Questions about panic

[Roguish Lawyer]

This is how to handle panic:

http://www.youtube.com/watch?v=Y_GJkKMPHxw

[nmap]

Originally Posted by PSM

I’m with Pete. I’m a buyer.

...

Optimism: This is still the strongest, freest, most productive, country in the world. We can weather this.

But, at my age, this might be the last downturn that I can afford to take advantage of. My son is DCAing in big time because I taught his all of the above. (I may need someone to change my diapers in the future. )

Pat

I'm not quite ready to buy. Bear markets can go lower, faster than expected. If I may suggest, Mauldin's "Bullseye Investing" has a good treatment of how to spot those great (but very rare) buying opportunities. From that perspective, we need a P/E ratio below 10...maybe below 8. We're still above 11.

Originally Posted by Storm

That being said, what we are seeing currently is obviously nothing that I've seen in my short time in the business. People that I am acquainted with at Goldmann, the Central Park Financial Group, and others are saying privately that they haven't seen anything like this either(some of them are 30-50 years my senior). Obviously, many of these people went through Black Monday in
'87, so that is a bit worrisome.

I was just starting to look at markets in 1974; but this is different. That bear market was a sort of slow death, with the market drifting slowly lower. There wasn't the rapid movement such as we see here.

I noticed a piece in the Chronicle of Higher Education by a history professor who draws parallels between the present and the panic of 1873. You might find it of interest. If nothing else, comparisons with events more than a century ago add gravitas to conversations.

LINK

Originally Posted by Storm

Additionally, these people are not conspiracy theorists, but they seem to believe something deeper is happening here. Almost like an invisible force is driving this panic. I am not well-versed, or competent enough to make those kinds of assertions, but some of them seem to believe much of this could be political gone awry.

Could be. But with regard to something deeper...you might consider two issues.

1) Boomers. I read this in Barron's back in 1999, and it stuck. For the period from 1980 or so until 2006, the boomers were looking forward to retirement. They - or at least the pension funds acting on their behalf - tried to save for the future. This implies lowered consumption and increased investment - or, if you prefer, stable commodity prices and an increasing stock market.

But along about 2008, we started to see a change. Boomers began to retire. They (and those acting on their behalf) quit putting money into retirement accounts, and began consuming. So...they keep consuming stuff, but they liquidate investments. This may imply inflation and under-performing markets for the next couple decades.

2) Peak Oil. (Caution: I'm biased. I believe in the theory. Others do not.) Notice that energy prices went up a lot just before the current events, putting added pressure on the economy - and on people who bought expensive houses. If Peak Oil is valid, then it is possible it will have a substantial impact on the economy and the markets.

Originally Posted by Storm

During times like this, a smooth orator can turn this panic to an advantage, which is exactly what you are currently seeing him attempt to do. At this point, he could probably tell most Americans he is going to burn their houses down, and it wouldn't change their vote.

Economic hard times create fertile ground for demagogues. I expect to see strong pressure toward socialism and worse. (I didn't say I wanted to see it, just that I expect to see it.) Holders of stocks and bonds are likely to be demonized as "the rich".

If Obama wins, and if he takes control of both houses of Congress, I expect matters will be worse than otherwise.

Originally Posted by Storm

I apologize for the length of this post, as well as it being a bit scatterbrained. Hopefully it helps your quest just a bit Nmap.

Thank you for your thoughts. I enjoyed reading it.

[nmap]

Originally Posted by CPTAUSRET

I heard a radio transmission on "Guard channel" in VN, it went something like this; "This is CPT XXXXXXX" he then gave his callsign, followed by "We are at 2000 ft, just lost my main rotor, tell my wife I loved her!"

If the general population had even a fraction of the courage and self-control exhibited by the pilot, we wouldn't have a problem.

Thank you for a good story - and may the Captain rest in peace.

[nmap]

Originally Posted by Jack Moroney

It is critical for those that find themselves in this situation have not only the confidence of those that look to them for guidance but that the game plan for controlling the situation and moving forward is understood and within the abilities of those that find themselves flailing around in a panic mode. Those that are in a panic mode already see themselves as stakeholders in the outcome of the event, the trick is how to harness those stakeholders so that they no longer run around in circles at ever increasing speeds with the threat of running up their own 4th POC put providing a clear azimuth to an objective that they can all see and obtain. In the most dangerous of panic situations, the resolution can require unorthodox actions often at great personal risk.

Colonel Moroney, thank you for your thoughts. Your knowledge of people and leadership was exactly the type of expertise I hoped to access.

I perceive two sides to the insights you added. On the positive side, effective leadership can interrupt panic among subordinates. However, if those in a leadership role cannot craft a successful intervention, the panic behavior will build upon itself and get worse.

I interpret this as meaning that our national leadership has a challenge to meet, and if they fail to do so, the markets will continue to face increasing distress. Since this is a global crises, and there does not seem to be any leader accepted by most countries, it sounds as if intervention and bailout will fail. Therefore, the markets must continue down until the bear trend is exhausted.

If that is the case, the situation will not be pretty.

[nmap]

Originally Posted by greenberetTFS

nmap,

I retired in 1998, as VP of Domestic Sales with a respectable retirement package to help me thru my golden years, only I was very heavy committed into the Communications market. I personally knew the CEO at MCI and had invested $180k in their stock. I lost it all within 6 months. Now I'm almost 72 and working as a Security Guard. I don't really blame anyone but myself about the money I lost. But I can say,don't be afraid to SELL when the stocks are dropping. I didn't and I counted on an upturn that never happen........

GB TFS

It is amazing how fast a company - or even a nation, such as the USSR - can fail. Enron was the hottest stock around; and then, suddenly, it wasn't.

Words of wisdom, Sir. Cutting loses is critical.

Thank you.

[Roguish Lawyer]

nmap, I feel left out!

[nmap]

Originally Posted by Roguish Lawyer

nmap, I feel left out!

Sir, I don't know if you are familiar with the Blackadder television series. There is a character who portrays an English peasant, circa 1485, named Baldrick. In each episode, Baldrick always has a thoroughly impractical scheme, which he calls his "cunning plan".

So, Counselor, in that spirit, my cunning plan was to respond to part of the answers each day, thus bringing the thread to the top and - perhaps - generating more answers. Or, if you prefer, I was maintaining a strategic reserve.

In the event you haven't seen Baldric, I have attached an image for your amusement.

[nmap]

Originally Posted by CoLawman

I'm with Pete and PSM I'm buying. I am a mutual fund kind of guy as I do not have the knowledge or time to do the research needed to buy individual stocks. I have searched but have yet to find a Mutual Fund with reputable management that is designed to profit from this Grizzly market. It seems to me that there are plenty of buyers for such a product. I want a fund that is made up of the IBM's that are selling remarkably below their 52 week lows. I want a fund that does not have a stock like GM that looks to be the "buy" of the century to me, but in reality could go belly up.

Nmap your posts are very much appreciated. You can manage my money if you ever get back in the game!

I'm fond of mutual funds too. I like the Vanguard group - they are no-load and have some of the lowest expense ratios in the business. They have something for every taste, and the ability to switch within the family of funds.

Another fund I like, also no-load, is Brandywine. LINK They do have a fairly high expense ratio, and they trade within the portfolio - so each year includes some tax events. They strongly emphasize value investing - finding good quality companies that have been beaten down in price.

Something else to consider...I have not gotten into these yet, but I am looking at them...are stock "exchange traded funds", such as IOO. The IOO issue consists of the 100 largest companies in the world. There are a great many other issues, including PHO (I have a little of this one) that invests in water companies.

I don't think it's time to buy yet, so it is a perfect time to do some research, read the prospectus, and get ready for more favorable days.

Originally Posted by Monsoon65

Nmap:

Thanks for the posts. I really do enjoy reading your input into the economic crisis. I think 99% of the sites out there are freaking and geeking over everything that's going on. I think people should be concerned, but screaming that it's the end of the world sure isn't helping things.

Thank you for the kind words. I agree with you.

"1974. The total decline in the Dow came to -45.1% in just under two years. The stock market’s bear market ending was immediately preceded by a most severe leg down in stock prices, losing -27% in less than two months from early August through October 4th. " ( LINK ). It was one of the greatest buying opportunities ever.

And then...back in 1980...Exxon was selling for $30 per share with a 10% dividend. A bought a miserable 100 shares and sold it for a nice profit. Had I held it, it would have increased more than ten-fold, even if I had spent the dividend each year.

It may be the end of the world for a few. It will cost quite a lot of people something. But it also represents (at some point) a chance to enter the market at favorable prices.

Originally Posted by Roguish Lawyer

This is how to handle panic:

http://www.youtube.com/watch?v=Y_GJkKMPHxw

(Chuckle) Yes, Sir, the fellow with the large open-end wrench should definitely put an end to the hysteria.

Panic isn't necessarily a bad thing - it can make great values. The time is not here yet (in my opinion), but it's coming...

[nmap]

Originally Posted by charlietwo

nmap- In your opinion, do you see any long-term negative affects as a result of the buyout? It seems to me that the unprecedented powers given to the likes of Paulson and Bernanke have the potential to be extremely harmful to the integrity of our nations institutions.

I will admit I only have a basic understanding of the markets, and macroeconomics, but this seems to be a very socialist policy being conducted by very shady characters. Aside from avoiding a Wall Street fallout, I can't see many long term benefits to such a major deviation from capitalist principles.

Hope you can show me some light here

Sir, I was going through this old thread - it is interesting, is it not, how matters turned out. Your post was made on Oct. 10th; today, we can see the harm.

That harm may include the loss of the dollar's reserve status, at a cost to you and I that may surpass our darkest imaginings.

Here's a chart of the Euro index. The dollar looks as if it's coming down as the Euro goes up.

LINK

[AngelsSix]

RL:

nmap, I feel left out!

I agree, but don't you just love youtube???