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alstry (35.45)

Seriously.....Don't Panic

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October 09, 2008 – Comments (17)

As many of you know I have been warning about this for about this for a while now.  Posting similar blogs time and time again saying the same thing in a variety of ways.  For what its worth.....we ain't even close to the bottom yet.....in my humble opinion.

Few of the so called "experts" on TV or the press are even identifying the problem correctly.  They have the issue backwards.  It is not a credit crisis causing the economic downturn.  It is because of nutty lending practices of the past eight years ending that has caused an evaporation of revenues.

Without revenues, Individuals, Businesses, and Governments go BANKRUPT.  Absent some sort of crazy government intervention that I can't forsee......get ready for a rapid rise in bankruptcies.  In the short run it will be painful but in the long run we will be much more competitive as a nation to set the foundation for our future growth.

This clensing process is capitalism....the greater the excess....the harder the clensing.....and our excesses were unprecedented......thus the correction should be too.  What should worry you is the current policies of the current administration driving our country to socialism/communism......and rest assured, that is the direction we are going.

We must allow the system to purge itself of the excesses or else government will impose a greater and greater control of our lives.  Don't panic about the market  correction....sit back and relax...it still has a long long way to go....what you should worry about is how our government is starting to dictate more and more of our daily lives....it if goes much further....then panic will be the appropriate response.

 

17 Comments – Post Your Own

#1) On October 09, 2008 at 8:01 PM, columbia1 wrote:

Seems as Obama goes up in the polls, the Dow goes down, wonder if there is any correlation between the two, I believe Obama teamed up with a democrat controlled congress will speed up the process of the fall of capitalism and the acceleration towards a more socialist society. Could that be possible? people voting with there wallets, large investors worried about higher capitol gains and dividend taxes, waiting till the election to figure how to best invest their money. Would the Dow of suffered as much if this was not an election year?

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#2) On October 09, 2008 at 8:07 PM, JakilaTheHun (99.93) wrote:

Our excesses aren't "unprecedented".  The excesses leading up to The Great Depression were worse. I think everyone calling for Dow 3,000 and the such are ignoring the fundamentals of the U.S. economy at the current point in time.  Things can get worse, but I think going much below Dow 7,000 would simply be absurd.  

At the same time, this is not to suggest that the US's best days are ahead.  Quite the contrary.  I think people think this is "the big one".  Rather, the big one is further into the future when US govt no longer can afford to "cut" taxes or bail anyone out because the US balance sheet is in such horrid shape, it has no choice but to allow a thorough economic collapse.  

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#3) On October 09, 2008 at 8:50 PM, alstry (35.45) wrote:

Columbia......Actually,

with regard to the fall of capitalism...nobody pushed  the ball further and faster then the current administration.  In less than eight years...the national debt doubled.....what took over 200 years to accumulate this administraton doubled it in less than eight.

Now someone has to figure out a way to pay back the debt that this administration watched accumulate.  The hypocracy comes in the fact that somehow it tries position itself as fiscally responsible....it is anything but and actually the most fiscally irrersponsible administration in US history.

It is not a Republican or Democratic issue...both are culpable...it is just that no one is more culpable than the current administation.

This is simply the facts and they are irrefutable.

Huney,

The excesses leading up to depression in the thirties were not even close to today.  Private debt, non federal, on an inflation adjusted per capita basis was not even in the same league as it is today.

Same with state and local government debt.

You will learn this fact very soon.

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#4) On October 09, 2008 at 9:03 PM, JakilaTheHun (99.93) wrote:

Alstry,

You know why they called it "The Roaring Twenties"?  Everything about the '20s was excessive. Even more so than the '90s.  Excessive lifestyles, excessive spending, and excessive valuations based on the naive belief that the market would perpetually go upwards.  

Moreover, the one thing about the Great Depression crashes not present in the current crash is an absurd level of speculation.  Certainly, you have some speculation driving up stock prices in recent years, but the big difference in the Great Depression was that it wasn't just a handful of stocks --- it was virtually every single stock!  In essence, the Great Depression was like combining the Internet bubble with the S&L crisis and throwing in '70s era stagnation to boot. 

I'm not sure why you're preaching about the debt.  If you read my comment fully, you would've realized I agreed with you about the detrimental effects of the debt --- I merely disagree with you about the timing.  GM didn't go under in the 1970s and the US won't "go under" in 2009.  Our debt is really bad right now but it's not unsufferable yet.  It's going to take another decade or so and the next crash is going to be harder than this one.  

But we're not quite there yet.  We keep biding for time and eventually we'll run out, but it'll probably be more like 2020 or 2025 before everything fully catches up to us. 

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#5) On October 09, 2008 at 9:11 PM, MarketBottom (29.79) wrote:

Alstry,

You are correct about most everything that you say. But, there is one major area that requires further thought. All events can after the fact be traced to their root cause. What we as Americans are going thru, in my humble opinion is directly related to historic acts of treason that occured over the last sixteen years. The answer to where we are today is contained in the US 30 year Bond Market, and as you say the current budget deficts.

I am not happy for the pain that people are experiencing now,  but in the end, we will be better people on more solid footing.

Safe Passage to all

 

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#6) On October 09, 2008 at 9:21 PM, alstry (35.45) wrote:

MarketBottom,

you are dead on....it would have been a lot less painful if this was addressed a few years ago.....but it is what it is and now we must simply face the tsunami.

The sad part is even today, in the "information age"....how lacking the American people stand with honest information.

Huney,

please don't take this the wrong way...but you are dead wrong.  Yes there were excesses but it was limited to a very small percentage of the population.

In the twenties few owned stocks, few had much of any debt, mortgages were 30% down and eight year amortizations, cities and states had almost no debt.

I am not sure if you will understand this or not, but in the thirties is was primarily an illiquidity issue versus today it is an insolvency issue.

in the seventies...GM had about 1/100th of the debt it has today on a relative net basis......

At this point we can just agree to disagree and thanks for your input.

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#7) On October 09, 2008 at 9:22 PM, columbia1 wrote:

I agree with you, and I'm a Republican,both sides deserve blame, way to much spending in the first term left us with huge deficits, putting us in a much weaker position to tackle this problem, And the method they used to deal with this crisis was more like punting the ball! One thing that really upsets me is Bush's attitude, he definitely is not acting as a strong leader, trying to calm people and slow down the panic talk(ensuring confidence that the market needs to hear). Things are bad, but all the media hype will just make things worse than they need to be. Smooth and steady should be the talking points, not doom and gloom!!

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#8) On October 09, 2008 at 10:18 PM, alstry (35.45) wrote:

EVERYBODY RELAX!!!!!!!!!!!!!!!!!!!!1

Oct. 9 (Bloomberg) -- President George W. Bush will address the nation tomorrow to tell Americans they should remain ``confident'' amid falling stock markets and a worldwide credit crisis, administration spokeswoman Dana Perino said.

The president wants to ``assure'' the country that Treasury Secretary Henry Paulson and other administration officials are making ``every effort to stabilize our financial system,'' Perino said.

BOY DO I FEEL BETTER NOW!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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#9) On October 09, 2008 at 11:39 PM, mliu01 (< 20) wrote:

We have not see any visible change in our daily life yet.

Saddly, it will come soon!!!

when everyone who has money in stock market see that and act. That will be the time we hit the bottom. alsty, I love your blog. You did a wonderful job. alstry I suggest you listen to peter schiff's Oct 1 radio show. in europacific website.

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#10) On October 10, 2008 at 12:03 AM, mickeyc21 (30.93) wrote:

Hey Alstry,

After a year of nasty comments I can't believe you're still getting argumentative people on your blog. You should be given a medal for (hopefully) convincing a few people to play it safe.

Sorry Huney, this aint the Great Depression crash. This is the railroad crash of the 1800's. Comparing a crash when the US was the world's biggest creditor nation to one where it is the world's largest debtor nation is a non-starter. 

 

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#11) On October 10, 2008 at 7:05 AM, saunafool (98.65) wrote:

Things are different this time.

How? It might be worse.

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#12) On October 10, 2008 at 8:31 AM, alstry (35.45) wrote:

mickey,

The nasty comments don't bother me.....I am not looking for praise.....although I appreciate the nice comments.....this is my way of giving back and keeping a diary of sorts.

If I can enlighten just one person....it is a net positive.

On the game side, my  guess is that you will start to see some bears turn bulls in the near future.  The market could react short term.....but until the appropriate policy decisions are implemented......down is the trend for the foreseeable future.

 

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#13) On October 10, 2008 at 10:09 AM, jegr5347 (< 20) wrote:

I am disgusted. Grade school children could have managed our treasury and central bank better than all of the dumba$$es in Washington. I am a sickened Republican who thought Barney Frank and Chris Dodd did a good job of putting together the rescue bill until I saw a 2003 you tube video of Frank. In it he was defending the exponential uncontrolled growth of Fannie and Freddie against Republican sentiment in one of the committee hearings.

Washington needs to be purged from top to bottom. Done!! 

Huney, the Great Depression resulted from an asset bubble just like the Dot Com bubble. Alstry is absolutely right, this is a debt bubble. Much worse and unprecedented. Housing prices only got to inflated levels because of unprecedented easy credit advocated by Washington, Congress, Clinton, Bush and Greenspan. Nothing like the Great Depression.

 

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#14) On October 10, 2008 at 11:28 AM, alstry (35.45) wrote:

jegr,

You give me hope that there are still people in America that can see the light.

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#15) On October 10, 2008 at 5:37 PM, StatsGeek (29.89) wrote:

I agree that we haven't seen the bottom yet.  But I also wouldn't be at all surprised to see the Dow back above 10k before that.  The market rarely goes straight down.

This debt and confidence problem is bigger than the vast majority can fathom.

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#16) On October 10, 2008 at 9:18 PM, Jhana9 (< 20) wrote:

Alstry--If nothing else, you have added perspective. I follow your thinking, and I'm glad you're sharing. Keep going. I look at all sides, but frankly, the things you say seem pretty right on. Even if in the end you're wrong, its good so hear some reasoned arguments.

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#17) On October 10, 2008 at 11:19 PM, alstry (35.45) wrote:

Glendorian,

I doubt I am wrong on this one...but don't worry...when most are in despair...you can be pretty confident I will be one of the biggest bulls in CAPS and providing lots of positive waves.

To me its simply a game.....and in games there are winners and losers.  The fun part about blogging is that you can help others without handicaping your own success.  Its really the best of both worlds.....because others comments actually allow me to question my own thesis helping me as well.

My nature is not that of a trader.....  But it is a skill I will be focusing on in the upcoming months......if I gain confidence in this area....I may focus more of my blogs into trading now that the mainstream press has picked up on my scoop and started running with the ball.

I am not sure there is much more I can add regarding the economic headwinds that you can't read in any newspaper or local broadcast.  At this point, the  real question will be what political changes will be forced upon us......such as 90% tax rates, nationalization of private assets,ect......but that isn't really germain to a investing message board.

For the past six months I warned about an economic disaster.  It was relevent to investing because I went net short across the board and out ran a 30% correction in the market by over 20% moving the ball forward NET by over 50%.  Not bad if I say so myself and hopefully some of you were able to take advantage of the information provided.

CAPS is a wonderful forum and there are many others that have similar perspectives as mine.  Clearly, I have no monoply on many of the issues I discuss...it is just that I think I was a bit more extreme than most a lot earlier.  That said, the magnitude of the changes going forward are going to shock many.

The political changes we are about to see will have a profound impact on our personal lives but really will be collateral to investing. 

My success in life has come from anticipating change.....being right.....and taking advantage of it.  Trading is a whole different ball game....you have to run with the chimps and try to figure out how manic depressive people will act or react while acting bananas regardless of reality.  I am not sure I am cut out for it but I am going to give it a shot trying to develop stratagies to compensate for my strengths and weaknesses.

This will be the new Alstry for CAPS....with the transition likely taking place over a period of weeks or months. 

In the mean time, my expectation is that real estate in America will be dead for years if not decades.  FloridaBuilder will stop analyzing dying RE deals because all deals will be dead....at least for the next five years.  It will come to light that the accounting for many of America's public companies was as corrupt and misleading as ever.  Many will never want to invest in the stock market for years....if not decades.

The fallout will be profound...but so will the oportunities.  And since I am driven by opportunities.....I look foward to the challenges.

 

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