RIDE 'EM, COWBOY
Hang on, it's going to be a rough ride.
It is almost time for the markets to open on this Friday morning, one week since the 'bail out' plan was adopted by Congress and signed by the president. Since that time the markets have nose-dived to the point that the gains of the past few years have been wiped out.
It is too late now to jump ship. The potential profits that may have been made by quick dumps has passed. Most investors are in for a long slide down while the markets adjust to the current crisis. Anyone who has invested in stocks over the long haul has made money. And that will include those who are invested in mutual funds through 401k's and IRA's.
What we are facing right now is the adjustment that had to come as a result of the gross overvaluing of most securities. We are in the middle of a bank crisis and a money market crisis. That has no relationship to the intrinsic values of equity securities. When banks lose their credibility due to poor judgments on credit risks and consequent purchase of junk mortgage securities, the only possible result is, as McCain pointed out a few years ago, a near-catastrophic failure in the system that generates a sense of panic in the speculators.
When the speculators sense a greater risk of loss, their natural inclination is to sell. And sell they have. And when the man on the street sees this happening it generates a sense of panic in them, compounding the problem. Just like lemmings following the first one to break for the sea, so the small investors get in line behind anyone who is running and the result must be an adjustment such as we are now seeing.
But the basic values are still there in the securities of manufacturers and service industries. And most of those are not included in such bellweathers as the Dow, the S&P and the Nasdaq. Solid performers such as local stocks are pretty secure.
The market just opened at 600 down on the Dow. But the credit markets are showing signs of strength today. Oil stocks are way down with the price of crude dropping sharply. The Dow is at a five year low now, at 9:40 AM. There is showing a basically irrational side to all this. And that irrationality can be fatal if it continues.
As indicated, an adjustment was due, whether the credit markets precipitated it or not. The securities markets have been grossly overvalued for the past three or four years. But, hang on. The ride will be rough for a few weeks. We will see extreme lows before it turns.
But it will turn. Once we realize that it is a functional adjustment, had to happen, and will stop and begin to creep back upward we will feel more secure and begin pushing the prices back upward. And it is now 9:45 AM and the Dow has moved upward, reversing the panic at opening and is now at down 164. It will jump all over today and settle near yesterday's close at days end--I think. But even if it drops lower, it is no reason for panic. It is and will be volatile for a few weeks but the turn will come.
Keep the faith. Behind the cloud is the sun. And it will shine again as it has. But we will have cloudy days on occasion. Let us hope the bottom has been reached or is very near and the trend is back to more reasonable levels. But don't expect the 13000 range again for a few years. But year end should show us closer to 10000 than the current 8000.
It is almost time for the markets to open on this Friday morning, one week since the 'bail out' plan was adopted by Congress and signed by the president. Since that time the markets have nose-dived to the point that the gains of the past few years have been wiped out.
It is too late now to jump ship. The potential profits that may have been made by quick dumps has passed. Most investors are in for a long slide down while the markets adjust to the current crisis. Anyone who has invested in stocks over the long haul has made money. And that will include those who are invested in mutual funds through 401k's and IRA's.
What we are facing right now is the adjustment that had to come as a result of the gross overvaluing of most securities. We are in the middle of a bank crisis and a money market crisis. That has no relationship to the intrinsic values of equity securities. When banks lose their credibility due to poor judgments on credit risks and consequent purchase of junk mortgage securities, the only possible result is, as McCain pointed out a few years ago, a near-catastrophic failure in the system that generates a sense of panic in the speculators.
When the speculators sense a greater risk of loss, their natural inclination is to sell. And sell they have. And when the man on the street sees this happening it generates a sense of panic in them, compounding the problem. Just like lemmings following the first one to break for the sea, so the small investors get in line behind anyone who is running and the result must be an adjustment such as we are now seeing.
But the basic values are still there in the securities of manufacturers and service industries. And most of those are not included in such bellweathers as the Dow, the S&P and the Nasdaq. Solid performers such as local stocks are pretty secure.
The market just opened at 600 down on the Dow. But the credit markets are showing signs of strength today. Oil stocks are way down with the price of crude dropping sharply. The Dow is at a five year low now, at 9:40 AM. There is showing a basically irrational side to all this. And that irrationality can be fatal if it continues.
As indicated, an adjustment was due, whether the credit markets precipitated it or not. The securities markets have been grossly overvalued for the past three or four years. But, hang on. The ride will be rough for a few weeks. We will see extreme lows before it turns.
But it will turn. Once we realize that it is a functional adjustment, had to happen, and will stop and begin to creep back upward we will feel more secure and begin pushing the prices back upward. And it is now 9:45 AM and the Dow has moved upward, reversing the panic at opening and is now at down 164. It will jump all over today and settle near yesterday's close at days end--I think. But even if it drops lower, it is no reason for panic. It is and will be volatile for a few weeks but the turn will come.
Keep the faith. Behind the cloud is the sun. And it will shine again as it has. But we will have cloudy days on occasion. Let us hope the bottom has been reached or is very near and the trend is back to more reasonable levels. But don't expect the 13000 range again for a few years. But year end should show us closer to 10000 than the current 8000.
posted by tanstaafl | 9:52 AM
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