Thursday, November 20, 2008

Waiting for Dow 7000

New lows and more bargains...

For about a year I have been hearing that stocks are a bargain, cheap - and that I should buy back in. And mostly I have replied “No thanks, I think they will get even cheaper”.

However, after the plunge I did buy some. Now those shares are cheaper and better bargains than ever before.

Thankfully, I put only a small share of my money back into the market. Unfortunately, the market has made that small share smaller.

I do believe there is value in dollar-cost averaging in the low end of the market. However, I am going to wait for a while. I think I will not buy again until the Dow is around 7,000.


At November 20, 2008 9:11 PM, Anonymous Anonymous said...

I agree. I bought zero equities for 2 years prior to Oct 10, when I bought again. I have since bought on the days when the market tested the lows, around 5 times. Consequently I bought a bit yesterday thinking it was yet another bounce off the base, which I quickly determined was a mistake. I did not buy today as I believe that the next base will form at DOW 7000 or 6800, and at that point I will begin buying.

I still have plenty of dry powder.

At November 25, 2008 9:44 PM, Anonymous Anonymous said...

Ok Mr.Zephyr, when you posted this the market had just closed at a multi year low in the face of the following circumstances:

1.) Uncertainty about the survival of the Big 3 autos.

2.) Uncertainty about the survival of C.

3.) Complete political silence from Obama or Bush.

Since that day we have received some clarity:

1.) It appears certain that the autos will get their bail out money.

2.) The government has ring fenced C's bad book and back stopped not only them but all the other Magnificient Nine banks with an explicit guarantee of their debt.

3.) Obama has stepped into the political void with appointments that appear to have been met with a certain amount of Wall St. approval.

Hence, 3 straight rally days. Given all that, do you still believe we will see DOW 7000? I have my doubts.

At November 26, 2008 1:45 AM, Blogger zephyr said...

We are seeing a rally on the good news. However, the rising unemployment and ballooning federal deficit will remain hanging over the economy and the market.

Profits will decline and PE multiples will slip. If profits fall by 20% (a near certainty) and PEs fall by a few points (very likely), then the market will decline to well below 7,000.

More than a year ago on June 7 2007, I posted that I thought the peak in the market was very near, and that 2008 would be a difficult year. Someone posting as “Amonomous” called my observations “Obsurd” (I am sure they actually meant Absurd). Turns out I was so very right. And it was very beneficial for me to sell when I did.

Will the market go to 7,000? Nobody knows. If it does I will buy more stock. If not, I will be happy with what I have.

But, so far my forecasts have on whole been very good for my pocket book. I removed most of my money near the top, and largely got out before the plunge.

I continue to expect a new low after this rally. Laugh at me if you like – but so far I am laughing all the way to the bank.

At November 26, 2008 3:25 PM, Anonymous Anonymous said...

Ok I understand.

And for the record - I am not now nor have I ever either laughed at you or posted as "Amonomous"! :-)

Take care.

At November 26, 2008 5:46 PM, Blogger zephyr said...

My comment about laughing was mostly rhetorical.
I am pleased to have your comments - making such clear points, and a good logical case. Only time will tell which way the scale will tip for the market.

At February 20, 2009 11:34 AM, Anonymous Anonymous said...

Your target of "around 7,000" is fast approaching!


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