750K Jobs Lost in March - How deep and how wide will our decline go?

[thedude_IHB]

I'm sure financial historians can find some value in the economic news published as of late. The details will no doubt fill text books in the future. I was hoping for a nice V shape recession and I'm feeling more like a U and hopefully not an L. I thought to myself about a year ago that there would be buying opportunity for a starter home when this bubble really deflated. Now the deflation time is looking a little longer than expected.





Maybe they really could clean things up with the first round of TARP money? Then I see the Fed pulling out all the stops with the quantitative easing. So the printing press is cranked up and lets see if that helps. The next thing coming is insane monopoly money budget deficits at the federal and state level. China says they are a little concerned about their dollar assets. At this point I've been hit with so many google news financial stories that nothing seems impossible for next week. Its almost like the oil and war in the remote deserts of Eurasia can't get a headline...





Buffet says be greedy when others are fearful and buy up cheap assets with a durable competitive advantage. However, in the practical sense that is harder than it sounds. Especially in these historically uncharted times where we are using every weapon in the arsenal. I'm hoping IHB can shed some light on these murky waters. Whats your gut feeling?





My take on it is that we pass the institutional risk at our corporations to the federal government with our current approach. At what point is the government's balance sheet a systemic risk? Is a 1 million job loss month coming down the pipeline? I sure hope this is the feeling capitulation and missing a bear market run that snaps out and turns the corner in 2010!

 

[Priced_Out_IT_Guy_IHB]

We won't know the total job loses until the Department of Labor report is released on Friday. Then we won't know the total actual jobs lost until the report is revised down the road.



Its easy to be Buffet and dump a bunch of money into the stock market after it goes down because he doesn't need the money he is playing with to survive. IMO wall street is a casino. Why, just look at how much it has run up ~16-20% since the lows reached a month ago. What kind of wonderful economic news have we had since then to justify a bear rally? Housing? Nope. Banking? Nope. Construction? Nope. Jobs? Nope. Doesn't make a whole lot of sense while the outlook on main street keeps getting dimmer. I am feeling the pinch and others I know are having trouble finding work. I don't know any companies that my friends are working at that are hiring except for a tax accounting firm. I don't foresee reckless consumer spending coming back to boost sales of overpriced $5,000 watches and $250 pairs of pants. The bubble isn't coming back. As such, I am personally waiting this year out to see where the chips fall and to invest into the market, and then I will invest slowly. My 401k is still 100% cash right now as I started it just last year.



Don't let the headlines get you down too much. People have always been stealing from the government, who then steals from the citizenry. This time around, we just know who is doing the stealing first (think AIG). Eventually everything will have to be paid back, but thats a few years down the road when inflation steals from the baby boomers on their fixed incomes.



No matter how far the declines go, you're going to be alright so long as you're living below your means. I think brighter days are coming for those who have been financially conservative, and the rainy days are coming for HELOC and Refi abusers who are going to have to be forced to adjust their lifestyle permanently.

 

[blackvault_IHB]

[quote author="Priced_Out_IT_Guy" date=1238667506] IMO wall street is a casino. Why, just look at how much it has run up ~16-20% since the lows reached a month ago. What kind of wonderful economic news have we had since then to justify a bear rally? Housing? Nope. Banking? Nope. Construction? Nope. Jobs? Nope. Doesn't make a whole lot of sense while the outlook on main street keeps getting dimmer. I am feeling the pinch and others I know are having trouble finding work. I don't know any companies that my friends are working at that are hiring except for a tax accounting firm. I don't foresee reckless </blockquote>


Too many people look at the stock-market as some kind of a gauge as to how the economy is doing. Nobody dictates the overall prices of equities other than the individual that holds it.

Let me put it this way...or rather ask you a question. Let's assume the DOW is at it's peak of 14K. Then all of a sudden we had 20% unemployment, median home prices falling at record levels, and signs that world is collapsing everywhere...but NOBODY, and I mean NOBODY sold a single share...where would the DOW be? Answer: 14.4K.



Prices of equities are dictated by information that you and I receive. When people panic and think the world is ending they will sell everything they have at record low prices. They don't care...they just want out. Fire sale prices. How long the fire sales go on is anybody's guess. However, isn't it possible that because of fire sale prices, prices tend to overshoot?



The way the stock market works, is that people look for ANY and I really mean ANY ounce of info that things are improving. Once they get that small itty bitty ounce of info...we are off the the races until more news comes out confirming otherwise or reconfirming.



NOBODY wants to be caught looking at equities at their record low prices just to watch it take off without them. Nobody wants to take a chance to buy though either at the worst of times. It's like playing musical chairs...once the music stops...everybody panics to find a char.



Do you really think that housing, banking, construction and job data has to significantly improve in order for the market to go up? I really hope not or you will be the last person buying. All it has to do is top going down at a slower rate as before. Don't be shocked if you see DOW continue to climb as unemployment continues to rise. Market looks 6-9 months into the future, not what goes on today.



As far as the casino comment....I agree, short term the market is a casino and if you can't play the game well, you'll be taken. But are you an investor or casino player? If you're an investor why even care that DOW dropped from 14.4K to 7K? I mean if you did your homework, and invested in something solid, it shoud survive and come out stronger. If anything, its your opportunity to buy more. However, if you are "spooked" just like everybody else, then chances are you dont have the big ones to pull the trigger when things look the darkest. (take a look at Best Buy...SOLID! Traded in mid 50s I believe, then fell to 18 and now at 37 and climbing. Now their competitor CC is out, making their future even brighter. )



Good luck to you.