Market crash: are we there yet ?

[Rickm505]

The most amazing thing just happened. I read a Ben Stein column and didn't choke. It would appear that Mr. Stein has had a brain transplant. He must have, as now he sounds just like me.

I never thought I would type that sentence.

Yahoo! Personal Finance: Calculators,Money Advice,Guides,& More

May wonders never cease. Mr. Stein is now calling for recession and blaming the Bush administration. It appears that Sailaway's pundit has abandoned him.

Or perhaps Mr. Stein has been reading my posts?

[eherlihy]

Originally Posted by chris_gee

The Dow chart posted by Erlihy is misleading. It appears to show a 4500% increase in the DOW from 1928 - 2007.
Since the DOW composition changes with time one would need in effect an index fund if such existed to mirror the changes.
The real return is after inflation, dividends, tax and fees. One estimate 1924-2006 is 2.69% pa but this does not include dividend tax and sets fees at 1.25%.
The graph is here iTulip.com - Real DJIA 1924 to 2006
Using the 2.69 instead of the author's original real adjustment of 1.64% one still gets a value about 1/3 over trend ie a 25% adjustment.
Of course that depends somewhat on the accuracy of the CPI figures.
The real return long run return may surprise some. I calculate it at around 800% over Erlihy's time period not 4500% much of the difference being inflation and dividends. In fact the real return would be pretty similar to bonds after tax as one would expect from blue chip companies of that order.

Sorry Chris,

I didn't intend to mislead. I was just quoting my source, finance.yahoo.com to make a point. I'm not sure that I buy into the "anonymous analyst's" theories, as I have not read them yet, (I haven't finished the 20+ pages in this tome yet either) but here is his graph:

But, as I said in my earlier post,

Originally Posted by eherlihy

If the sky is falling, it's still got a long way to go...

[wind_magic]

Fed decision here in about an hour on interest rates. A good time to be long companies that manufacturer green printers ink and paper.

[sck5]

fed drops rates by three quarters of a percent. THEY sure think there is a major problem in the markets. Lets hope they can deal with it (though it would be rash to bet on it)

[Rickm505]

Originally Posted by sck5

fed drops rates by three quarters of a percent. THEY sure think there is a major problem in the markets. Lets hope they can deal with it (though it would be rash to bet on it)

Let's see, The Fed has lowered its benchmark overnight rate six times and the discount rate eight times since the middle of August.

Obviously they are running scared, yet according to Chuckles, everything is just fine and The Fed must be mistaken yet again. Score yet another point for Mr. Credibility.

[sailaway21]

America will never have a strong dollar again and the beginning of the end was NAFTA. Once again rick displays that his economic knowledge begins and ends with the "shift-4" key of his computer. Either of those two assumptions are preposterous on the face of it and it's hardly worth explaing why to someone not listening.

That housing markets are in disarray and starts at a sixteen year low just might have something to do with the fact that there is already a tremendous over supply of new, uninhabited houses on the market. But then, Rick has always thought that the economy begins and ends with housing. It may be a news flash to Rick but most people only need one house. That's a fairly inelastic demand most of the time. Steady perhaps, but not elastic.

Interesting factors that make the relative strength of the economy impressive: Crude Oil over $100 a barrel-can't imagine how that would effect the largest industrial economy in the world. There are two wars going on. Unemployment is at historic lows. Don't bother preaching to me your version of the unemployment numbers; I live in Michigan which leads the nation and we're at 7%, a very low number historically speaking. People are leaving Michigan for work elsewhere and that's the good news; there is work elsewhere. In the meantime, the rest of us in Michigan continue to get up and go to work even though the auto industry is in the dumps and has been.

Given all those factors, and the housing turmoil, it's amazing the economy has done so well. Maybe the American economy is just a little bit more resilient than Rick imagines, and we know he has a fertile imagination.

The economy is bigger and more complex than anyone can understand or even imagine. The only thing that we're really good at is saying what it did six months ago and, even then, our impressions are subject to revision. That Rick continues, inexhaustably, to focus on his travails in the Florida condo market reminds one mostly of a welfare queen confronted with an empty Cheese-Doodles rack at the 7-11. That I persist in answering him doesn't say much for me either.

[wind_magic]

As true today as it was in April of 2000 ...

What a Real Bear Market feels like

My favorite line out of the whole article ... "Sometimes it's not a dip"

Edit, Sway that Cheese Doodle bit was hysterical ...

[Rickm505]

Originally Posted by sailaway21

Once again rick displays that his economic knowledge begins and ends with the "shift-4" key of his computer. Either of those two assumptions are preposterous on the face of it and it's hardly worth explaing why to someone not listening..

Of course I listen. I just don't agree with you and these days it appears I have some pretty good company. When the Federal Reserve, and the Secretary of the Treasury set policy that I happen to agree with, apparently they can't find "shift-4" either. I'll take that level of economic knowledge in a New York Minute.

Originally Posted by sailaway21

That housing markets are in disarray and starts at a sixteen year low just might have something to do with the fact that there is already a tremendous over supply of new, uninhabited houses on the market. But then, Rick has always thought that the economy begins and ends with housing..

Oh boy, where do I begin. Have you read nothing that I post? Talk about not listening Sailaway.

Yes this crisis began with real estate, it was caused by real estate and by real estate alone. Or to be more accurate it was caused by the financing mechanism put in place to handle the mortgages. Catch up on your reading sir. Our system has frozen over the inability to determine the quality of underlying mortgage backed securites. To Illustrate the point. The two Bank failures in the last 4 days. Both Carlyle Group and Bear Stearns folded because of mortgages. This is the crisis. It has how did you put it? "begins and ends with housing." Your attempt to foist the failures of our banking system on my shoulders is confusing at best. I have been out in front of issue and attempted to explain what was going to happen to our economy to this group 100 times since last August. You just didn't listen.

Originally Posted by sailaway21

Interesting factors that make the relative strength of the economy impressive: Crude Oil over $100 a barrel-can't imagine how that would effect the largest industrial economy in the world. There are two wars going on. Unemployment is at historic lows. Don't bother preaching to me your version of the unemployment numbers; I live in Michigan which leads the nation and we're at 7%, a very low number historically speaking. People are leaving Michigan for work elsewhere and that's the good news; there is work elsewhere. In the meantime, the rest of us in Michigan continue to get up and go to work even though the auto industry is in the dumps and has been..

I can't believe you wanted to type this. Look at what even you are saying. Crude oil over $100 a barrel? Sailaway, who do you think caused that to happen? Democrats? This administration caused this by starting a war in Iraq they had no business starting. And to suggest that 7% unemployment is a good economy, shows what you think of your neighbors who can't find a job. Maybe if that happened to you there would be at least some understanding of the pain this can cause.

Originally Posted by sailaway21

The economy is bigger and more complex than anyone can understand or even imagine. The only thing that we're really good at is saying what it did six months ago and, even then, our impressions are subject to revision. That Rick continues, inexhaustably, to focus on his travails in the Florida condo market reminds one mostly of a welfare queen confronted with an empty Cheese-Doodles rack at the 7-11. That I persist in answering him doesn't say much for me either.

What we do understand is the economy can not function without financing. Or have you not noticed that our leaders are in full panic over this crisis and the man you spent the last 6 months quoting in this forum has now done a 180 and disagrees with you as well.

I'm surprised at you. You live in one of the states that's been hit the hardest and yet do nothing to study why this happened to the people of your state. It turns out you're just another republican rat who's shocked that the lights have been turned on and you have no where to hide.

While you're pondering this why don't you take out an ad in the local paper and tell your neighbors how you don't want the dollar to fall so that Ford and GM and Chrysler can export more autos and put them back to work. If I were you, I wouldn't put my name or address in that ad.

At least Ben Stein found the backbone to put the blame where it belongs. There's a lesson in there for you Sailaway.

[chucklesR]

Rick - quote the post where I said the economy was 'doing just fine'?

find it, quote it.

[PBzeer]

Oddly enough, as the moon set in the west, the sun, did indeed rise in the east this morning. The market goes up, the market goes down. Somehow, I get the feeling, were we all still around, that 200 years from now we could be having a very similar conversation.