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dwot (99.55)

Crash is slow, then crash is fast

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November 19, 2008 – Comments (17)

Last year I was obsessed with watching the market as I expected serious cliff diving and the market held awfully well.  So, I adjusted my thinking to figuring it was going to be a gradual decline and then in the last couple months the decline has been quite rapid overall.

In any event, we are getting awfully close to my S&P 700 target to consider getting back into the market.

I truly have not looked closely at individual stock since before this major decline as I simply wasn't finding anything I liked.  I took a quick look at Dell this week and it doesn't look bad to me.  So, it is probably time to get back to researching stocks and considering where I might stick some money.

But, I stick hard to a rule that there's no rush.  If you miss one opportunity another will always present itself. 

Interesting how only 2 or so months ago I was thinking I'd be watching the market for at least another year, and now I'm not so sure.

17 Comments – Post Your Own

#1) On November 19, 2008 at 6:09 PM, DarkToast (91.21) wrote:

HP seems much stronger than Dell to me. HP is taking a lot of Dells market share.

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#2) On November 19, 2008 at 6:19 PM, MaskedMan2007 (99.36) wrote:

Today's price action on the index shows that the market should go down to a lower level in the next two weeks. I think that the Dow could go to 6500 in this next move, so your target of the S&P to 700 is very realistic to me.

I still play the market with technical analysis, as I took a bear position on the canadian financial sector and the nasdaq 100 today.

I admit that when I look at the fundamental of some companies there are interesting bargains to start buying for the long run. I still don't buy for the long term now.

 

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#3) On November 19, 2008 at 6:25 PM, lquadland10 (< 20) wrote:

I am thinking 500.

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#4) On November 19, 2008 at 6:37 PM, Ph1sh55 (28.89) wrote:

You can find much better positioned companies than dell right now...highly advise against them!

Dell's original strength was their competitive advantage at building desktops with better margins and more customization; now they are no longer better at system building on the cheap than others, their customer service has heavily degraded, and desktops are obsoleting.  Their laptops are not near the best or the cheapest on the market..I just don't see the huge growth potential going forward.  This is more like a dying company struggling to cope by branching out, only they do not offer the best service at anything they are branching out to.

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#5) On November 19, 2008 at 6:40 PM, MarketBottom (29.84) wrote:

The Dow low of around 7200 was the bottom in 2002s post September 11 era. It may serve as an intermediate area of support with a sustainable rally off that area. The rally could last for several weeks, but in all likelihood will not be the ultimate Dow low. S&P 725 would be a spot to consider if you are not buying for the long haul.

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#6) On November 19, 2008 at 6:47 PM, dwot (99.55) wrote:

DarkToast, interesting you favor HP.  Honestly, they are perhaps one of the worst companies I have dealt with and I am determined to never support them with another dollar of my disposible income.  They have refused to honor both warranties and coupons with me.  Normally I really go after a company that sells me garbage that dies with little use, gives the worst quality copies after only about 1800 and the toner cartridge still half full, etc., but instead I just tell people looking the very poor quality I've gotten from them.

MaskedMan, my Dow target is 7000....  I haven't looked at the Dow for about a week.  I have been so busy.  Wow, below 8000...  Getting close.  

lquadland, 700 was my look at the market target :).  

Ph1sh55, you may very well be correct.  My look at it did not put it into a reject pile at this point.  I find that many people I know have bought Dell and are content with their purchases, so I tend to think they will be repeat business.

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#7) On November 19, 2008 at 7:00 PM, loudoungroup (< 20) wrote:

I think anyone thinking 7200 is the ultimate bottom has little understanding of what is happening.  We are undergoing a massive deflationary crash.  Short term treauries are about to yield negative returns and TLT could hit 105 area before it ultimately collapses. 

I am looking for an ultimate bottom in 2010 -  DOW 3000 range.

GL.

 

 

 

 

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#8) On November 19, 2008 at 7:04 PM, DarkToast (91.21) wrote:

Dwot, I always build my own computers. I haven't ever owned a machine made by either company. I have done a lot of testing of both companies laptops and HP uses higher quality components, but this is not why I favor HP either. I favor HP only because I know they are eating Dells lunch right now.

I do think that strong tech stocks are likely to lead the way when equities eventually begin to recover.

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#9) On November 19, 2008 at 7:22 PM, EquityBull (67.04) wrote:

Markets are more about emotion and psychology then about technical analysis or fundamentals.  If this was not true you would not see these wild swings each hour, day or week.  Greed and fear rule at any given moment.

 People always think things are better then they are when times are good and think things are much worse then they are when they are bad.  Guess which end of the pendulum we are at now?

 With the markets off around 50% we know we are much closer to a bottom then the top.  Volume's are very low meaning no conviction by sellers or buyers.  3 trillion sits on the sidelines waiting for a reason to get back in.  That reason may be nothing more than a random runup that holds.  

Trying to guess it is a fools game.  Buffett who is the greatest investor of all time and he'll tell you the same.  I'm accumulating stocks here as the risk/reward is squarely in my favor.  I may not catch the bottom but at these price levels, dividend yields and cash positions I am buying businesses and not tickers.

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#10) On November 19, 2008 at 7:44 PM, dwot (99.55) wrote:

Marketbottom, I couldn't predict a bottom, just when I looked and thought about what I thought would be fair for the Dow I came to 7000.

loudoungroup and EquityBull I keep filed in the back of my mind that the Asian crisis of the 80s or 90s resulted in a bottom at something like 11c on the dollar from the peak.  What was fair value?  I don't know, but if you bought 50% from the peak you'd have lost 78% before seeing a bottom.  I can be patient.

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#11) On November 19, 2008 at 7:51 PM, DemonDoug (98.90) wrote:

Good job Deb.

Of course, if you had been reading itulip, you would have understood that "A Financial Market Crash is a Process, Not an Event"

A Financial Market Crash is a Process, Not an Event

Liquidity dries up. Truth is revealed.

by Eric Janszen

A financial crash is not sudden, singular event. The way the Crash of 1929 is commonly misunderstood, the market crashed on Monday, October 31, 1929 and soup lines formed Tuesday.

A financial crash is a process lasting as long as a year, punctuated by a few notable grip-and-grin market events that make it into the history books. Underlying the process is the dissolution of a fallacious belief system that developed over a period of many years. Fallacies floated on an ocean of cheap credit. As the credit dries up, facts are revealed under the harsh light of reality.

Multiple fallacious beliefs now show under the light of evidence for all to see. The complicity of the ratings agencies in creating the housing bubble, while notable, is a minor revelation compared to the big three.

-----------------------

It's so funny deb I keep referring you to itulip, the more you speak the more you sound like the lead guy over there.  He even was asked in february of this year about clean tech/green tech or infrastructure plays if he had any stock ideas, and his answer was "not yet."  The producers of the show were annoyed, but his point was that there were a lot of companies that are going to go under or get beaten down, and then when the dust settles then we can see who the winners will be.

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#12) On November 19, 2008 at 8:01 PM, johnw106 (61.34) wrote:

I will admit I had no idea it was going to be this bad. I was thinking "ok a correction and back to normal by April".

The more the worms come out of the carcass the farther back I want to be to avoid the stench. The unwinding of this bubble is more like the Hindenburgh crash. And it just left Germany. Crosses the Atlantic in 2009 and hits the ground sometime in 2010 maybe.

Then again I could be totally wrong and we will see DOW 10,000 by the end of 2009.

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#13) On November 19, 2008 at 8:24 PM, QualityPicks (32.92) wrote:

I'm an engineer. I used to be a fan of IBM back in the 80s. They built the best PCs. Then, they fell behind, while their products carried a premium for being "IBM". Compaq was a worthy competitor, but I didn't care much about them. But then Dell came along. Their machines were almost as nice, but way cheaper than IBM, and they had awesome customer service. No reason to buy IBM anymore I felt. Dell grew on me. Then, everybody caught up, and it seems Dell lost the edge. They were neither better nor cheaper. They totally lost focus and created like a hundred lines of products when all you needed was a computer :) When I go to their site, they have so many products, that it seems to me I have to fill out a survey and navigate many screens so that "Dell", not me, decides what the best machine for my needs is. I no longer like them.

Then I started taking notice of HP. They started to innovate as much as Sony but they were cheaper than Sony. I started to like them, I also felt HP had the best printers and reliability and quality. But seems to me they don't care about quality as much, and their products can be hit or miss.

So who do I think makes the best PCs now? Apple. Their brand represents the things that are important to me: quality, elegance and simplicity. They seem to be constantly innovating and finding ways to do more with less. Amazing company. I think that while Steve Jobs is there, they will continue down this path.

 

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#14) On November 20, 2008 at 12:08 AM, TheGarcipian (87.28) wrote:

Deb, I think you're pretty close with your guess of DJIA at 7000, though I've personally stated prior to this that I expect it to land between 7200-7500 before heading back up. This equates to about 725 on the S&P500 scale. It could go lower (hopefully not), but based upon theoretical and historical P/E ratios for past declines and recessions/depressions, this is where the markets should bottom out. However, every circumstance is different, even if it's in the smallest of details. I'm more concerned about the length of the cycle. It would seem that if we suddenly drop to 7200 in the next 4 weeks that we've not had enough pain in terms of duration to really mean anything to the average investor and those nefarious fund managers. The bottom will only occur when most everyone is exhausted and hope is all but lost. Hopefully, we won't have to go below 7000 on the Dow to prove that, but we may have to go 6-9 more months (and probably more like 12 more months) in order to get there psychologically. And if the market is anything, it's about investor psychology (markets are not efficient -- no way in hell; that's a line of academic crap, not reflecting reality).

Cheers,
--Gar

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#15) On November 20, 2008 at 1:35 AM, dwot (99.55) wrote:

DemonDoug, I know that with the great depression the bottom wasn't in until 32...  Damn good link there...

Johnw106, lots of people didn't see it or they'd have exited ahead of the hedge funds.

QualityPicks, I don't like Apple.

TheGarcipian, I think we have to wait until problems with the alt-A mortgages and the commercial real estate to work through the economy.  To me, Dow 7000 is where to start looking, not necessarily buying.

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#16) On November 20, 2008 at 4:06 PM, gman444 (31.43) wrote:

 Dwot,

 If I am understanding correctly, you are estimating bottoms of 700/7000 for S/P/Dow in anticipation of the alt-A, real estate, and credit card problems to come?  In other words, you are anticipating markets going lower than that if those problems don't hit before markets reach those targets?  Many props for your insights....

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#17) On November 20, 2008 at 6:19 PM, dwot (99.55) wrote:

gman444, if you look at the big credit driven crashes of the past, well, the great depression didn't bottom until 11c on the dollar from the top.  The Asian crisis was the same.

Who knows where the bottom is, but there is a serious, serious currency/debt problem and I thought 7000/700 was a good place to start looking. 

I have not followed the market nearly as closely as was following it when I decided to bail just over a year ago.

Even at the 7000/700 level I think there are significant risks because you really don't know who owes whom and there is no question that some long standing businesses are going to go out of business and there will be challenges from that for other businesses.

Those derivatives are still out there.  There are lots of hedge funds that are still running into trouble.

I tend to think it will go lower and probably below a fair value because of forced selling.

I also do not see the markets working like the past for long term.

I should do new post...

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