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Dow May Crash to 7,500 If 10,600 Not Breached

danarhea

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Although not caused by the same market forces, there is an eerie parallel between what we are now experiencing and the Great Depression. There was also a recovery in 1930, after the crash hit in 1929. Then the second shoe dropped. I have been saying for a long time, in both the Bush and Obama periods, that the market would eventually go a lot further down than it has so far, and I still stand behind what I originally said. My original statement was that the Dow would end up between 7,000 and 8,000, and it looks like a CNBC analyst is pretty much saying the same thing.

Now I am no analyst, and I have no credentials, but it doesn't take a rocket scientist to see that a sizable bubble still exists. That would be the derivatives market. No matter how hard the government tries, it is not going to be able to stop that bubble from bursting. IMHO, and I have felt this way for a long time, the Great Recession is going to turn into the Great Depression, part Deux. I cannot see how this won't happen. Bubbles are still there, the government can only prop up the markets to a certain point, and the Fed can only lower interest rates so far. After all, how much below ZERO can the interest rate go? The Fed's back is now against the wall, and there is no more wiggle room.

As for whose fault this will be, I have said time and time again that it was President Clinton who signed the Gramm-Bliley bill that dismantled all the Glass-Steagal protections that were in place to prevent this from happening. Unfortunately, it is President Bush who is going to be unfairly blamed for something he was not directly responsible for. Obama will take some blame too, but for the short term, Clinton is going to be let off the hook. Not so in the distant future, when historians will look back on Great Depression II more objectively. 20 years from now, I have a feeling that this will become known as Clinton's folly.

In the meantime, get ready for a wild ride. It's coming, whether or not you want to see it. Right now, know that the small light you see, way down the tunnel, is the harbinger of the great freight train that is coming straight at us, and is surely going to run us over. Those who are prepared for it are the ones who will survive the coming crash.

Article is here.
 
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washunut

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Although not caused by the same market forces, there is an eerie parallel between what we are now experiencing and the Great Depression. There was also a recovery in 1930, after the crash hit in 1929. Then the second shoe dropped. I have been saying for a long time, in both the Bush and Obama periods, that the market would eventually go a lot further down than it has so far, and I still stand behind what I originally said. My original statement was that the Dow would end up between 7,000 and 8,000, and it looks like a CNBC analyst is pretty much saying the same thing.

Now I am no analyst, and I have no credentials, but it doesn't take a rocket scientist to see that a sizable bubble still exists. That would be the derivatives market. No matter how hard the government tries, it is not going to be able to stop that bubble from bursting. IMHO, and I have felt this way for a long time, the Great Recession is going to turn into the Great Depression, part Deux. I cannot see how this won't happen. Bubbles are still there, the government can only prop up the markets to a certain point, and the Fed can only lower interest rates so far. After all, how much below ZERO can the interest rate go? The Fed's back is now against the wall, and there is no more wiggle room.

As for whose fault this will be, I have said time and time again that it was President Clinton who signed the Gramm-Bliley bill that dismantled all the Glass-Steagal protections that were in place to prevent this from happening. Unfortunately, it is President Bush who is going to be unfairly blamed for something he was not directly responsible for. Obama will take some blame too, but for the short term, Clinton is going to be let off the hook. Not so in the distant future, when historians will look back on Great Depression II more objectively. 20 years from now, I have a feeling that this will become known as Clinton's folly.

In the meantime, get ready for a wild ride. It's coming, whether or not you want to see it. Right now, know that the small light you see, way down the tunnel, is the harbinger of the great freight train that is coming straight at us, and is surely going to run us over. Those who are prepared for it are the ones who will survive the coming crash.

Article is here.
Not sure what you mean by saying that there is a bubble in the derivatives market. That is a pretty broad statement. Derivatives cover all sorts of assets, so which asset class do you think we still have a bubble in.

You have a range for the dow, do you have a range of EPS that makes sense for that?

The market is very volitale, however not sure you have presented more of what I call a guess rather than a projection. Saying that not out of disrespect, because trying to figure out this market has been very hard.

One final thought. The market and the economy do not have a 100% correlation. For example what is good for employment may not be good for short term corporate profits. Also many of the Dow or S&P companies get a bunch of their revenues and profits overseas.
 

Ahlevah

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I think the stock market is heading much lower, and I say this as someone who's loved investing in stocks since 1973. I hate bonds, but I now find myself almost 100% invested in Treasury bonds and notes, high-quality corporate bonds, and cash. I think we're heading into a double-dip recession, and the earnings just won't be there to support higher stock prices. Analysts were way too rosy on their earnings estimates for 2011. They're already revising their 2011 earnings estimates for the S&P 500 downward, which they assumed would beat the record set in 2006.

HEARD ON THE STREET: Disconnect on Recovery by Analysts - WSJ.com
 

Onion Eater

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washunut

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I think the stock market is heading much lower, and I say this as someone who's loved investing in stocks since 1973. I hate bonds, but I now find myself almost 100% invested in Treasury bonds and notes, high-quality corporate bonds, and cash. I think we're heading into a double-dip recession, and the earnings just won't be there to support higher stock prices. Analysts were way too rosy on their earnings estimates for 2011. They're already revising their 2011 earnings estimates for the S&P 500 downward, which they assumed would beat the record set in 2006.

HEARD ON THE STREET: Disconnect on Recovery by Analysts - WSJ.com
The Fed seems to think growth will be in the 3.5-4.5 range for 2011 and 2012. The economy may be slowing from the 1st half pace but I do not yet see signs of an outright reduction in GDP.
 

Ahlevah

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The Fed seems to think growth will be in the 3.5-4.5 range for 2011 and 2012. The economy may be slowing from the 1st half pace but I do not yet see signs of an outright reduction in GDP.
In April, the Fed assumed growth in 2010 in a range of 3.2 to 3.7%. At their June meeting, they revised that downward a couple notches to 3.0-3.5%. I'll bet my belly button that that range will be revised downward again in a couple months.
 

washunut

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In April, the Fed assumed growth in 2010 in a range of 3.2 to 3.7%. At their June meeting, they revised that downward a couple notches to 3.0-3.5%. I'll bet my belly button that that range will be revised downward again in a couple months.
still a long way from negative, especially with an election in a few months.
 

Ahlevah

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still a long way from negative, especially with an election in a few months.
Just remember this is the same Fed headed by a chairman who claims he only saw the biggest asset bubble in history in hindsight and who kept the Goldilocks Economy on track by raising the Discount Rate until August, 2007 (when Jim Cramer had his famous "They know nothing" rant). Four months later the economy entered recession.
 
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