because it bleeds money out of productive enterprise, the places that produce real goods and services. And that is where the real value of stocks are derived. Just my opinion.
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Report this Comment On March 06, 2009, at 9:16 PM, orofnap wrote:

Nouriel Roubini should not be hailed as a genius because he predicted the present problem. i bought a house ten years ago. two years ago i sold it at a price that i could not afford. its tangible worth wasn't any different. it still had two bathrooms, three bedrooms and a yard, but it sold for triple the amount of what it was bought for. my wages did not triple. the math is not difficult. Nouriel Roubini made deductions my six year old nephew can make. take an effing bow. in 1929 a third rate power like north korea could actually scare someone. in 2009 third rate powers rattle their sabers and the u.s. anchors the sixth fleet off their shores. the world is totally different.
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Report this Comment On March 06, 2009, at 9:45 PM, ReillyDiefenbach wrote:

"Socialism does not breed a good stock market."

Good thing we have that socialist highway system so you can get to work.
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Report this Comment On March 06, 2009, at 10:05 PM, GaryCCB wrote:

Say what? Socialism built our highways? Eisenhower was a socialist? I thought capitalism built this country. I thought all socialists societies have failed over the long term. Gee, I guess my study of American history was flawed...
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Report this Comment On March 07, 2009, at 1:25 AM, dividendgrowth wrote:

Actually, there was no P/E in 1932.

American businesses as a whole lost money that year.

That was the best time to buy stocks, ever.
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Report this Comment On March 07, 2009, at 8:02 AM, otto32848 wrote:

The socialist highway system comment refers to the fact that though the work is performed by private contractors the projects themselves are government funded. It's a logical but somewhat flawed argument in that the profit motive remains in play for those contractors. They'll cut every corner they can which is why we have government inspectors. What you won't see is a bunch of guys standing around leaning on their shovels because, for the contractor, time really is money. Contrast that with a state or municipal detail doing patch work or street cleaning. There's a world of difference.
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Report this Comment On March 07, 2009, at 9:34 AM, thewinkshow wrote:

JJB Sports shares are very low, and expected tot fly in the next few weeks
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Report this Comment On March 07, 2009, at 9:49 AM, ReillyDiefenbach wrote:

"Contrast that with a state or municipal detail doing patch work or street cleaning. There's a world of difference"

In my state and municipality, the men and women who maintain the roads work hard and provide excellent service, all at no additional markup.

Perhaps one of you armchair gurus would care to tell one of them personally how lazy and inefficient they are?
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Report this Comment On March 07, 2009, at 10:22 AM, redryder420 wrote:

The bailouts have Got to stop..AIG on its forth??? Time to retire..sorry AIG you had a good run. I would hope banks NEVER become nationilized...then I'd like to see how socialist the US has become..I think Obama is pouring money into failing banks because HE knows the govt can control them---does notice the more he talks the lower the market goes?????????????
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Report this Comment On March 07, 2009, at 10:25 AM, maiday2000 wrote:

The difference between 1980 and 2009 - Ronald Reagan versus Barack Obama. I think I will stay on the sidelines for a bit longer...
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Report this Comment On March 07, 2009, at 10:44 AM, dfrndez wrote:

The S&P had the P/E at 25 by the end of February, I don't know how it increased from nearly 17 to 25 with the slashing prices since the end of January. Most of the quarter 4 earning results were already accounted for in the January 2009 end of month P/E I would assume. An 11.7 P/E seems unreasonably low regardless though.

If you believe that the market is here or close enough (I personally do) it would be advantageous to shore up on high beta growth stocks, and traditionally the companies emerging strong after a recession are those that were most severely impacted during the previous recession - tech stocks. The Nasdaq has been fairly resilient and is only beginning to set new lows from its previous low.
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Report this Comment On March 07, 2009, at 10:45 AM, javaharv1 wrote:

Making predictions is a fools game. There are hundreds of predictors and when one of them is right - only in hindsight - the press quotes him or her and they are now a genius and we will now listen to them.

If you have been around awhile you know that no one knows anything for sure except for one thing and that is no one knows anything for sure.
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Report this Comment On March 07, 2009, at 11:03 AM, javaharv1 wrote:

If you study the market you will observe that the market has only gone down no more than three years twice (so far). Oct 1929 -Aug '32 (32 mos approx) and Mar 2000- Jan 2003.(33 mons approx) That is before it started to recover. This recession so far is the worst since '29. What is going to be different this time around? How often have we heard, "things are different now"? This time the consumer will not be back as before, for at least a good long time. That is not hard to predict considering the debt load of the consumer versus the need to save more. But do recognize that we Americans love to shop.

As for government spending in lieu of consumer spending, one can be partisan on that issue but there are a few fact that some like to ignore: Expenses versus capital investments. That is infrastructure, education, and health care can increase productivity, i.e. capital investment. I know some people don't like to recognize that military spending outside of wages tend to be a costly expense - non productive - no economic benefit.(please do not argue that weapons manufacturing creates job and therefore is an economic benefit - if you believe that go back to your econ 101 studies.) But of course we need to defend ourselves against real enemies, but that does not take all the money that is spent in the military budget.

So, the government is going to spend us out of this mess and most of us are hopeful that it will succeed. If not it may be the end of this once great nation.
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Report this Comment On March 07, 2009, at 11:04 AM, sails2 wrote:

The real question is "Is anything different now from the situation which existed in the past which would lead to a whole new paradigm?" I suggest there are some things to consider:

We now have unregulated derivative trading.

We now have ultra-short ETF's which allow too many speculators to gang up on and short stocks (financials, GE whatever).

The banking and finance system is way too complex and the incentives in it are tilted to maximize gain for the players rather than anyone who builds, sells, or uses something.

Financial institutions do not hold any responsibility for the esoteric products they create. What would happen if banks who made home loans had to keep mayby 5% of the loan on their books? Would lending standards change? Would the quality of loans change?

The communication of either good or bad is way to fast and maybe not well enough understood with CNBC becoming a sort of financial Rush Limbaugh.

The next question is "Should or Can anything be done about any of this or should the majority of us just lie back and take it?"
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Report this Comment On March 07, 2009, at 1:11 PM, investusgregory wrote:

Warren Buffet has been telling people to buy since the Dow was in the mid 9000's. As you know he has lost 10 billion dollars on his portfolio in past 12 months so I wonder whether it is still appropriate to cite the "oracle" albeit with your cautious disclaimer..

We all know that the destruction of value in the markets has been enormous but in the long term this is good as the price liquidity of shares increases proportionately to the rise or fall of stocks. What this means is that the more stocks are "ramped up" by traders and company marketing the lesser the price liquidity is. The more stocks fall the greater the price liquidity and therefore true value of stock is revealed.

I believe that the Dow at 4000 would enable complete liquidity at price for stocks. Investors , on the other hand, are likely to provide major support at around 5800 keeping stocks marginally inflated.
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Report this Comment On March 07, 2009, at 2:25 PM, rubenkincaid wrote:

Nobody knows where the bottom is in this climate, but I don't think we've hit it yet. I don't think 4500 / 550 is unimaginable.

After losing 30% (300K) since labor day, I've pulled out of the market. It's not worth losing sleep over, and I'd rather watch from the sidelines. Even if it does bounce back soon, I'll never see returns as great as my losses over a similar amount of time. I'll invest again as it returns, but I don't want to ride it to the bottom.
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Report this Comment On March 07, 2009, at 4:51 PM, MarkD wrote:

Of course, you have forgotten one thing. We have an incompetent president in the White House who understands nothing about how to grow an economy and who is trying to radically change this country for the worse. Until competency returns to the White House, this market will have no confidence.

Mark Dias

http://mark24609.blogspot.com/

"If I had followed CNBC's advice, I'd have a million dollars today provided I'd started with $100 million" Jon Steward, The Daily Show
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Report this Comment On March 07, 2009, at 6:19 PM, TMcNasty wrote:

Buy low sell high right?

Could now be a great time to buy? Maybe.

Could the market go up? Maybe.

Could the market move down further? Maybe.

The bottom line is the market has been trending lower for a LONG TIME now. And our gov't. is doing unprecendented things to try and "fix" it. The rules are changing daily. That is creating confusion. And on top of that unemployment is still staggering, oil demand is low, and a whole host of things are still saying we could be heading down more.

If you ask me the market will bull again, but it won't be like '87...a blip. This cluster-F could take awhile to sort. Look how long it's taken already?

I'd say now is a good time to SAVE some money and PREPARE to invest when the market stabilizes at least. There's no reason to jump in unless you're realy sure the market as a whole has reason to move upward. Does it?

Markets dont lie. They moved down and are staying down for a good reasons. Until those reasons are sorted it's gonna stay flat or drop more. If those are my only 2 options I'll stay sidelined thanks. The only place I really saved $ is the 403b I have that has a guaranteed 5.5% return fund. THANK GOD I moved all my BS mutual fund junk into that last summer. I only lost $200!

Let the ever optimistic out there try to snag GE, MSFT, BAC, etc. on the "cheap" only to lose more next week.

Remember. NOT losing capital in a bear market ='s MAKING capital in a bull market.

Why is that so hard for people to get? Even Buffett admitted he mighta jumped the gun last year. Guess what Warren. You're right...you did. You have no shortage of $...why did you feel you needed to try and scoop up cheap stocks so quick? Serves him right.

It's because no one realized the depth of the depravity in the financials. To be honest...I think there are more skeletons out there yet. I want them ALL out in the open before I buy anything other than the most defensive dividend paying stocks like maybe WMT, MO, and KO.
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Report this Comment On March 07, 2009, at 6:25 PM, TMcNasty wrote:

Furthermore...

The gov't. may provide just enough life support to banks and "troubled" homeowners to keep them limping along. So banks will remain reluctant to loan and homeowners just getting by will only buy the basics. Sounds like the makings of a Japanese lost decade to me. Everyone just getting by.

Then the slightly better off among us get to try to pay this deficit off over the next x years. Limping along does not equal some wild bull market you'll wake up one day to have missed.

To fix this debacle we need a REAL day of reckoning for banks, homeowners, and everyone else. I wonder how much of our last bull market was people taking out home equity to buy stocks. Do you think those millions of people can afford to do that again?

Think people!
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Report this Comment On March 07, 2009, at 10:55 PM, ReillyDiefenbach wrote:

"We have an incompetent president "

Had an incompetent president, you meant.
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Report this Comment On March 08, 2009, at 5:27 PM, clevelandrudge wrote:

We may not know when this market will hit a bottom. We do, however, know one thing for sure: this nation hit a bottom with the Bush administration. It will take us many, many years to climb out of the hole he and his accomplices put us in.

Anyone inclined to criticize President Obama after only six weeks in office needs to remember one thing: our country has been traumatized during the past eight years by a dysfunctional and abusive "father" who has only recently been kicked out of the house. It will take us until the end of Obama's first term for our economy and our collective psyches to recover. His economic policies will be working by then and he'll easily be re-elected.

The crybabies on the right better get used to it.
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Report this Comment On March 08, 2009, at 7:54 PM, NotCrazy wrote:

I don't know if we're at a market bototm, and frankly, neither do you. We can't know, so long as we're mere mortals without the gift of prophecy. But what we do know is that we're a lot closer to whatever the market's bottom will ultimately turn out to be than we were a few months ago, and that now is therefore a better time to invest.

Of course, that's assuming that this is not actually the end of the world. If it is, would the last one to leave please turn out the lights?
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Report this Comment On March 08, 2009, at 8:26 PM, SonicFoolAz wrote:

Easily have another 30/40% to go. It takes time for everything to work through the system. The biggest single drops have likely already happened, however, the full impact of out of work wokers, credit debt defaults, and other general defaults hasn't quite worked it's way through the system. Many of the folks that lost their jobs are not yet experiencing financial stress. It's going to take time and a further slide before things can rebound.
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Report this Comment On March 09, 2009, at 2:32 AM, biotech4ever wrote:

For the record I'm an Independent. I was glad to finally see Bush go but there is nothing in the Obama administration giving me any confidence that the situation will get better. Bush doubled the national debt in 8 years and now Obama is on track to beat that in 3 years. In addition he's going to hurt small businesses and Geithner has no solid plan on how to rescue the banks. It makes me sad to think about the future.

As Bernie Saunders said, "If companies are too big to fail, they are too big to exist" Yet are we doing anything to break AIG into smaller pieces? How about Citigroup? Bofa and Wells Fargo got bigger, what happens when they fail? The FDIC is asking for 500 billion loan from the treasury which for some odd reason is hardly getting much attention. Gee uh, 500 billion, so is Citi, Bofa and WF all going down?

Then you have GE with 500-600 billion in debt obligations. Hartford will probably collapse this year with many other insurers to follow. We certainly can't afford to bail out all these companies.

Worst of all, we are not only making the same exact mistakes as during the Great Depression but we have thrown away two pieces of legislation that came from that time, that being the Glass-Steagall act and the uptick rule. On top of that we have something the Great Depression didn't have and that is all these unbelievably complex derivatives that makes everyone's head hurt just trying to make sense out of them.

There is no end in sight to the bad news so a DOW 4000 would not surprise me in the least. Also sobering is that even with the huge decline from the 2007 peak the PE ratio is now about 14, but recessions in the past it's been as low as 6-7.

Don't get suckered into the rallies. Wait for conditions to improve(which may be a long long time) before getting back in. SpecBear has a great post about market timing in the Great Depression. I quote from his post

"In fact, if you were just two months early getting into the market, you were worse off than someone who got in 9 months late."

Preserve your capital, pay off debts. Wait for the banking mess to sort itself out first, assuming it ever does.
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Report this Comment On March 09, 2009, at 9:17 AM, nilshp wrote:

And another strategy is trying to recover some $ by trading (vs. investing) actively during the incredible volatility as we lurch between slump and rally... An action born of desperation - maybe so!
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Report this Comment On March 09, 2009, at 1:37 PM, RML1 wrote:

I strongly feel that one of the tragedies of this decline is the removal of the uptick rule. Shorts can now go totally nuts and generate gains on an hourly basis. The talking heads spout doom and gloom playing perfectly into the Shorts hands. The uptick rule served a very important function. Let's have it back to bring some sanity into the trading floor.
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Report this Comment On March 09, 2009, at 3:33 PM, chrissmuir88 wrote:

All this talk of bottoms never ceases to amaze me. How could ANYONE know if it is a bottom or not? I can understand why people would call it - after all, we all need a little hope - but there really isn't much of a basis to call anything at this point. All we do know is that momentum is clearly pointing downward, and sentiment is overwhelmingly negative.

Chris Muir

http://blog.invariant-capital.com

http://www.fool.com/investing/value/2009/03/06/is-this-the-market-bottom.aspx?source=idesitit10000001