Here eight financial types tell what they think is coming next. Their thoughts are worth the reading, but I see no evidence they've placed their money where their mouths are going.

Yes, very good reading. A few of those people are always bearish gold bugs, so I take some of their opinions with a grain of salt.

What I find a little troublesome, with so much in doubt, are all those suggesting we have seen the worst. And what I consider almost strange, they say we have seen the worst, people can invest here, BUT it might get worse. Huh?

This may take much longer to turn around than most think.

The news has been horrible for the economy this week and the market still rallied. I don't exactly know how to take that. I suspect it is a false rally. I'm back in cash. I am still thinking of shorter term trades rather than "investing" at this time. The future still looks too murky.

Doug,     
     I agree with you that we have not yet reached bottom. The rally will continue for a time, then the the down trend will resume. Even so, I think some stocks are ripe for buying: If a company provides essential goods or services, is sound financially and pays attractive dividends, why wait? If share price goes even lower that will be a chance to buy more shares.
     We'll not live to see a better opportunity than we have right now.
Seán

I agree a person likely can buy here, some. They do need to be able to willing to ride them down at times over the next year.

Averaging in over this year is a wonderful approach. I will likely do "some" of the same.

But my approach has evolved some. My early retirement has made me even more protective against taking losses rather than my previous approach to simply maximize gains.

This has served me well to miss almost this entire down market. I didn't need to predict the devastating fall. I only needed to think that stocks were overpriced at the time with bad things on the horizon.

Surely the risk/reward, the potential for stocks to go up/down ratios have changed dramatically to lean to less risk and greater upside potential from here, at these low prices.

My success with my recent trade has given me a cushion of 31 S&P 500 points as of today, with my fortuitous sell, and the desire to try it again with the recent extreme moves we have had and may see yet.

I am not yet ready to get conservative and buy and hold. And a ways away from thinking the upside is assured enough to go out on margin. But I might soon with dividend yields above the margin interest rates. My only caution is that dividends might get cut and not only make the margin cost more expensive but hurt the stock at the same time. But risk is risk.

Then again, one more trade like the last one and I have earned away that risk. This is where money makes money by success allowing more profitable risk. And at these yields borrowing to buy stocks, the stocks almost pay for themselves.

Best wishes. I think you know what you are doing.

quote:

I think you know what you are doing.—Doug

     I hope you're right! I see two defects in my performance:
(1)I've been buying after prices start to climb instead of before a bottom happens and (2)I tend to chase a stock with rising prices, which is a waste of money. One lives and, by the grace of God, one learns.
Seán  

quote:

Originally posted by Sean:

quote:

I think you know what you are doing.—Doug

     I hope you're right! I see two defects in my performance:
(1)I've been buying after prices start to climb instead of before a bottom happens and (2)I tend to chase a stock with rising prices, which is a waste of money. One lives and, by the grace of God, one learns.
Seán  

- I have heard Cramer mention the type of strategy you are using for getting in to a position on a stock. You buy some and put in a limit order lower. Then if it goes up you make money but might not buy as much as you like. If it goes down you get more at even a better price. It is somewhat a win win if your time frame is long term. I like it.

As to me I had to laugh at myself with my concern on currently being out and trying to trade the S&P 500. Last trade I had that good score but was concerned about now and missing a huge rally.

I use the S&P 500 for my reference and trading. I last sold with a nice profit Dec. 8 at 910. Then it fell starting the next day. I was jazzed and ended up with a 40 point down cushion to buy back in. Then the Fed cut rates to zero and my cushion went away to all of 2 points. Then down, then up to 930, missing 20 points on the upside being out. But it was not unexpected. Then it fell again, and back up. My emotions about being right, wrong, right, wrong, had me questioning myself a lot.

At the low point in my resolve the other day it closed up at.....909.97 or 0.03 points off my sell, all of 0.0033% change.

But at this point my original scenario, prediction, still holds and seems to be playing out. Knowing that earnings estimates in a downturn tend to be too high and slow to come down, along with year end selling and maybe retail customers shocked by year end statements that the market would tumble at the first of year.

Also I expected worsening employment from future layoffs already declared with warnings.

All is coming true but I can't track the retail investor other than to watch mutual fund outflows/inflows.

Earnings seem to be coming in or are now being expected at the low end of estimates at this start of the earnings season. They are issuing warnings right before reporting also. That is not usual or normal. Only time will tell if that continues to be true. And how much is already priced in.

How low is low or the bottom? We only really know in hindsight.

But I have my 40 point 4.5% cushion back for more potential profit on the upside. Now I have to start figuring when is a good time to get back in.

More and more they are becoming less optimistic about this whole year. The idea of a recovery "in the second half of 2009" (except very late) is becoming more muted.

As always, "on the other hand" real bottoms usually only come about when the majority are totally pessimistic.

Right now my read is that the majority is certainly depressed.

I can't say if that is close enough to being the same thing.

quote:

...real bottoms usually only come about when the majority are totally pessimistic.—Doug

     I look at it this way: Prices are low. Investors are fearful. Good enough. Why wait for a bottom that has, possibly, occurred already? DOW is an example; I think its recent sell-off, due to Kuwait's reneging, was excessive. I'll be buying it whenever the price breaks $15.05, if that occurs again. Meanwhile, other fish are frying.
     I, too, expect a rally soon, but certainly no recovery. We'll be hearing bad news about the economy until indebtedness returns to sustainable levels. Governmental efforts, here and in most other countries, is directed toward restoring easy credit, and will end by increasing debt. A real recovery may happen, if we're fortunate, about ten years from now.
Seán

The Euro may be less stable than is generally believed.
Seán

quote:

Originally posted by Sean:
The Euro may be less stable than is generally believed.
Seán

Yikes, that is a very ugly take and assessment. They have no problem using the word "Depression" with some of those countries. Their economies are still falling as is ours.

Add in that Japan and the Asian countries are slowing, contracting, more than anticipated making the Gobal situation worse.

That is one reason I am still in a trading mode. My biggest current fear is that this recession will continue to grind away at us. While not expecting the Great Depression, I still am concerned at the comparison. The Crash was in 1929 but the stock market didn't bottom until 1933. There were a number of rallies in the interim.

We aren't making the same financial mistakes this time, like higher taxes and interest rates. But that time was during a global recession too, not just the US and we are far more globalized now. Although, the Depression was also a time brought about by overleverage and bank failures.

If I thought it were a garden variety business cycle downturn I would be all in now and buying all I could hoping for a "V" shaped recovery. I still have my doubts about even a "U" shaped one.

At least I wanted to see the latest earnings reports and the companies' forward looking statements. Earnings start coming out in full force this week. Just as so many are filled with "hope".

I have little doubt that trailing PEs will be going up if stock prices don't come down.

Doug,
     I am assuming the worst-case outcome: Hyperinflation, thanks to an oversupply of bailout money and depression (enterprises closed for lack of profit, resulting in unemployment on a massive scale). I can think of nothing our new administration can do to stop disaster; there is no way to bail out a boat that's already underwater.
     Money can still be made by skillful trading, but I doubt its worth the trouble. Inflation will destroy the value of any money earned. I think the better course may be to use investment money to buy shares in stable companies that will survive the coming storm; such shares will retain real value even if the dollar fails and is replaced by a new currency. I'm buying a few shares at a time in order to have the protection of price-averaging and am diversifying among companies with low debt and essential products to reduce risks of corporate failures.
     As you know, I always expect the bleakest outcome and am delighted when I'm wrong. That is doubly true on this occasion.
Seán

I forget you are:

"Sean; The happily disappointed extreme pessimist".

I suppose planning for and expecting a complete collapse of society as we know it leaves you either right or happy you are wrong. What a wonderful way to construct a win-win scenario, sorta.

My words:

quote:

But at this point my original scenario, prediction, still holds and seems to be playing out. Knowing that earnings estimates in a downturn tend to be too high and slow to come down, along with year end selling and maybe retail customers shocked by year end statements that the market would tumble at the first of year.

Also I expected worsening employment from future layoffs already declared with warnings.

Ahh, just what I was looking to see:

"The markets are taking another nosedive on the news that some of the nation’s largest companies are doing worse than expected. That means Wall Street is even riskier."

source

"The big thing is there was a lot of bad economic data this morning" said Colin Cieszynski, market analyst at CMC Market Canada in Toronto. "Canadian retail sales were worse than expected, U.S. housing starts and building permits were worse than expected, jobless claims were worse than expected."

Dismal economic data drags stocks down

"The decline is worse than expected and may be due to such factors as poor returns on equity investments and increasing competition among insurers, Kenneth Lo, an analyst at UBS AG, wrote in a report."

Source

"World markets mixed as US data worse than expected

By LOUISE WATT and CARLO PIOVANO – 1 day ago

LONDON (AP) — World stocks were mixed Thursday after worse-than-expected U.S. unemployment and housing data cut off an earlier rebound that saw investors buying up beaten-down bank stocks.

An announcement by Microsoft Corp. that it is cutting 5,000 jobs over the next 18 months — a sign of how badly even the biggest and richest companies are being stung by the recession — also sent U.S. stocks down in early trading."

sdource

"Tension between Thain and Lewis reportedly has built since the company in December learned that fourth-quarter losses at Merrill were going to be much worse than expected. Those losses almost led BofA to back out of the deal, until the federal government pledged help to absorb the hit. "

Bank of America, Thain Part Ways

"Darling Says U.K. Downturn Is Worse Than Expected

By Gonzalo Vina

Jan. 23 (Bloomberg) -- Chancellor of the Exchequer Alistair Darling suggested he may have to scale back predictions of economic recovery later this year, acknowledging that Britain’s recession is deeper than expected.

“We did expect to be a significant downturn, indeed we have seen that,” Darling said in London today. “It is undoubtedly sharper than many people believed, partly because you have seen industrial production go down because of exports.”

The economy contracted at its fastest pace since 1980 in the fourth quarter, pushing the U.K. into recession."

Bloomberg

And on and on:

Microsoft said the economy and IT spending had softened more than expected, ...

reported a worse-than-expected 11%

problems facing President Barack Obama could be even worse than expected, ...

Most Latin American stocks fell in early trading Thursday in the wake of worse-than-expected economic data

as analysts portrayed its worse-than-expected 83% plunge in fourth-quarter net income

despite the worse than expected contraction in the economy in the fourth quarter.

In the UK, the government released their GDP numbers for Q4 and they were worse than expected at -1.5% ve 1-1.2%

as a wave of worse than expected earnings from makers of electronic components and consumer products hammered Japanese and South Korean stocks.

Investors have reacted to some worse-than-expected reports

European shares ended lower Thursday, as worse-than-expected results from Nokia overshadowed strength in financial shares. ...

Last week's update revealed worse than expected gross margin for the group,...

Global stock market indexes continued to retreat on Friday morning, with investors again freaked out over the potential of a worse-than-expected recession

And more and more.

"Worse than expected" seems to be the catch phrase at this time.

And that is "just as I expected"?

Doug,
     Add this little chart to your bad news bouquet. What a grand new year this promises to be—for vultures and hyenas!
Seán

A disturbing chart indeed. But over those years they have greatly changed how they figure employment and unemployment numbers of today's number cannot be directly correlated. They fail to tell us that. We may be closer to being there than most realize or admit now.

quote:

your bad news bouquet

Alas, that wasn't my point to project it as, or report, "bad news".

It was to present it as bad or overly optimistic "expectations".

Part of my point is my disbelief that people are considering it "news" as in my opinion most was known or easily determined, obvious, they just are not admitting it.

What triggers a sense of incredulity is that there can be an institutionalized and known error factor, the overly optimistic earnings estimates in a downturn, my premise, under which most operate.

And that such an error factor can be known to me, as a non professional observer, from which I can profit.

It is exactly the kind of thing I look to find.

For What It is Worth:

My current, immediate, take on the market is that it very much WANTS to rally as all this news keeps coming in so horrific.

The market, the psychology, seems to be taking the bad news in stride for the most part.

In the last couple of weeks, as the news comes out it has been slamming the markets down hard, but buyers are coming in and buying the dips the same day, sometimes pushing it positive after bad news.

But watching it daily can be deceptive. We fell 2% overall last week despite much larger moves during the day, several times.

My cushion was 11% but now 9%. I am not by nature a trader or timer but if I see 10% or more of a move possible I start to look at it.

Right now we are at the peak of earnings, yet, as said the bad news is being taken well.

I am still looking for a bit more of a dip looking for another short term trade. Maybe on a stimulous bill rally in a few weeks.

But for the moment I still feel we are on the edge of going either way.

Doug,
     I hope to see significant rallies, followed by sell-offs, in the near term, but doubt a true bull-market can begin in the year ahead of us. Underlying the present market is enormous indebtedness, world-wide. That debt will not simply go away and, until it begins to be paid down, recovery is not possible. Bailout funds do relieve some pain, but they are adding to the debt and will exacerbate the problem.
Seán

I went all back in today with my trading on the S&P 500 which is I do with the majority of my holdings at this point.

As I said this market was acting like it really wanted to rally and I suspected it would. But I had been expecting the market to fall further first with the horrible earnings and the horrific employment numbers that came in as bad or worse than my estimate.

And the market ignored those! On what I think are bailout hopes and valuation judgements.

I wanted to play the bailout, TARP, stimulus rally but was hoping from a slightly lower level. A little lower would have made me more comfortable about a trade, would reduce the risk more.

With the way I see the market and sentiment at the moment I think the Nov. low is more likely to hold than I felt a month ago.

I think we will still be in a trading range as you do, but I think it is more likely to be at a bit of a higher level from here.

Ps, if nothing else I see a bit of a short squeeze in the offing at the moment. I don't know if this is the trade that gets me in to stay or my opinion will change after a rally. But I am a little less concerned with a fall despite future earnings likely coming in weak for this quarter.

     OK! I'll grudgingly admit there seems to be a support level somewhat over 800 for the S&P 500. I doubt it can sustain much more bad news without falling lower and I am not hopeful that the new bailout will have any more effect than the prior ones; why should it?
     On the bright side (for me) there is the continuing opportunity to buy at lowered prices. Right now I am accumulating DOW at about $11 because I don't believe the failure of the Kuwait deal came even close to being as damaging as the Market seems to think it was. There is also the cost of acquiring Rohm & Haas that DOW can ill afford. My main concern is that DOW is trying to solve the problems by going into debt.

This last call has not done well. I am down over 4% already.

I have to admit today scared me a bit as it tumbled down hard. The market is far from rational. It is ignoring bad news but can tumble on no news or better than expected news.

My best hope is for a short squeeze next week.

I do kick myself a bit. After buying last Friday, thinking the move on the stimulus had started, they were going to pass it last Friday or Saturday and be signed soon. Then it was delayed, not as great as hoped, and so on.

This weekend I remembered playing a similar stimulus (the first tax cuts and rebate checks?) and it followed the exact same scenario! Dang. I know people tend to repeat behavior but always hope I can recognize it in myself. I thought I was missing the move up, like before and it fell on the delay......like before.

But I can console myself that the other one turned out okay if I recall properly. I think we headed higher for a couple months after the stimulus was signed before correcting again.

The economy was looking a little better at that time though.

I am disappointed that some of the bump I think we will still get, and on which I hoped to profit, will go to getting me even, rather than all profit. Oh, well, live by the sword....

Your DOW held up well to the dividend cut it appears.

     I've spent a lot of time searching out the substance of the rescue bill and found very little that will help us small investors. I don't expect it will have much long-term effect on stocks; Treasuries should be driven down because buyers, foreign and domestic, will require higher yields.
     My DOW survived the expected cut in dividend better than I thought it would. However, I was able to buy a lot at $9.96 and could have done better, had I waited. I'm half afraid I'll get an even better opportunity tomorrow! Looking back I realize I paid $15 a share when I bought my first batch! It helps to dollar average.

     And now, having lost a slew of points, we're testing the November lows, or so the chartists say. I think it may be more correctly said that the lows are testing me.
Seán

Doug,
     The bargain prices for good stock are much scarcer now. I think I'll pull my horns in and wait for a correction before I buy again. One possible exception is PFE, which looks under-priced. It has been short-sold quite extensively, so a strong rebound seems likely.
Seán

     Today the market soared. All my stocks gained dramatically for no apparent reasons. More than half of them traded above their average volumes, which is noteworthy, given that most days this year volume has been on the low side.
     To me, the gains are meaningless because I don't intend to sell the stock. I am buying it solely as a hedge against inflation. Good news for me would be a sharp correction that would allow me to add to my holdings at a lower cost. Perhaps tomorrow will make some bargains.
     Trouble is that other investors, more knowledgeable than I, may also see stocks as a shelter against the failure of our currency. If so equities will continue to appreciate without regard for unemployment, bad corporate earnings or impecunious consumers.
Seán

     It was a tug o' war, but the market closed a little up, with my portfolio showing a minor net gain on less than average volume. At least part of the sustained rise in prices must come from short coverings. Once that borrowed stock is paid for, a correction is to be expected. I'll take that as a buying opportunity.
Seán

quote:

Originally posted by Sean:
     It was a tug o' war, but the market closed a little up, with my portfolio showing a minor net gain on less than average volume. At least part of the sustained rise in prices must come from short coverings. Once that borrowed stock is paid for, a correction is to be expected. I'll take that as a buying opportunity.
Seán

Sean,
- July can be a difficult month because as you noted volumes can be smaller with many traders taking the summer off. That makes things more volitile and you can not trust the moves as well.

- I agree there has been a lot of short covering in this move.

- But I also agree the market seems well ahead of earnings. Take Caterpiller for instance. Earnings came in DOWN 66%, year over year, and they bid up the stock 10%! All they had to do was say it "should" get better.

- Those playing with the numbers "as they are currently" say the market is way ahead. Earnings for the year for the S@P 500 one pundit I heard said $40. "Putting a generous multiple of 15 on that number give you an S@P value of 600." Now the person claiming an opposing view said $40 was low, more like $50. That still only give you a number of 750, not 950.

- One flip side question I have is wondering if they are deducting the bank losses from the total. If so then the companies other than the banks deserve a much better price as the total earnings is not representing the individual companies.

- But 15 is still a growth multiple. Sure we had been closer to 20 much of this decade and I think that is way too high, predicting too much growth which we can now see was false. And current PEs based on the earnings of the last two quarters are at record highs, higher than the internet bubble, I heard was well over 30 times. As high as the crash of '29!

- Therefore I have no doubt the market is, currently, entirely priced on future hopes. What remains to be seen is that if the recovery is slower, how will the market react? Or can companies, the economy, recover to grow earnings and justify these current prices. I think earnings will grow, but not this fast or soon.

- The current prices could hold, maybe. I still hear around 1000 for the S&P 500 by year end, assuming better times. That means we are ahead of ourselves and there is little to drive the market higher. Only hints of higher numbers and that is met with scepticism.

- I feared the number could have been worse and missed some of this latest move. Still thinking protecting against losses is more important than maximizing gains I am looking for another entry point. I will probably make a decision at the end of the month after this heavy week of earnings.

regards.