Official Let's Make Some Money Off Stocks Thread
10-08-2008, 10:03 AM
#1344
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Originally Posted by cthree,Oct 6 2008, 08:53 PM
Cash is king. Put it in a nice interest bearing insured account.
My 2 cents. crude < 70 in 3 months and.... vote for McCain.
10-08-2008, 10:56 AM
#1347
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As sahtt said before, it's forced selling.
The are a couple of issues which are forcing the sale of equities:
1) Fund redemptions. It's redemption season for the Hedge Funds and people are pulling out. That forces the to sell to rise cash. Not baby boomers, institutions and more so banks and financial institutions which need to raise cash. There is a run on the hedge funds;
2) Margin calls. As prices go down traders are hitting margin violations and are forced to sell to cover their margin obligations. It's a self feeding cycle of de-leveraging. The more they sell to cover their margins the lower the prices go and the more they need to sell. We aren't dropping 4%/day by accident. Each day investors and traders are having to liquidate to cover their margin calls and those calls come every day.
This market isn't going to bottom until everyone is honest and is completely de-leveraged in their positions. Look, real growth is about 3-4% per year (average GDP growth). The market (S&P500) was marked in 2002, 6 years ago, at 800 points. If you take a compounded growth rate of 3.5% for 6 years on 800 you get 983.
Thus, IMHO the real price of the S&P500 is between 900 and 1000. We are at the top of that range now and I expect we won't see the bottom until nearer the bottom of the range, somewhere about 900 points since it's traditional to overshoot. It could go lower than that but again IMHO until we get to the lower 900's we aren't going to see any meaningful rebound.
The end is getting near and I think you'll see it when the losses subside. As long as we are going down 4-5% every day there is no way it has unwound. A slowing of losses is a sign that the forced selling cycle imposed by margin calls is near over.
It's not sentiment and you can't read too much into it. It's wholesale dumping of stock to raise cash to stay in business.
We touched 970 today (an important support level) and bounced off into the low 1000's. Is this the bottom? maybe, maybe not. We need a couple of days or weeks to see what happens. Please don't rush in and buy stuff. It's not going to bounce to 1200 overnight. We could sit on the 950-1000 level for months awaiting the return of the bulls. There is no need to get all rushed. I'll post a chart which illustrates soon.
The are a couple of issues which are forcing the sale of equities:
1) Fund redemptions. It's redemption season for the Hedge Funds and people are pulling out. That forces the to sell to rise cash. Not baby boomers, institutions and more so banks and financial institutions which need to raise cash. There is a run on the hedge funds;
2) Margin calls. As prices go down traders are hitting margin violations and are forced to sell to cover their margin obligations. It's a self feeding cycle of de-leveraging. The more they sell to cover their margins the lower the prices go and the more they need to sell. We aren't dropping 4%/day by accident. Each day investors and traders are having to liquidate to cover their margin calls and those calls come every day.
This market isn't going to bottom until everyone is honest and is completely de-leveraged in their positions. Look, real growth is about 3-4% per year (average GDP growth). The market (S&P500) was marked in 2002, 6 years ago, at 800 points. If you take a compounded growth rate of 3.5% for 6 years on 800 you get 983.
Thus, IMHO the real price of the S&P500 is between 900 and 1000. We are at the top of that range now and I expect we won't see the bottom until nearer the bottom of the range, somewhere about 900 points since it's traditional to overshoot. It could go lower than that but again IMHO until we get to the lower 900's we aren't going to see any meaningful rebound.
The end is getting near and I think you'll see it when the losses subside. As long as we are going down 4-5% every day there is no way it has unwound. A slowing of losses is a sign that the forced selling cycle imposed by margin calls is near over.
It's not sentiment and you can't read too much into it. It's wholesale dumping of stock to raise cash to stay in business.
We touched 970 today (an important support level) and bounced off into the low 1000's. Is this the bottom? maybe, maybe not. We need a couple of days or weeks to see what happens. Please don't rush in and buy stuff. It's not going to bounce to 1200 overnight. We could sit on the 950-1000 level for months awaiting the return of the bulls. There is no need to get all rushed. I'll post a chart which illustrates soon.
10-08-2008, 01:39 PM
#1349
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Originally Posted by PearlwhiteS2k,Oct 8 2008, 04:35 PM
I'm loving the +160 -200 +125 -80+ 110 -200 
day trader must be making a killing.
day trader must be making a killing.
Even been whipsawed in the market?
10-08-2008, 03:19 PM
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Originally Posted by PearlwhiteS2k,Oct 8 2008, 12:35 PM
I'm loving the +160 -200 +125 -80+ 110 -200 day trader must be making a killing.
day trader must be making a killing.When you see stocks moving back and forth with dollar moves, there are guys out there with 1,000-10,000 shares seeing s2000's worth of $$ at each tick. If a particular sector just falls or rises all day, that's when trading isn't just a battle ground.