johnw106 (30.82)

The experts aint getting it either.

November 21, 2008 – Comments (5) | RELATED TICKERS: BND , SPY

The last few days I have been watching daily videos and reading blogs and articles.

There are dozens of experts (or so they are called) who seem to be clueless. They are still saying things like "buy and hold" "its just a bump in the road" "its a mild recession" "stay the course" "its a small correction" "DOW 14,000 in six months". Some who swore by stocks and dismissed bonds have changed their tune and now want everyone to buy corparate bonds. Hello? Buy bonds of companys that can go poof at any time? I am nervous holding AAA US Government bonds in this market. And which companys are safe? So many have went bye bye that the S+P isnt 500 strong if they follow their own rules and boot them out of the index. Hopefuly they can find a few to fill the gaps.....

And they are still encouraging people to buy mutual funds and shovel hard earned money into 401k plans. And none of them seem to realize that this is a balance sheet recession. It wasnt caused by inflation from a over heated economy or skyrocketing wages. People and institutions are flat broke. No one has any money. They cant borrow money because they are maxed out on loans now. The only way to get out of the hole is to pay down debt and save.
The fed lowering interest rates to 0 to try and lure people into the markets and to borrow money will back fire. The banks will lower rates on savings. And they wont want to lend money at less than 4% interest. They make no profit doing so. The people who do have good credit and may be inclined to do so other wise will not borrow in a bad economic enviroment. How do you think they got this way? Good credit and savings do not come about by being reckless with your money. They will wait till things stabilize. 

 I have no debt,have savings and can borrow money. But I am scared to put any money in the stock market now that it has broken S+P 800. When people like Peter Schiff say its a bear market for years to come and others who are not blinded by the media and wall street hype are talking about S+P of 500, I tend to listen.

Maybe I am wrong. Maybe I am missing out on this fabled bull run and explosion to DOW 14,000. If so I will have to be happy with my 5% return on CD's and my small position in utilitys and index ETF's. But I would rather play it safe and wait a bit. And if the market doesnt go back up in the next few years? Will dividends turn more profit than CD's and money markets? If the recession/depression lasts for two or three years how will companys be able to maintain dividends that amount to anything?

And then you have the fact that anyone who bought AAA mutual fund bonds or ETF bonds over the last ten years have put money in their pocket while holders of equity stocks have lost on average 48% of their money,it gives a person even greater reason to pause before hitting the buy button.