Dow and economic contraction

[nmap]

Some news today...

WASHINGTON (Reuters) - U.S. industrial production fell a sharp 2.8 percent in September, the biggest decline since December 1974, according to a report on Thursday that was likely to reinforce fears of a recession.

Economists had expected a decline of 0.8 percent, after a revised 1 percent decline in August, initially reported as a 1.1 percent fall.

The Federal Reserve said in the report the September drop was exacerbated by Hurricanes Gustav and Ike, as well as a strike at aircraft maker Boeing. Business equipment production was off 7 percent, while consumer goods were down 1.4 percent.

For the third quarter as a whole, industrial production decreased at an annual rate of 6 percent.

Economists were already warning that the economy may have contracted in the third quarter after surprisingly weak September retail sales.

LINK

I've attached a montly basis chart of the Dow Industrials. It appears that a 26 year long bull trend has ended.

My opinion...it is not the time to buy. There remains substantial downside risk.

[Jack Moroney (RIP)]

Originally Posted by nmap

My opinion...it is not the time to buy. There remains substantial downside risk.

Concur. But then look at the bright side, I will be able to carry forward capital losses for the foreseeable future if I decide to dump some of these holdings

[Dan]

Originally Posted by nmap

My opinion...it is not the time to buy. There remains substantial downside risk.

There is always risk in investing in something that you can't control and it depends on what your buying; I increased my holdings with a buy late yesterday and I will likely make another buy next month. The long term approach I take in investing, 20+ years, makes this a good time to invest imo. You have your opinion and I have mine

[nmap]

Originally Posted by Jack Moroney

Concur. But then look at the bright side, I will be able to carry forward capital losses for the foreseeable future if I decide to dump some of these holdings

I hear what you're saying, Colonel Moroney. Still, all things considered, I guess I would rather pay the taxes.

Originally Posted by Dan

There is always risk in investing in something that you can't control and it depends on what your buying; I increased my holdings with a buy late yesterday and I will likely make another buy next month. The long term approach I take in investing, 20+ years, makes this a good time to invest imo. You have your opinion and I have mine

And I wish you luck, Sir. If I may be permitted a cliché, markets and horse races are all about opinion.

But perhaps you would be willing to share a hint about where you're seeing some particularly good values?

[CoLawman]

Nmap,
How about TMO I found it while researching Brandywine funds as you suggested. Brandywine really likes them. I did the research and talked my warrior son into spending some of his tax free monies on it. He concurred and put in an order to buy it at 42. I really really like this stock and was so committed I purchased it vicariously. I told you I am a mutual fund kind of guy.

[Razor]

Originally Posted by nmap

IBut perhaps you would be willing to share a hint about where you're seeing some particularly good values?

Bank of America. It survived the recent darwinian selection of lenders, and is currently close to its 5 year low. Might it still end up on the chopping block? Sure, but in the end investing is a best guess game. If it survives, it stands a chance of doing very well in the next 10+ years as the lending market eventually relaxes and credit flows more freely again.

[Dan]

Originally Posted by nmap

And I wish you luck, Sir. If I may be permitted a cliché, markets and horse races are all about opinion.

But perhaps you would be willing to share a hint about where you're seeing some particularly good values?

I am a nobody in the investment world and I'm sure you already know what I'm about to say; the best tip I can give for investments is to get & live debt free, invest where you get a match first, then fund your ROTH IRA each year, and finally fund other pre-taxed investment options you may have. Many on these forums are government employees and can annually fund a $5,000 IRA and then $15,500 of pre-taxed dollars in TSP; even with moderate to conservative returns they will do very well over time if they invest even a portion of that much each year wisely.

My version of investing wisely is to keep our investments as simple and worry free as possible by using mutual funds with good, long term records that invest heavily in debt free companies; I use the Dave Ramsey approach of splitting our mutual fund investments evenly with 25% each in large-cap, mid-cap, small-cap and foreign investments that have no transaction fees or load fees (This doesn't keep me awake at night like day trading techniques previously did). Once I found some we liked, we set things up to make the investments automatic; most people don't have or want to take the time to invest money manually each time they get a pay check.

The only thing I don't have setup automatically is our ROTH IRAs to be funded; I look for good opportunities to fund those each year and since I didn't fund them yet this year, I thought and still think this is a great time to do it; we funded half ours this week and the rest will occur next month when the market might be lower yet (if it's higher no worries either).

So back to my opinion (and yes we all have them); I believe the timing is perfect for a debt free person to invest in mutual funds that are heavily invested in debt-free companies versus debt-laden companies. Debt problems created this down market...Debt free people with the funds can do some loading up while everyone else either sells or just plain isn't buying. Ask me in 20 years how my investments this month did for me...I do keep records.

[Jack Moroney (RIP)]

Originally Posted by Dan

I am a nobody in the investment world

As am I, even with a Master's in business with its usual blend of finacial courses. I chose a broker that I know to help me manage what I have and we have concurrently developed a long term plan. We are well diversified in several investment instrumentalities but even then, as you mentioned, their is no guarantee that you will meet your investment goals because, especially today with world wide exposure to many of the organizations, shit happens. I find the business interesting from the standpoint of using the intell estimate approach to picking the instrumentalities and companies in which to invest. But then when you are an old guy like me with nothing but time on your hands you can afford to be more involved than most and even at that I depend more on my broker than I do my own limited views. I look at my portfolio more as a growth fund for my kids and have used some to offset large projects like home additions or toys (garden tractor, snow blower, etc).

[Surf n Turf]

Originally Posted by Dan

I am a nobody in the investment world and I'm sure you already know what I'm about to say; the best tip I can give for investments is to get & live debt free, invest where you get a match first, then fund your ROTH IRA each year, and finally fund other pre-taxed investment options you may have. Many on these forums are government employees and can annually fund a $5,000 IRA and then $15,500 of pre-taxed dollars in TSP; even with moderate to conservative returns they will do very well over time if they invest even a portion of that much each year wisely.
My version of investing wisely is to keep our investments as simple and worry free as possible by using mutual funds with good, long term records that invest heavily in debt free companies; I use the Dave Ramsey approach of splitting our mutual fund investments evenly with 25% each in large-cap, mid-cap, small-cap and foreign investments that have no transaction fees or load fees (This doesn't keep me awake at night like day trading techniques previously did). Once I found some we liked, we set things up to make the investments automatic; most people don't have or want to take the time to invest money manually each time they get a pay check.
The only thing I don't have setup automatically is our ROTH IRAs to be funded; I look for good opportunities to fund those each year and since I didn't fund them yet this year, I thought and still think this is a great time to do it; we funded half ours this week and the rest will occur next month when the market might be lower yet (if it's higher no worries either).
So back to my opinion (and yes we all have them); I believe the timing is perfect for a debt free person to invest in mutual funds that are heavily invested in debt-free companies versus debt-laden companies. Debt problems created this down market...Debt free people with the funds can do some loading up while everyone else either sells or just plain isn't buying. Ask me in 20 years how my investments this month did for me...I do keep records.

Dan,
Your investment strategy is exactly what I have been preaching to my kids for 30+ years. They follow your logic very closely, and have done well for themselves.
The only difference I have with your strategy is the ROTH IRA. They weren’t available when we started, and by the time they were allowed, I would have taken a big hit in converting.
You are doing the right things right !
SnT

[CAL]

Dan has some good advice in his above post. Now more than ever is the time to begin investing if you haven't started already. For those who don't know how to start, there are plenty of websites and books you can read to get you off to the right start. Here's a broad stroke about starting out that is basic advice:

Investment Basics

[Pete]

It appears to me that in a gereral sense the US seems to be weathering the storm a bit better than the rest of the world.

Not to say things are rosey, but looking around here things aren't "Bad Bad".

Might some say the US is a safer place to invest money for a short while?

Might we join the rest after the election?

[nmap]

Originally Posted by Pete

Might some say the US is a safer place to invest money for a short while?

Might we join the rest after the election?

Sir, some are clearly saying precisely that. I've attached a chart of the U.S. dollar - it reflects the condition you suggest.

We might well join the others post-election. I keep wondering if the crises referred to by Biden and Gen. Powell might not be an economic and monetary crises, perhaps made worse by those who are not our friends.

The U.S. has big budget deficits, and the rest of the world lends us money.

What if that stops? What if they demand higher returns on their money?

[CAL]

Originally Posted by Pete

It appears to me that in a gereral sense the US seems to be weathering the storm a bit better than the rest of the world.

Not to say things are rosey, but looking around here things aren't "Bad Bad".

Might some say the US is a safer place to invest money for a short while?

Might we join the rest after the election?

I don't know if you've heard the saying "When America sneezes, the world catches a cold." Outside of the US you have developed foreign markets (Europe, etc.) and emerging markets (Brazil, etc.). Of course the emerging markets are the riskiest asset class (within this context) because of their lack of stability. It is generally accepted that foreign developed markets are still not as safe as the good ol' U S of A. That being said, it is also generally accepted that exposure to foreign markets should have a place in your portfolio.