Thu 16 Oct 2008
Poll du Jour: How deep is the rabbit hole?
Posted by Prieur du Plessis under Investment, Markets, Money
Renewed economic fears were paramount yesterday with investors firmly focused on the intensifying economic damage that inevitably follows financial damage. Although the credit markets were seeing some signs of easing, spreads were still at elevated levels in the absence of confidence returning to the lending markets.
Some Q3 earnings reports beat analysts’ estimates, but the debate is now squarely on how deep and long the global recession will be. US GDP estimates are continually being revised lower, with the Q3 numbers now at -1% and Q4 at -2% “Yet Street analysts still see higher earnings!?!!?,” questioned Bill King (The King Report).
Nouriel Roubini, professor at New York University and chairman of RGE Monitor, forecast the US’s economic woes at an early stage and with great accuracy. He remains pessimistic and sees a deep and prolonged recession, lasting at least 24 months, as reported in the Bloomberg video interview below.
Click on the image below to view the video clip.
With ugly economic realities weighing on stocks, causing another 90% down-day yesterday, how do you see the stock market’s direction over the next few months? Have prices discounted the worst and will October play its traditional role as a “bear killer” (having done so on 11 occasions since WW2), or will markets sink deeper into the abyss?
Let’s do a snap poll to determine readers’ views on whether the Dow Jones Industrial Average will be up or down from its current level (8,578) by the end of October 2008 and December 2008 respectively. All you need to do is to click the appropriate button on each of the poll images below. The poll will run until 22:00 EST on Friday, October 17, 2008, whereafter the results will be reported on the blog.
Please also post any interesting ideas or links that you would like to share with the Investment Postcards community, in the comments section.
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October 16th, 2008 at 3:27 pm
The amount of inflation we can expect to begin to arrive around year end can obscure the results of this poll. Flooding the money markets can cause them to “rise” while actually becoming steadily worth less. This phenomenon should prevail for the next several years.
October 16th, 2008 at 3:45 pm
As someone fairly new to the market (and below 30 years old) this seems like an opportunity to go balls to the wall! If only I could source liquidity… So what if it takes another 2 years to clear the mess? I think; not sure about Dec 2008, but DOW much higher in Dec 2009.
October 16th, 2008 at 3:46 pm
The amazing levels of volatility we are experienceing just might push the sell-off to levels noone is expecting at this stage, when combined with the public’s sentiment (have we experienced the true herd effect yet?) when everyone starts bailing out … at least that is if the governments of the world can’t really start to reassure the investing community that everything will be patched back together for the next bubble.
October 16th, 2008 at 4:12 pm
This mess is not going to go away in a hurry and more downside is a very real possibility. And why on earth should we have any confidence in the governments to solve the problem overnight - they caused it in the first place.
October 16th, 2008 at 8:24 pm
Another great article! The problem now does, indeed, rest on main street. Unemployment has not to date shown significant downside, but I believe consumer spending is going to be dismal in the near future. Unemployment will then ramp up by spring time.
What will extend the mess is both credit tightening for individuals and the overhead supply of both housing and areas such as autos during 2009.
October 16th, 2008 at 9:02 pm
never trust anyone under 300, go back to 1720 no one can forecast what outcome we will have. if anything life and markets have cycles and this one started late 2006 and should end earliest late 2010 most likely 2012. then we will have a sideways period of 1-3 years due to the new regulations 2014 will start a value trade,then a return to global growth(oil demand= which should last for a 6 year cycle.current concern credit mkts, libor the key to short covering move to stocks starting in november, don’t be fooled until the bkx, vix, and housing indexes recovery
October 17th, 2008 at 2:59 am
Prieur, it is possible for the market to go sideways for short periods of time. Therefore, I decline to vote. Also, one has to ask himself this question: If the analysts predict the market will fall 2% and it falls 1% instead, is this any reason for a bout of irrational exuberance? Is this guessing game more important than the reality of the situation. One wonders whether he would be better off ignoring what these Wall Street analysts say and do his own numbers. The improved picture of Roubini is appreciated. Generally, when his visage pops up on the screen I get a similar reaction to when I spy Nosaferatu on the late movie.
October 17th, 2008 at 4:42 am
I believe this downturn is more about the
hedge fund mangagers having to liquidate
their postions to raise cash, along with withdrawals and panic selling from the media hype. The ban on short selling should have
been extended until liquidity returned to the markets.
Since markets do not perform rationally,
the onset of a new administration will have
a short-term postive affect in the first
90 days. So I predict that the end of the
year will be a higher number for the DOW.