Poll: What will TSE be in 3 months (Dec 31)

[Radio_Shack]

For your Ref TSE : 12146 Today (sept 9th)

Be square or for ever hold your penis.

 

[emacs]

I am thinking the markets are currently a lagging indicator & will melt down in October

maybe, but i also recall there wasn't a meltdown in August when the TSX dropped 432 points on July 2, 2008 ...

 

[Radio_Shack]

11401 today

 

[Radio_Shack]

10900 today. Seems we know the trend now

 

[21pro]

even the Contrarians are expecting TSX at 6000 and even 3000 pts. a possibility:

regarding the S&P and Dow from 2006:

This is the story of an economic superpower. After
two decades of innovation and strong economic
growth, times were good. The jobless rate
was the lowest in memory. The nation’s expertise
in applying new technologies was unequalled. But selfconfidence
had started to change into complacency. Success
and wealth were no longer goals to aggressively strive
for. Instead they were considered birthrights. And the new
road to riches was as old as Tulipmania. By borrowing more
and more money, its citizens gradually created a world of
make-believe where it seemed that everyone could get rich.
Gross consumer debt exploded, rising seven fold in a decade.
Low interest rates fuelled widespread recklessness. Why
settle for a measly 1 or 2% return when you could get ten
times that, buying stocks or real estate? Why, indeed. Investors
jumped into real estate and the number of paper
millionaires soared.
Am I talking about America in 2006?
No. This is Japan in the 1980s.
How did Japan’s story end? As the bubble inflated, those
who urged caution were ignored. There is no insanity so
dangerous as the belief in never-ending profit. While this
type of insanity always proves temporary and short, the
tragic aftermath is severe and long lasting. In 1990 interest
rates in Japan rose and the stock market and real estate
bubble, inflated beyond reason, collapsed. On December
31, 1989, the Nikkei stock market index almost reached
40,000. It would not reach that level again. The stock market
plunged 50% in less than a year. Three years later, it
was down to 14,310, a decline of 63%. Property prices
crashed and the Japanese miracle began to unravel in earnest.
When prices were rising, and debt flowed freely, no
one paid much attention to the credit worthiness of their
borrowers. But now as prices plummeted, that negligence
came home to roost as over-extended investors were forced
into bankruptcy.
The punishment for the excesses of the eighties was biblical
in its magnitude. Just as Japan’s speculative bubble echoed
the excesses of the Roaring Twenties, the aftermath recalled
the implosion of the Great Depression of the Thirties.
There was the same sad picture of panic-stricken depositors
jostling in lineups to get money out of insolvent
banks. The Japanese government tried to hold the line with
bailouts and emergency financing but the deluge of defaulting
debt was too much. Hyogo Bank was the first to
fail, followed by Hanwa Bank, followed by Hokkaido
Takushoku Bank, Japan’s tenth largest. Stock brokerages
also fell. The most notable was Yamaichi Securities, a hundred-
year-old firm that was one of the four biggest.
Japanese retirees who were looking forward to a comfortable
living in their senior years faced an ice-cold reality.
The cheerful consensus that stocks would always be the
best investment over the long term was being tested to its
limit. And today, seventeen years later, with the Nikkei
barely above 16,000, that consensus has failed its most stalwart
supporters.
What does this story have to do with us? Just this: The
bubble that led to Japan’s financial disaster is replaying itself
today in America.
• Stock market margin debt, the amount of money investors
have borrowed to buy stocks, has reached US$230
billion.
• Households accumulated US$1.33 trillion in net new
debt during the first quarter of 2006. The expansion in
new borrowing outpaced the rise in disposable income according
to the Federal Reserve.
• The ratio of household debt (US$11.84 trillion) to total
household assets (US$66.03 trillion) is at record levels.
The problem is that debt can only be reduced through repayment
while household asset values (i.e., house and stock
prices) can fall of their own accord.
• An ordinary 1800 square foot home located an hour
outside San Francisco sells for US$800,000 (and that’s considered
cheap).
• In a replay of the financial negligence that gripped Japan
in the eighties, American banks are peddling so-called
“negative equity”, or “option adjustable rate mortgages”.
Can’t afford a $600,000 mortgage? No problem. The bank
can set you up with a monthly payment that doesn’t cover
the interest on your loan. Instead, the shortfall is added to

 

[21pro]

your principal. According to Businessweek, more than 1.3
million clueless borrowers have taken out US$466 billion
worth of these mortgages in the past two years. Only in a
bubble would lending large sums of money to people who
can’t pay it back seem like a good idea.
• The Bush administration continues to run enormous
deficits, shattering records four years in a row. The U.S.
federal debt passed US$7 trillion in 2004. Less than two
years after, it now stands at US$8.55 trillion.
The danger signs are already clear. American housing
sales have slowed dramatically and inventories are at 13-
year highs. House prices have started weakening in some of
the hotter real estate markets. With interest rates at twoyear
highs, the pain is only just beginning. Remember the
US$11.84 trillion dollars of household debt that Americans
are carrying against US$66.03 trillion of assets. When
house prices and stocks start to fall, the value of assets will
plummet but that mountain of debt must still be paid back.
To avoid default, consumers will drastically cut back spending,
which in turn accelerates the slowdown. This is the
vicious circle that defines what happens after every speculative
mania.
The big difference between the Japanese bubble and the
American bubble was that Japan’s financial disaster was
largely confined to that country. We won’t be so lucky when
the American bubble bursts. A severe American downturn
will have a brutal impact on the global economy. As our
largest trading partner, Canada will be one of the first to
feel the pain. China’s export-driven sectors will be hit hard.
Worse, China’s go-go economy has its share of lax financial
practices and dangerous debt. A slowdown in American
demand for its exports could trigger a replay of the Asian
economic crisis of the late 1990s.
How will the markets react? If we see a repeat of the Nikkei
experience on American stock markets, the Dow could fall
from its current level of 11,400 to 3,800. Real estate values in
California and Florida could be reduced by half. Gold stocks
will fall at first with the general stock market but then later as
bankruptcies start to snowball and companies default on their
bonds, the price of gold will soar.
There is a real chance of a panic on Wall Street. The last
major crash happened in 1987 when stocks dropped 22%
in a single day. Many of today’s traders and brokers have
never experienced a major bear market. By Santayana’s principle,
the conditions may be ripe once again for some truly
fearsome days (Santayana’s principle: Those who don’t remember
the past are condemned to repeat it.). An equivalent
drop today would mean a loss of almost 2500 points.
What could make a panic even worse is that we’ve never
had a crash in the Internet age. The Net’s ability to propagate
rumor and fear could make things quite ugly.
In light of the perilous times ahead what is one to do?
First, be fiscally conservative. How much debt you are carrying
will determine how well you ride out the approaching
hard times. Don’t let a well-paying job lull you into
thinking you can carry a high debt load. In a severe downturn,
unemployment will soar. Second, be sure that you
can absorb losses in your stock portfolio without panicking.
This means figuring out ahead of time what your comfort
level is. Warren Buffett has long advised that stockholders
should always be prepared for a 50% drop in share
prices. Unfortunately many investors ignore this and put
too much of their wealth into stocks during bull markets
only to end up selling in fear during bear markets.
I expect that the following investment vehicles will do
exceptionally poor:
• Banks which have high exposure to ARMs (Adjustable
Rate Mortgages) and that have a lending base in areas
where real estate speculation is worst (California and
Florida come to mind). Examples include Countrywide
Financial Corporation (NYSE: CFC), FirstFed Financial
Corporation(NYSE: FED). Sophisticated investors
may try playing with put options on these companies.
• The U.S. dollar.
The bottom line is that in bubbles prudence does arrive
for the speculative crowd. But only in hindsight, when it is
least useful.
Wynn Quon, MBA, Chief Investment Analyst, Legado
Associates, wynn_quon@legadoassociates.com

He was pretty accurate, wasn't he?

 

[21pro]

Now this from the same investor in early August 2008- ie, prior to all this carnage that we have seen in the last few weeks. prior to AIG needing a bailout, and way prior to any mention of a 700B government bailout proposal.

It was in our October 2006 column that we first warned
of the impending collapse of the real estate market in
the U.S. By now the woes south of the border are
depressingly familiar. We can sum up the real estate
bubble and the subsequent bust in two sentences:
1. A large number of people thought they could levitate.
2. They were wrong.
For five years the U.S. real estate market was a farcical
circus of self-delusion and deception based on the belief
that house prices would keep rising indefinitely. In the history
of finance, farce is always a prelude to tragedy and the
tragedy has now begun in earnest. Over the past twelve
months thousands of subprime mortgage borrowers walked
away from their obligations triggering the biggest flameout
in real estate history. In the first quarter of 2008, 1 in 78
households in California received a foreclosure filing. In
Nevada, the rate is even higher at 1 in every 54 households
(source: RealtyTrac). We’ve seen the implosion of mortgage
brokers including Countrywide Financial, which we
warned readers of in our October ‘06 column. We’ve seen
the collapse of brokerage house Bear Stearns, the bankruptcy
of Indy-Mac (the second biggest bank failure in U.S. history)
and the emergency government bailout of mortgage
giants Fannie Mae and Freddie Mac.
Real estate prices in the U.S. have fallen faster than in
the Great Depression. Prices are down thirty-five percent
from their peak in Las Vegas, fifty percent in the worst-hit
areas of California and Florida. And the troubles are likely
to get worse because the subprime mortgage crisis is yesterday’s
news. The next dominos of debt that will fall include:
• So-called Alt-A mortgages, loans that are just slightly
above subprime in quality. Foreclosure rates on Alt-A mortgages
have doubled in Southern California. Over twenty
percent of Alt-A borrowers are already behind in their payments.
• Prime rate mortgages - During the first quarter of 2008,
195,000 subprime mortgages and 117,000 prime rate mortgages
were foreclosed in the U.S. But the rate of increase of
prime rate foreclosures was 32 percent compared to an 11
percent annual increase for subprime mortgages.
• Home equity loans - When prices were skyrocketing a
few years ago, homeowners borrowed over US $1.1 trillion
against the value of their houses. The money was used for
everything from new cars to vacations. Now with prices
plummeting and refinancing scarce, these loans are in jeopardy.
• Consumer credit card loans - Default rates are creeping
up: 6.4 percent of consumer credit card accounts are in
default, up from 4.51 percent in February 2007.
On top of these dire statistics comes the worst indicator
of them all – the U.S. unemployment rate has risen to 5.7
percent, a four-year high. Rising unemployment means the
U.S. is entering a negative decline spiral. As people lose
their jobs, they cut back on spending, putting even further
pressure on the economy.
What does this mean for us in Canada? Canadian investors
can be forgiven for being complacent. The TSX is still
almost 15 percent above the level it was two years ago. We’ve
benefited from skyrocketing commodity prices. Oil prices
soared to record levels.
But complacency isn’t wise. The storm south of the
border will eventually make itself felt here. Canadian bank
stocks have already been pummeled and it won’t be long
before the rest of our economy feels the pain.The question that readers may be asking: Won’t the U.S.
economy bounce back quickly as it has in the past? Why is
this downturn any different? The answer is that credit crises
are fundamentally different from typical recessions.
When banks suffer huge losses and write down billions of
dollars in capital, there is a huge ripple effect. Banks make
their profit through leveraged lending. For every dollar of
capital they have on hand, U.S. banks are allowed by law
to lend out ten dollars. Think now about the US$400 billion
that U.S. banks have lost so far in the crisis. That translates
roughly into $4 trillion dollars of liquidity that the
banks are no longer supplying to the economy. Even consumers
and businesses with good credit will have trouble
getting loans. No wonder the $100 billion tax rebate that
was implemented by the Bush administration in April had little effect. The stimulus program sounds like a lot of money
but it’s completely dwarfed by the trillion dollar credit tightening
by the banks. And as banks lose more money, this
situation will get worse.
As we discussed in my September 2007 column, the
damage from a financial credit crisis can be devastating.
The analogy I drew then was with the Japanese economy
in the 1990s. Let’s take a look at what happened to their
stock market:
Japan’s financial credit crisis began in 1990 when their
real estate market collapsed after a decade long bubble. Their
primary stock market index, the Nikkei 225, plummeted
from about 40,000 to 15,900 in two years. And then it
went sideways for another ten years before plunging to a
new low of 7,900 in 2003. The critical point is that the
Japanese investor who invested at the peak is down 67 percent
after almost two decades. So much for the triumph of
the long-term investor.
We cannot say that the U.S. will repeat this dismal experience
because each crisis has its own particular dynamic.
We simply don’t know the answer to the key questions.
How much bad debt will need to be written off? What
policies will the Federal Reserve and the new incoming president
implement? At what point will unemployment peak?
On the other hand, we can’t rule out worse scenarios either.
Note, Japan’s crisis happened while the rest of the world
had strong economic growth. It’s hard to imagine, but Japan
would have had an even rougher time if the global economy
hadn’t buoyed them up. The bad news is that if we look at
today’s credit crisis, there are signs that the slowdown is global
in scope. Shanghai’s stock market is already down more than
fifty percent from its peak of last October, while India’s Bombay
Sensex index is down twenty-five percent from January.
If we fall, there will be no one to catch us.
What’s the bottom line?
First, there will be bargains galore as the stock market
falls. I believe that a fifty percent decline (or more) is quite
possible. The Dow and the TSX could easily dip to the
6,000-7,000 level. But bargain hunting must be done with
great discipline. The temptation is to buy on every dip because
this has worked well in the past. Taking the same
approach now could be disastrous. The Japanese investors
who happily bought in 1991-92 expecting
a market rally ended up in a world of
pain. The proper way to bargain hunt is
to set pre-defined limits for your stock
market investment, identify points ahead
of time for entry and then steadfastly stick
to your plan. The key though is to make
these plans now, rather than amidst the
fear and anxiety when the bear market
strikes in full force. Your plan should be
specific. How much in additional funds
will you commit to the stock market
when the TSX index falls to 9,000?
6,000? 3,000?
If you are a conservative investor like
me, you can take a pyramid approach. For example, assume
you are willing to invest a maximum of $14,000 during
the bear market. Your plan could then be to invest
$2,000 when the TSX falls to 9,000, another $4,000 when
the TSX hits 6,000 and a final $8,000 if the index hits
3,000. The numbers you choose will be different depending
on your individual situation but this basic pyramid strategy
ensures that you a) cap your risk exposure and b) buy
more at cheaper prices. Note, most investors during deep
bear markets end up hurting themselves by unconsciously
adopting an inverse pyramid strategy. They buy too much
on the early dips and when the market plunges lower they
stop buying altogether. We saw this happen in the dot-com
bust of 2000-01. Plenty of people stepped in to buy tech
stocks after they had fallen by thirty percent. But when
prices continued their nosedive, buyers became as scarce as
squirrels on Hwy 401. Tremendous bargains were missed
when great companies like Corning went into deep discount
territory. (Corning went to $1.60 and is today a $20
stock.)
Does all this talk of plummeting markets scare you? If it
does, then it is likely you have too much money invested in
the stock market. Most people over-estimate their risk tolerance
because they don’t think about the downside during
a bull market. Very few people (I certainly don’t know any)
can calmly steer a portfolio that is 100 percent invested in
stocks through a severe bear market.
The right way to address the discomfort is to adjust your
stock market exposure. The wrong way is to panic and sell everything (unless you really need the money). If your portfolio
is thirty percent stocks, even a bear market drop of
fifty per cent will only impact your net worth by fifteen
percent. The other mistake is denial – believing that a stock
market crash will never happen. That would be like living
in New Orleans and ruling out the possibility of a Katrina.

 

[Radio_Shack]

Over 1000 pts down today so far to 9775.

Panic sets in.

 

[Radio_Shack]

Is now a good time to say "I told you so"???


... I still think we are still a long way from the bottom!

Many have told me this and thats why I am in Cash since 4 months ago! Cash is king. Waiting to pick up the pieces and cash in when the going is good.

Speaking of good, what does your great skills tell you about when it's safe to go back in or do ya just like predicting the doom and gloom..LOL

 

[Mencken]

My prediction is 10,500 for Dec 31, 2008. With more downside risk than upside to that number.

 

[Radio_Shack]

9600 today down 456pts (4.5%)

It will be interesting to pull this thread up Mid next year and discover we should have been buying the shit out of the market this week or dumping everything on fears we actually can dive below 8000 this year.

Funny, I didn't even consider well below 10000 so I only made one option, total crash.

All I know is the market will be have to recover in a major way eventually or the Taliban will move in and take over North America with Osama as president instead of Obama. Better stock up on rags to wrap around our heads.

 

[S.C. Joe]

But what about the "Santa Claus" rally that might happen towards the end of the year?

Looking back at many years, the market does not end at a top or bottom. Now I thought last week the bottom was near--I blew that one, lol --but there has to be a bottom somewhere...we can't keep going down triple digits each and everyday.

 

[21pro]

like I said, I predict will test 6000 on the TSX and maybe even 3000.

 

[Radio_Shack]

oh hell, lets just say the market will goto zero.

 

[JohnLarue]

oh hell, lets just say the market will goto zero.

Well I know I will be buying then

 

[Radio_Shack]

9236 points now. Combine that with weak Canadian $ it's gotta start hurting about now.

 

[Radio_Shack]

Brace yourself for today. down another 200 points today as of 3pm

 

[21pro]

been calling 6000 tsx since '07.

 

[Radio_Shack]

8000 right now lol.. down 486 pts..

 

[gentle_lover]

bmo is only 35 bucks and td only 45 bucks!!!!!!
do you guys think we can make money out of them by buying them and sell them in dec? lets hear argument.