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Here is an article that explains why stocks shouldn't rise.http://www.benzinga.com/global/10/08/439904/what-is-the-catalyst-for-a-move-higher-in-the-stock-market

Looking around the picture does look very bleak at this point. US housing is back in the toilet, stocks are being shunned for bonds, market technicals are showing crash or bad times and so on.

I suppose this is a great recipe for the Fed to print up some money at some point here and blast the shorts out of the water. From there all that bond money and money business is holding can start flooding in to make a great rally and thus start a true recovery.
 

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Pretty much sums up why I am pretty much 100% cash these days.... though I doubt we'll re-visit the March 2009 lows, but if we get close to that, I'll be back into stocks, big time.
 

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Following the pack is a great way to ensure mediocre returns. the financial media has a vested interest in scaring people into watching/reading/listening to their predictions of arrmagedon. Nobody knows the future. I chose to be optimistic-my nature I guess.
 

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I find the claim that "there is plenty of optimism in the stock market" stretches credibility quite a bit. If anything it's the opposite: there is so much pessimism about stocks. The WSJ reported the other day that burnt by no returns over a whole 10 years, retail investors are fleeing the stock markets in droves. If you look at mutual fund numbers, investors are taking money out of stocks. Sure, the pessimism can get much worse but nobody is going to ring a bell when it is at its lowest point.

The question is: what's a better time to invest? Is it when most investors is gung ho about stocks or is it when most investors are too fearful of putting money in it?
 

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Neither. It is when the fear is dissapating rapidly.
I think it depends on your time horizon. If you're investing for the short-term and want to "get rich quick," then yes, you probably want to buy when the fear is dissipating rapidly. If you're investing for the long term, you'll probably either just keep buying with no regard to how the market is doing now, or you'll take advantage of opportunities to buy more shares while prices are low.

My investments are all for retirement, and I pay virtually no attention to how the markets are doing now. I haven't seen any convincing evidence so far to suggest that stocks are no longer a good long-term investment or that this downturn marks a fundamental shift from which stocks will never recover. I've seen lots of theories and arguments, but if you go back to any previous downturn you'll see lots of theories and arguments too, most of which turned out to be wrong.
 

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I think it depends on your time horizon. If you're investing for the short-term and want to "get rich quick," then yes, you probably want to buy when the fear is dissipating rapidly. If you're investing for the long term, you'll probably either just keep buying with no regard to how the market is doing now, or you'll take advantage of opportunities to buy more shares while prices are low.

My investments are all for retirement, and I pay virtually no attention to how the markets are doing now. I haven't seen any convincing evidence so far to suggest that stocks are no longer a good long-term investment or that this downturn marks a fundamental shift from which stocks will never recover. I've seen lots of theories and arguments, but if you go back to any previous downturn you'll see lots of theories and arguments too, most of which turned out to be wrong.
+1
 

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Looking forward, we know for a fact that there is no way we can quickly return to the spending habits of the past 5 years, since this was artificially inflated by easy availability of credit. If credit continues to stay low long enough, prices will rise (inflation or too much money chasing too few goods), and in order to avoid this, the alternative is raising interest rates (increase cost of credit resulting in repayment of credit and effective reduction of money supply). Either way, it will have an effect that will slow down growth.

Under the assumption of the above, there will be a ripple effect through the entire economy from slowing of growth and this should ultimately reflect in stock price PE multiples declining.

The most important question of when it will end will be solved when increased interest rates reduce the money supply to the point that inflation risk is reduced. Then we will be free to start the cycle again.

I believe this will be a long drawn out process as it does not make sense to increase interest rates suddenly and create a recession just so we can get back to growth sooner. So macro-economically, dont expect a return to huge growth any time soon.

I agree that short term market swings seem to be mostly news driven rather than driven by business results, since based on macro factors, the market should stay more or less flat. Therefore I think there is a good case for leaving the market to go into bonds, or trying to find some way to exploit short term value opportunities driven by news. I dont think passive long term investors are going to do well over the next 5 years or so.
 

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There is alot of evidence to suggest the market not going higher, or further down, or sideways at least.

Last market slide, I went to cash, then got back in on the way up, and didn't really do any better than had I just stayed in anyways.

Because of that experience, and some of the examples in the post, I am basically investing for a sideways range bound expectation of the market. Which is a great market to invest in.

The top of the cycle lasted a few years, and I expect a few years for this regrouping trend.

What will be the trigger to higher ground, who knows....but I would put a change in sentiment as being involved in that trigger.
 

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Discussion Starter #12
Short term does look higher, as I said in another post that XFN looks very oversold and ready to rise which it did today and probably continue into next week but in no way do I believe it is hold at this time.

In reality consumers have to much stuff and can't afford their houses at this time so that needs to be cleared up along with all that housing inventory in the US. Interest rates are so low and it still isn't helping much which does not leave room for the Fed to lower rates.

So I also believe sideways is the best we can hope for in the stock market over the next few years, but that doesn't mean you can't take advantage of great oversold buying opportunities as they arise.

At this time if one has the guts I would say that HGD looks like a good short term buy as gold is way overbought, but you will also be betting against a good seasonality period for gold.
 

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TD analyst on BNN's Moneytalk sees U.S. stocks part way through a 20% correction to be followed by three or so good years. Expect the bottom to occur in September or October.

The U.S. dollar will generally continue to rise and therefore commodities will likely decline.

Gold could, at some point, experience a 36 percent decline without violating it's long term moving average.

The TSX could go down to the 9500/10200 level before bottoming out. It is down only 10% so far on it's way also to a 20% correction.

Currently, there is a 98% correlation between emerging markets equities and the S&P 500 which is highly unusual.

Suggestion is to be very defensive now for the next several weeks. 'Cash' is probably the best option.

The markets are currently susceptible to any Black Swan events that may occur. Consider any such event that cause a market drop to be a buying opportunity.

Buy low!!
 

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This is starting to sound a lot like the talking heads on BNN who get questions from callers. Their advice is usually the same: this is a well run company, good long term potential, might want to buy on weakness, might be risky right now. I would be shocked if they would just say once in a while.." haven't got a clue". In reality everybody is guessing.
 

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This is starting to sound a lot like the talking heads on BNN who get questions from callers. Their advice is usually the same: this is a well run company, good long term potential, might want to buy on weakness, might be risky right now. I would be shocked if they would just say once in a while.." haven't got a clue". In reality everybody is guessing.
Some of them, like Berman, say "I don't follow that stock."
 

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I haven't seen any convincing evidence so far to suggest that stocks are no longer a good long-term investment or that this downturn marks a fundamental shift from which stocks will never recover. I've seen lots of theories and arguments, but if you go back to any previous downturn you'll see lots of theories and arguments too, most of which turned out to be wrong.
I usually enjoy your posts brad, but I completely disagree with the above. There is LOTS of evidence that stocks are no longer a good long-term investment. See the post above which stated: "The WSJ reported the other day that burnt by no returns over a whole 10 years, retail investors are fleeing the stock markets in droves."

I believe this to be accurate as it closely mirrors the experience I and some friends have. I started investing in 2001 and for years took a passive "it's a long term investment, who cares about what happens" role just like you mention. Over different types of investments, different advisors and different companies, I can only show you about $300 worth of growth on $10K (not all invested at once) since 2001. Another post in this thread predicts no good growth for the next 5 years. That's 15 years. To say that this poor performance over this amount of time shouldn't bother long term investors isn't something I can agree with. If I had to retire right now I would have $300 in my pocket. I could have made 10x more than that working at a snack bar or buying lottery tickets!
 

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Stocks don't need to rise to generate profits. Passive investment strategies (like those advised by the big banks) are not making money (or losing money) in the current trading environment. Saying that, I still think that stocks will significantly outperform any other passive investment in the next 10 years (DJIA - 22000 by 2020).
 

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Well maybe I'm just lucky. Started buying equities about 1997. First purchase was a big bank in Sept/97 I think I paid about $20 (split adjusted) That stock is up about 330% while paying about 3% dividend each year. It isn't even the best performing big bank stock over this period. Currently these banks are paying 3-4% current dividend yield which sure beats some low risk alternatives. I think I will just keep em and live off the divs.
 
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