Bad Times, Great Markets

AuthorHouse

Contents

Introduction..........................................................................................ixChapter One The Mess We're In.........................................................................1Chapter Two The History Of The Dow And What It Portends...............................................18Chapter Three The Long Road Ahead.....................................................................35Chapter Four Workers: Getting and Growing Money Viable Stocks And Four Portfolios.....................47Chapter Five Near Retirees: Keeping And Growing Money.................................................98Chapter Six Retirees: Keeping Money...................................................................104References............................................................................................119Index.................................................................................................121

Chapter One

Humpty Dumpty sat on a wall, Humpty Dumpty had a great fall, All the king's horses And all the king's men Couldn't put Humpty Dumpty together again -Humpty Dumpty; a nursery rhyme

Out going President George Bush in his last press conference was asked to reflect on his terms in office, his accomplishments, disappointments, wishes. Finally, a reporter asked him his thoughts on the economic drop and where the economy was headed. He replied that he didn't think anyone knew what had happened or where it was headed, nor did he know. He was right on the first, and clueless on the second.

President Barack Obama has said he plans a trillion dollar stimulus package. We'll need it, and it probably won't be enough. The grand total (for his first term) will probably be closer to 2 trillions.

Where are we, what got us into this mess, and where are we headed?

It is, without doubt, the biggest and broadest economic calamity any of us has ever seen. It may even dwarf The Great Depression (See Chapter Three).

But we should not be overly horrified: great economic booms and busts have occurred often and almost regularly in the past. Bottom line: it's all due to human emotion: greed and fear. Greed pulls them in the markets, and fear drives 'em out! (Read Kindleberger(7) for an exhaustive insight into literally hundreds of disasters throughout the past four hundred years, and especially his boom-bust table that goes on and on). We've had many bubbles, and more are to come.

We can easily blame the Bush administration (for lax regulations and enforcement, laissez fair attitudes, and inept administration officials, the costs of both wars, and weak-willy attitudes to get the economy going again, and other things too numerous to mention): but many others are also complicit: congress, with its quarreling, inefficient and unimaginative processing of ideas; companies and individuals overreaching investments and expansions; governments and institutions continuously on track to overspend and expand at unsustainable rates, all leading to the inevitable Boom and Bust!

But, most of all, we, the consumer, rich people, and average citizenry, have overspent, overly lusted for more and more. We have only ourselves to blame, ultimately. It's in our nature to want more, compete with the Jones, and create unsustainable prices and levels of production.

Before delving into this mess in greater detail, let's diverge to a typical day in the economic world, represented by a daily scene on CNBC.

Cnbc 10/29/2008

It is 8:30 a.m., and the consumer confidence number has just come out. Mark Haynes' face drops, he emits a sorrowful grunt, and comments that, at 38%, it's the lowest in recorded history, versus 63%, itself low, for September. Not a good start for the day, especially since yesterday had been a great one, bringing cheers and hope from the investment multitudes: The Dow Industrials had been up nearly 900 points to almost 9100, the S & P 500 had spiked up an enormous 90 points, and the struggling NASDAQ soared 143 points, sending recovery joys to many traders.

Yet Mark, the perennial "Dour One" remarked that this was the 79th anniversary of Black Tuesday of the Crash of 1929. He also remarked that two weeks ago the Dow was up 900 points, then hit new recession lows of 8160. Also, the Nikkei ( Japanese stock index) hit a new low(7200) since 1992. It is not an auspicious start for the day, nor for recovery hopes. But we must trudge on, in hopes that the day and the nascent recovery will continue upwards.

A governor and senator were just on, laughing. What in the world were they happy about? Their own cozy, blustery, safe positions, not the investors' or consumers, presumably.

Joe Kernan, David Faber and Becky Quick were still on commenting about a few companies. The Libor(London Interbank) rate stood at 1.14%, reflecting a low short term rate, the FTSE was up 227 to 4150, the CAC40 +225 to 3340, the DAX stood at 4803, down 30, the Shanghei Index was down 52 at 1719, but the Nikkei was up 599 at 8212.

The short term rate on Treasury bills is very close to zero, meaning people are paying the government to just hold their funds for safety's sake, they're so scared of all market holdings (stocks, bonds, real estate).

Oil is up $3.13, but still in a wicked downtrend from a historic high of over $140 earlier in the year, standing now at around $67 per barrel. How much lower can it go, before the inevitable bull market starts up again? T. Boone Pickens assures us that it will go to $200 soon, and he has put billions of his own money into oil. Oh, the sorrows of misfortune! If only we could but glimpse one day into the future!

Gold stands at $750.8 per ounce, up $10.2 from yesterday's close. The gold bugs still insist it will go to $2000 as more panic sets in. Little do they know all assets will be flattened ( Bill Gross, PIMCO, predicts earlier in the summer).

But one bright spot is on the horizon: the dollar is faring decently against several currencies: the Euro, Pound, and some other European currencies; but not well against the Japanese Yen, which has been pummeled, along with its economy and assets, since 1990.

Governor Bill Ritter of Colorado is being interviewed. His is from one of a few states that is showing some uptrends in its economy and employment – versus others like Nevada and California, which are especially on the ropes in almost every category, and really hard hit in real estate. There are rumors that it(California) might have to declare bankruptcy (A state? What on earth for? It can always taxersize the living daylight out of everyone and everything that walks or crawls in that God forsaken state [natural calamities, to mention one area]).

A Fed decision is coming today, at 2:15 p.m., when observers expect a &fra12; point lowering of the funds rate. Little does anyone know it will eventually touch virtually zero. They want to give money away, so desperate are authorities to jump-start the economy. In anticipation of that move, two former Fed governors, Meyer and McTeer, are interviewed. They echo current members' feelings that the liquidity crisis must be broken, to give more money at cheaper rates to banks who in turn lend out to credit...