Monday 8/8/2011 Judgement day for world stock market

[cypherdoc]

a CNBC analyst made a great point.  if the debt downgrade really meant we were going into a hyperinflationary phase then UST yields would be going UP.  instead they are going DOWN which means people are fleeing into UST's despite the downgrade.  this means investors are MORE fearful of another economic downturn and are fleeing stocks and risky assets. 

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[BTC_Junkie]

a CNBC analyst made a great point.  if the debt downgrade really meant we were going into a hyperinflationary phase then UST yields would be going UP.  instead they are going DOWN which means people are fleeing into UST's despite the downgrade.  this means investors are MORE fearful of another economic downturn and are fleeing stocks and risky assets. 

The ironic thing is that treasuries going from AAA -> AA+ means the average rating of portfolios has lowered. As funds try to adjust weightings to move their average back upward, they will most likely have to ditch BBB- bonds and buy more treasuries (by far the largest high rated bond available).

Treasuries being downgraded could mean that more funds will be buying them.

[cypherdoc]

a CNBC analyst made a great point.  if the debt downgrade really meant we were going into a hyperinflationary phase then UST yields would be going UP.  instead they are going DOWN which means people are fleeing into UST's despite the downgrade.  this means investors are MORE fearful of another economic downturn and are fleeing stocks and risky assets. 

The ironic thing is that treasuries going from AAA -> AA+ means the average rating of portfolios has lowered. As funds try to adjust weightings to move their average back upward, they will most likely have to ditch BBB- bonds and buy more treasuries (by far the largest high rated bond available).

Treasuries being downgraded could mean that more funds will be buying them.

watch out Russell.

[cypherdoc]

gold AND Treasuries going up in value is a contradiction.  one is due to break down.  which one?

[demonofelru]

Dow futures point to a 150-200 point drop in the dow at the opening bell.  Over the next 3 months, though, expect U.S. markets to appreciate in value 25%, just like with Japan's 1998 debt downgrade from AAA to AA resulting in the Nikkei jumping 25-30%.

you're quickly losing credibility.  stocks continue to crash and bitcoin rising.  sorry.

Yeah stocks are on unsure footing right now, however bitcoin is not exactly rising.  You say that but he's the one who's credibility is suspect?

[cypherdoc]

Dow futures point to a 150-200 point drop in the dow at the opening bell.  Over the next 3 months, though, expect U.S. markets to appreciate in value 25%, just like with Japan's 1998 debt downgrade from AAA to AA resulting in the Nikkei jumping 25-30%.

you're quickly losing credibility.  stocks continue to crash and bitcoin rising.  sorry.

Yeah stocks are on unsure footing right now, however bitcoin is not exactly rising.  You say that but he's the one who's credibility is suspect?

define your time frame.

[demonofelru]

Dow futures point to a 150-200 point drop in the dow at the opening bell.  Over the next 3 months, though, expect U.S. markets to appreciate in value 25%, just like with Japan's 1998 debt downgrade from AAA to AA resulting in the Nikkei jumping 25-30%.

you're quickly losing credibility.  stocks continue to crash and bitcoin rising.  sorry.

Yeah stocks are on unsure footing right now, however bitcoin is not exactly rising.  You say that but he's the one who's credibility is suspect?

define your time frame.

I was thinking your time frame is the present.  "stocks continue to crash and bitcoin rising" makes it seem you were saying bitcoin will keep rising which would mean they currently are.  I seems I have misinterpreted it though.  It seems like English might not be your native language that may be why I misunderstood if so sorry wasn't trying to be a jerk.

[hugolp]

a CNBC analyst made a great point.  if the debt downgrade really meant we were going into a hyperinflationary phase then UST yields would be going UP.  instead they are going DOWN which means people are fleeing into UST's despite the downgrade.  this means investors are MORE fearful of another economic downturn and are fleeing stocks and risky assets. 

The ironic thing is that treasuries going from AAA -> AA+ means the average rating of portfolios has lowered. As funds try to adjust weightings to move their average back upward, they will most likely have to ditch BBB- bonds and buy more treasuries (by far the largest high rated bond available).

Treasuries being downgraded could mean that more funds will be buying them.

But only one agency has changed the rating. I think the USA gov debt can still be claimed as AAA because of the other agency ratings (not 100% sure though).

[lemonginger]

Well Israel's stock market tanked so bad they had to stop trading today.  If anyone would have known of this downgrade beforehand I thought it would be the israeli's

Israel has its own domestic issues at the moment.

We might see another 3% down day, but honestly I think it's more overall shakiness, threat of Italy/Spain, China making some noise than the downgrade, which was heavily telegraphed all week.

[KBundy]

Greetings all,

Given the commotion regarding the recent dip in several stock indices, I thought it may applicable to post this chart.

http://i29.photobucket.com/albums/c273/tiabobs1/dowjones.png

As you can see, there have been several large dips in the market over the last few decades, and while causing short term problems for the American economy, the market has always bounced back, and we're all still alive and kicking, so far.

Also take a look at this,
http://online.wsj.com/mdc/public/page/2_3047-djia_alltime.html

While the large dip in the market on 08/04/2011 was severe, there were 4 days in 2008 in which the market tumbled even larger margins.

While professional money is one of the causes of slow decimation of the middle class, and is an unspeakable evil in this world, the "Judgement Day" frame of mind people are taking about this dip may simply be a ploy to shake out the market and accumulate and lower price levels.

-KBundy

[Cluster2k]

Dow futures point to a 150-200 point drop in the dow at the opening bell.  Over the next 3 months, though, expect U.S. markets to appreciate in value 25%, just like with Japan's 1998 debt downgrade from AAA to AA resulting in the Nikkei jumping 25-30%.

you're quickly losing credibility.  stocks continue to crash and bitcoin rising.  sorry.

Bitcoin rising?  I swear they were worth over $20 two months ago.  Maybe I'm just imagining it.

I'm sure someone will point out that bitcoins were worth less than a dollar early this year, but that's about as useful to me as pointing out that the Dow Jones index was once less than 1000 points therefore it's still heading up today.

[brocktice]

Dow futures point to a 150-200 point drop in the dow at the opening bell.  Over the next 3 months, though, expect U.S. markets to appreciate in value 25%, just like with Japan's 1998 debt downgrade from AAA to AA resulting in the Nikkei jumping 25-30%.

you're quickly losing credibility.  stocks continue to crash and bitcoin rising.  sorry.

Look, I'm all on board with bitcoin and everything, but the slow climb back from lows not seen before in months is not what I'd call a significant rise worth noting.

[cypherdoc]

sure i'm biased and yes a btc rise depends on your timeframe but look, btc is a great concept whose time has come. 

i like to buy when there's blood in the streets.  i "think" i see a price stabilization and slow climb from the ashes but only time will tell.

[HappyFunnyFoo]

KBundy,

I think you're the only one that has a solid understanding of the stock market here on these forums.  Props for posting the chart and for attempting to inject reason into this looney bin.

On a side note, P/E of financial stocks is so incredibly low now that they're the best buy of the 21st century, second only to March 2009 (I tripled my money in one day on Citigroup!). This, combined with great earnings, an improving job market, falling oil prices, and the simple fact that banks are far, FAR more capitalized than they were in the fall of 2008, should lead to a gentle bull market.

If you had your buy button ready last week, you should be sitting on 15-20% solid gains on financials right now.  Bitcoin is still in the sub $10 crapper.  I'm waiting for that supposed bitcoin price rally...

[BTC_Junkie]

On a side note, P/E of financial stocks is so incredibly low now that they're the best buy of the 21st century

It depends what you think that "E" really is... if you think there's no double dip then you're correct.  However if there is a W shaped recovery then reduced earnings will likely show the current pricing more reasonable.

banks are far, FAR more capitalized than they were in the fall of 2008

US banks are certainly in better shape (except for BoA which is still questionable), but a lot of the current concern is with European banks.  The impact of EU Government bond "defaults" is still being determined, and creates a lot of uncertainty.

[Ten98]

As you can see, there have been several large dips in the market over the last few decades, and while causing short term problems for the American economy, the market has always bounced back, and we're all still alive and kicking, so far.

Sir, I must applaud you. To state that the great depression was merely a "short term problem for the American economy" is truly a masterwork in understatement.

Bravo, good sir, bravo.

Most of us don't view the world in 100-year time spans, and we are somewhat worried.

[MatthewLM]

a CNBC analyst made a great point.  if the debt downgrade really meant we were going into a hyperinflationary phase then UST yields would be going UP.  instead they are going DOWN which means people are fleeing into UST's despite the downgrade.  this means investors are MORE fearful of another economic downturn and are fleeing stocks and risky assets. 

The ironic thing is that treasuries going from AAA -> AA+ means the average rating of portfolios has lowered. As funds try to adjust weightings to move their average back upward, they will most likely have to ditch BBB- bonds and buy more treasuries (by far the largest high rated bond available).

Treasuries being downgraded could mean that more funds will be buying them.

These funds are completely idiotic. I don't know if there would be any data for this but I bet the federal reserve increased it's purchases of treasuries to prevent yields increasing after the downgrade. You surely can't put this all down to funds and idiotic scared investors?

[CurbsideProphet]

KBundy,

I think you're the only one that has a solid understanding of the stock market here on these forums.  Props for posting the chart and for attempting to inject reason into this looney bin.

On a side note, P/E of financial stocks is so incredibly low now that they're the best buy of the 21st century, second only to March 2009 (I tripled my money in one day on Citigroup!). This, combined with great earnings, an improving job market, falling oil prices, and the simple fact that banks are far, FAR more capitalized than they were in the fall of 2008, should lead to a gentle bull market.

If you had your buy button ready last week, you should be sitting on 15-20% solid gains on financials right now.  Bitcoin is still in the sub $10 crapper.  I'm waiting for that supposed bitcoin price rally...

The S&P is still overvalued by historical standards.

http://www.multpl.com/

I know you're specifically talking about financials but for a bit broader spectrum, there's the chart.  Had you been long financials yesterday and today you would have gave most of that gain back.  Had you been short a few weeks ago you could've easily surpassed those gains.  Hindsight is nice like that.

I'll give you that the banks are better capitalized now than in 2008.  I'm assuming we're talking about US banks.  But the US is still on the cusp of a recession and soverign default is a very real concern for MULTIPLE European countries.  That's enough to bring everything down, financials (as well as small cap, biotech, etc.) will be hit the hardest.

I said it before on this board, the only bank I'm really looking at right now is WFC.  And I think it will go cheaper so I'll wait.  Then again I could be wrong, afterall, only one person on this board is apparently qualified to understand the stock market.

[BTC_Junkie]

The S&P is still overvalued by historical standards.

http://www.multpl.com/

I know you're specifically talking about financials but for a bit broader spectrum, there's the chart.  Had you been long financials yesterday and today you would have gave most of that gain back.  Had you been short a few weeks ago you could've easily surpassed those gains.  Hindsight is nice like that.

I'll give you that the banks are better capitalized now than in 2008.  I'm assuming we're talking about US banks.  But the US is still on the cusp of a recession and soverign default is a very real concern for MULTIPLE European countries.  That's enough to bring everything down, financials (as well as small cap, biotech, etc.) will be hit the hardest.

I said it before on this board, the only bank I'm really looking at right now is WFC.  And I think it will go cheaper so I'll wait.  Then again I could be wrong, afterall, only one person on this board is apparently qualified to understand the stock market.

I agree with sentiment regarding the financial's uncertainty, however your statements regarding the P/E ratio of the S&P looks inaccurate. The Wall St. Journal reports the S&P P/E at 13.57 (a good amount lower than the 16.5 historical average). 
See: http://online.wsj.com/mdc/public/page/2_3021-peyield.html

Of course, all that really matters is if the current "E" will go down from here or not, so P/E is a pretty poor indicator of value during recessions.

[CurbsideProphet]

The S&P is still overvalued by historical standards.

http://www.multpl.com/

I know you're specifically talking about financials but for a bit broader spectrum, there's the chart.  Had you been long financials yesterday and today you would have gave most of that gain back.  Had you been short a few weeks ago you could've easily surpassed those gains.  Hindsight is nice like that.

I'll give you that the banks are better capitalized now than in 2008.  I'm assuming we're talking about US banks.  But the US is still on the cusp of a recession and soverign default is a very real concern for MULTIPLE European countries.  That's enough to bring everything down, financials (as well as small cap, biotech, etc.) will be hit the hardest.

I said it before on this board, the only bank I'm really looking at right now is WFC.  And I think it will go cheaper so I'll wait.  Then again I could be wrong, afterall, only one person on this board is apparently qualified to understand the stock market.

I agree with sentiment regarding the financial's uncertainty, however your statements regarding the P/E ratio of the S&P looks inaccurate. The Wall St. Journal reports the S&P P/E at 13.57 (a good amount lower than the 16.5 historical average). 
See: http://online.wsj.com/mdc/public/page/2_3021-peyield.html

Of course, all that really matters is if the current "E" will go down from here or not, so P/E is a pretty poor indicator of value during recessions.

It depends on how the "E" is being calculated.  Trailing, forward-looking, etc.  If you click on the FAQ section of the link you'll see why there's a difference in Shiller's calculation vs the one you quoted.