If it was no so cruel, I would love it. I myself have simply looked at a small section that at a guess could be close to 10% and multiplied my guesstimate by 10. . I do not ever recall picking a figure out of the sky because it was the right size. But In all fairness, how would one go about calculating a figure when all you know is . . "Its Big"

In retrospect they could have picked a bigger number, and still been equally accurate.

__________________

Today Bush decided to save the car industry.

The big question is whether he is carrying corn to a dying horse.

The oil price yesterday fell below USD 36 / barrel so fuel efficiency is no longer that important question. The problem as I have understood it, is that many Amercans still buy much more fuel efficient Japanese cars.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

The problem is that the Big Three have consistently lost market share since the 1980s (and even before). In the last 13 years they have lost an additional 30% of the market.

Believe it or not they actually DO make cars that people wants, but Toyota and Honda simply make them better. Camry/Corolla Accord/Civic beat anything by anybody in the US market.

Malibu/Cobalt, Fusion/Focus aren't actually BAD, they just aren't as good or better.

To even say that Toyota and Honda are Japanese at this juncture only acknowledges their roots. Toyota, Honda, GM, Ford are all multi-national corporations at this juncture.

Which one is more 'American' - the Toyota Camry (Georgetown, KY) or the Ford Fusion (Hermosillo, Mexico)?

__________________

And now Norway is getting into the car industry. If I am not misinformed there are three "green" car companies here. At least one is sucessful so long.

It will most probably be comarable to Opera vs I.E. / FF even if Opera is best IMO

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

Actually I am watching many of these companies too. They have several smaller companies (Chrysler even owns one here called GEM), there is one up in Canada, etc.

Its very much akin to the birth of the auto industry where you saw a plethora of new entrants which eventually got gobbled up as the industry consolidated....(Look at the history of Chrysler, you will see Chrysler starts, AMC gets Nash, Studebaker & Desoto, AMC then gets JEEP, and then Chrysler gets AMC.....(I'm not sure about Studebaker, but you get the drift).....same thing with GM, they acquired many of their divisions by buying out competitors.

Most of the new entrants will not survive, but the one that will innovate will create the standard (hopefully) for green transport into the future.

The recent drop in the price of oil highlights yours previous assertion that taxes on carbon emissions will be necessary. At $36 per barrel (I filled up at $1.47 per gallon yesterday in NJ), there is little incentive for the green car industry to progress.

Unfortunately the success of any green industry ultimately creates the very market conditions for its own demise (less demand for fossil fuels, lower price for fossil fuels, less incentive to convert to green technologies).

__________________

Overhead. Overhead. You may know the economic concept.

They should hire new bosses (hopefully) driving (their own) fuel efficient cars in stead of private jets.

My biggist concern are banks, insurance comapanies and other dinousaurs with too much infra structure (buildings stc).

I have predicted that http://www.flysas.com will go bust or have to merge. Yesterday it was announced that they would sell their majority holdings in Spanair and Air Baltic.

Chaotic dynamics (economic transition, evolution and reallocation) are beautiful. Time for American turbocapitalism to adapt and adjust faster.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

Global warming, the ice in the Artic melting opening up potential enormous oil / gas fields close to the US Alaska / Canadian, Russian and our border. Do you remember my obeservation of a classic oil price bubble and a floor oil price at USD 1 / barrel?

Today, the oil price hit a new low of USD 33.87 / barrel. Now the price has fallen 113.13 USD / barrel from a top of 147 to 33.87, even if OPEC have announced that they will cut production with 2 million barrels / day. The price is only USD 32.87 / barrels away from my price target.

Socalled Norwegian experts don't understand why the NOK depreciates. They have not even mentioned that this depreciation help our emerging car industry, sea farming and other traditional export industries.

Further information if you are interested: Use Google translate to translate this DinNettAvis, norske og utenlandske nyheter døgnet rundt site / page.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

That is the danger of being a commodity exporter. If the commodity is in demand and creates demand for your currency, it can make other industries less competitive. They even have a name for this, they call it 'Dutch disease' after the discovery of natural gas caused the Dutch currency to appreciate.

__________________

I think our government is aware of the dependence on oil and gas, but they will not buy my lower bound prediction interval of the oil price at USD 1 / barrel.

It is a well known fact that the price discovery first takes place in the futures price. I think it was on friday that crude oil for february delivery was priced at USD 42 / barrel. An indication of a temporary local bottom??

It is too early to know the future.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

Kgun said
"It is too early to know the future"

It is always too early to know the future! never too early to speculate.

__________________

At $1.00 per barrel it isn't worth selling. A little evidence from history. Farmers dumped milk rather than sell it at low prices during the Great Depression. If demand weakens and you have a supply glut, it could happen, but only temporarily. The weakened demand will still pull on the demand end and the suppliers will simply shut down (most of them producer at marginal costs much higher than $1.00 per barrel); the weakened demand continues to pull until it soaks up the glut and then pulls the system 'taut' again.

At $1.00 per barrel, instead of exporting oil, Saudi Arabia could burn the oil, desalinate ocean water, irrigate fields (check out crop circles; not the alien kinds of course, online where they pump water from deep acquifers and create a round green oasis in the desert) and simply substitute for food imports.

A barrel is 42 gallons - oil weighs about 7.3 lbs per gallon = barrel = 306.60 pounds....that would mean that oil would sell for 1/3 of a cent per pound (+/-)

The only way I predict such a price is if alternative energies become the norm and there is a pre-existing supply of oil which needs to be liquidated never to be produced again. In theory you could even get a negative price in the sense that it might become a product that people would pay to actually get rid of.

__________________

Yes.

Yes, in a distant future it is a possibility. Worst case scenario for an oil company. Best case scenario for our planet? Ask Al Gore. In my forseeable future oil also has alternative uses, that is more important than bruning it as fuel.

Yes, in a sense comparable to the liquidity trap. Markets are so depressed that investors must be paid to invest (negative interest rate). The FED funds rate is now zero as far as I know. In Japan it has been close to zero for more than a decade.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

I was just reading about the impact the closure of a GM plant in Ohio is having on a small town. Its been there for 27 some odd years. Small towns have to be careful about these things. Being a 'one mill' town; not an enviable position.

Its yet another lesson in diversification.

__________________

Now Oslo, a small town of 400 000 inhabitants will use NOK 30 Bn over the next four years to restore and renew schools, other buildings and infrastructure. Traditional keynesian policy, that creates a lot of jobs for other companies via the multiplier effect. Our prime minister is an economist.

It may as I have written before be the start of a deflationary depression. If that is the case, there are some big problems for companies like oil companies that have been wage leaders. The price of their product have fallen dramatically, while costs, especially wage costs stand still. How will they handle that? Will they cut wages, fire people or use a combination to improve the free sustainable cash flow?

Example.
A company with 1 000 employees paying an average wage inclusive the present value of future pension costs of USD 200 000 / year want to reduce wage costs with 50 %. That can be done by firing people, lowering wages or a combination. In a deflationary depression wage decreases may lag price decreases. Some companies may get problems because of that fact. When the alternative is unemployment, employees may be willing to reduce their wage. That may be difficult here because of strong labour unions. I see how my gasoline bill is reduced with 30 %. Other commodities may soon follow, so a reduced wage may not imply lower purchasing power. The price of oil have dropped dramatically, our exchange rate depreciation reflect that, so it has ceteris paribus been more expensive to travel abroad. The fact however is that the cost of travelling abroad have dropped even more.

So dynamic companies that are fast to adapt and adjust to changing environments will have the best chance to survive. Adapting and adjusting may be a question about life or death of the company. The western economy is not used to deflation. Aside from a few exeptions there has been a global inflation the last 75 yesrs. Earlier periodes of inflation and deflation changed more frequently.

Toyota, the worlds largest car company experiencing a deficit the last month of more than USD 1.5 billion. Japanese companies have been fast to stop participating in rallies and formual 1 etc.

Necessity is the mother of invention or back to basics.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

Well, hate to feel sorry for energy companies....hehe....but seriously let's take a look at the income statements.

XOM: EXXON MOBIL CORP Income Statement

Check out the operating expenses as a percentage of gross sales.

10-16% of gross sales is being spent to make sure that the company keeps humming. That's for infrastructure, wages, selling expenses, bribes, coups, or whatever nasty things Exxon is up to.

As a percentage of gross sales that is pretty good a very enviable position to be in economically.

Now of course their gross sales will decrease, but so will their cost of goods sold.....Even assuming that all of their operating expenses are FIXED (which most assuredly they are not), Exxon is still going to pull in a pretty penny.

__________________

1. That is 2007 data. The quarterly data is not complete yet.
2. Look at the candle stick chart at the right. A stock in free fall.
3. May be a more interesting chart: XOM: EXXON MOBIL CORP Top Competitors
4. XOM seems good on profitability EBIDTA etc.
5. Bad on dividend.
6. Financial strenght good - LT Debt to Equity Ratio (MRQ) etc.
7. Analyst Recommendation: Buy on all 4. Hm??

Note that in the Classic 1940 edition: "Security analysis" by Benjamin Graham and Divid Dodd, Part I Chapter IV "Distinction between investment and speculation" they write page 60.

<cite>
It would undoubtedly be a wholesome step to go back to the accepted idea of income as the central motive in investment, leaving the aim toward proft, or capital appreciation as the typical characteristic of speculation.
</cite>

That chapter should be a must reading for every investor. Also note their cynic's definition of investment as successful speculation. (my bolding).

Successful speculation.

In my personal view, that means (under the current market conditions)

1. The company survives this correction.
2. Assuming a future stock price increase and a long enough holding periode.
3. Investing close to the bottom and a shorter holding periode. Bottom fishing.

Undistributed dividend make the company stronger while assuming capital appreciation in a bear market is a risky business.

The quarterly reports in 2009 will be intersting reading.

The bubble has bursted. Where is the bottom?

Exxon Mobil to profit from the pain - MSN Money - Jubak's Journal

Alternative source: XOM - Stock Quote for Exxon Mobil Corp - MSN Money

Stock Scouter rating of 9: (Like Morning star ratings it may be high at a top)

StockScouter Stock Rating System - Exxon Mobil Corp (XOM) - MSN Money

XOM Analyst rating, analyst recommendation - MSN Money

Hm. Hm.

Look at the financial Results and the submenus, especially Management Efficiency. Income / Employee much better than the industry average and about 5 times better than the S & P 500 average.

Key Financial Ratios: Financial Results - Exxon Mobil Corp (XOM) - MSN Money

Conclusion:
The data is reported history lagging the current drop in the oil price. I would not speculate on capital appriciation in these economic enviroments. Dividend (investor income) payout are no better than for their competititor. Despite a stock price in free fall, the company seems stronger than their main competitiors based on historic data.

Agree. Hopefully it will be a soft landing. So far it seems more like the beginning of a crash.

This was no investment / speculation advice. Only a few minutes superfluous fundamental analysis of balance sheet posts and the stock price. Off balance sheet (immaterial) posts like environmental effects, goodwill etc. are not taken into account.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

Of course, their first and second quarter 10Q will reflect the higher price of oil. Their third and fourth quarter will be more interesting. But in my opinion, its one thing to take a hit on a quick fluctuation, the telling tale will be if the price of oil remains low throughout 2009 and then we will see the income statement from 2009 (in 2010 of course), then we will see how flexible and adaptive Exxon is to the market....

I didn't see any chart, where is the chart you are referring to? The drop in the price of oil will undoubtedly be reflected in some kind of lower share price for Exxon. In your initial post you said that in this economic environment, the market will reward those companies that are flexible and capable of adapting to changing and fluctuating market conditions. I agree. I believe that Exxon's income statement reflects a certain amount of inherent flexibility. Compare Exxon's statement's with both UPS (high operating costs as a percentage of gross sales) and GM (cost of goods sold way too high as a percentage of gross sales) - both are infrastructure heavy and relatively inflexible.

Its a good chart because it shows the price of the stocks of Exxon and its multi-national competitors.

The question is really whether Exxon will be able to maintain its margins.

Aren't they all these days? hehe. I joke, but if you're buying a stock to get the dividend ONLY (which you aren't of course), the rate of return is a joke.

If I could predict the future and where the price of oil would be, I would comment or otherwise be standing in front of the NJ Lottery machine!


I must agree, I think that we've gotten away from what a stock is really supposed to be. Over the years, somehow the investment community has begun to prefer to take their return in the form of accumulated capital gains rather than in the form of dividends.

Well, every investment is some form of 'speculation' in the sense that we truly don't know what the future cash flows of that company is going to be. I would say an investment in Exxon today would rank as speculative in the sense that market volatility (Oil @ $147, Oil @ $40, within months of each other), should lead any reasonable person to conclude that any sales forecast for Exxon predicting sales of Exxon into the future (or its cost of goods sold) is, at best, a guess, based on assumptions about the price of oil that may or may not be true.

In English, I believe the word for undistributed dividend is 'retained earnings' - and yes, it can make you stronger because it gives you cash to fall back on. You can use that cash to expand (probably not in this market), or to hopefully de-leverage (pay off debt)

Yes, that will let you know if we've hit the bottom.

Interesting stuff

You're looking at it from the point of view if somebody should buy Exxon's stock. I'm looking at it more from the point of view of whether Exxon itself is viable and its ability just to maintain margins and to respond in a flexible fashion. What Exxon has demonstrated is an ability to ramp up its operations pretty quickly when times are good. Now that times are bad and its core commodity has declined in value, will Exxon's relatively low operating costs cushion it? I think so, but we'll see.

Ugh...pessimism....on the eve of the eve of Christmas!

Love the disclaimer!

__________________

Along the right edge of the above page when the market is open.

Alterneatively, on this BigCharts - Interactive Charting

page

1. Enter symbol: XOM
2. Time: 1 year
3. Frequency: Weekly
4. Chart style: Candlestick
5. Draw chart

Bearish candle stick with a top a little below 85 and a bottom at 75.

Monday + Tuesday ==> Doji at 75 on low volume.

Change
2. Time: 5 years.
3. Frequency: Monthly

Draw chart.

The tendency is clear however. The stock has declined with a declining oil price, so

the future oil price development is important.

Questions: Is it a

• Temporary.
• Medium term
• or permanent

drop?

What happened in October? A low at 58.

You can use a battery of technical indicators at BigCharts. Note that most of them are a function of price and not independent.

P.S. On the last setup (5 year monthly) change XOM to DJIA and you get an ugly candle stick chart.

1. You have been correct so long that DJIA will not drop below 7 500 (support if you draw all data).
2. Change to msft, and you have been wrong on Microsoft so long.

That was a faster technical analysis and far from any investment / speculation advice.

Two interesting books.

1. http://books.google.com/books?id=-0H...ad=3_0#PPP1,M1
2. http://www.irrationalexuberance.com/

Google:

sornette didier stock market crashes are predictable

I was unsure of the correct English term, I also thought of withold dividends, but retained earnings is correct.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

I see, its an interesting tool, very well set up.

Of course, with Exxon, the relation between the price of oil and the stock price of the corporation is intuitively obvious. Nevertheless, check out the chart if you go back ten years; when at one point I think oil was below $20.


In this market? Everything is apparently temporary. It could be a prelude to an even larger drop or a prelude to a rebound in commodities.


I lost you here, what did I say that was correct?

Looks like there is a sticky point at 8000

I don't believe that I've ever touted Microsoft as a stock. I am a devoted 'google' bear thinking it to be overvalued, but I don't think I've been wrong on Microsoft inasmuch as I've never had much of an opinion on the value of Microsoft's stock.

Ooohhhh boy, you have your fractal right on the cover!

Looks like a textbook from business school.



UCLA - Earth and Space Sciences - Prediction: The future of the USA stock market - August 19, 2005
Prediction: The future of the USA stock market

"Our analysis [1,2] has confirmed that the USA stock market antibubble has entered the second-order Landau regime. The first figure shows the modeling and prediction of the US S&P 500 index from 2000/08/21 to 2005/08/16 using the second-order Landau LPPL formula as well as the third-order Landau LPPL formula (LPPL stands for log-periodic power law). See [3,4] for a derivation and use of the third-order Landau formula in the context of the Nikkei antibubble from 1990 to 2002. The second figure shows the modeling and prediction of the Value Line Arithmetic Index.

We have included the third-order Landau LPPL forecast because we believe it is possible that the market is undergoing a transition from the second-order regime that started approximately at the end of 2002 to the third-order regime, after more than 2.5 years."

Now these predictions are made at the end of 2006 and if you look beyond the known data (AT THE TIME) his forecasts have LARGE deviations. I wouldn't call predicting a wide range of reasonably anticipated results as being particularly predictive.

And then he concludes:

"It is interesting to note that, while most of the scenarios are bearish on the S&P500, there is the potential (3 out of 20){aka 15%} for a continuation of a moderate growth over the next year. In contrast, for the Value Line Arithmetic Index, most of the scenarios forecast a flat or slightly increasing market over the next year."

I can make a prediction as well, Exxon Mobil could trade as low as $20 or as high as $150 in the next year. And as long as the stock trades in that large range, my 'prediction' is not correct; albeit not particularly useful to anybody.

Don't worry about it, I knew what you were talking about. I assure you that your English is much better than my Norwegian. The only time I correct you is when I think you might actually be interested in knowing, for your own English proficiency, what the correct term is.

__________________

I have already decided that Kgun in part uses this forum to improve his English language skills, If I compare (with my memory) some of Kguns earliest post with today's I would say he has done an excellent job.

I would highly recommend any none native English speakers to just start talking on WPW. There seems to be a huge topic variety, and many members willing to converse.

I believe we have many "non posting' members that might be a little fearful of posting poor English language skills.
How do we fight this. . The other side of the world can often translate into a different perspective.

I manage to communicate in just the one language. I have always held multi lingual people with high respect.

On Topic. . The latest Toyota information tells me that the USA automotive fightback could border on a bloodsport.
I do love Ford, GM and Chrysler. (I drive a Ford Falcon - Aussie one)

__________________

Google:

7500 cw1865 kgun site:webproworld.com

and you find this post #52

Look at the date and use bigcharts to view the stock price of Microsoft.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

Not a random textbook. Professor Shiller placed all his money in cash before the march 2 000 stock market crash. The second edition of the book warned about the housing crash.

Google:

professor shiller stock market crash


Note:

1. He works at the UCLa earth & Space sciences.
2. Earth quakes and credit tsunamies that Greespan call this crash have many charateristics in common.
3. You should read his book "Stock market crashes are predictable" before you devalue his predictions.
4. Yes anybody can make wide prediction intervals that in a extremely volatile market shall be wide. Have you heard about small earthquakes before the big? But can you combine your predictions with probabilities?
5. Do you remember what I told you about an expanded flat that has a positive probability? If not, look back in this thread.
6. If a person get a heart attack, I can say that most probably (s)he is dead within 15 years. That is a fact that most of them die within 15 years, at least before the latest improvements in health care and medication.
7. That does not imply that you rely more on me than on the doctor.
8. The difference is that the medical study is easy compared to mathematical finance.
9. I have a friend that had no problem being a docotor. He had, according to himself, no chance taking a degree in economics. Mathematical finance is more difficult.
10. Do you think that linear trend regression and extrapolation is better? Stock market fluctuations are not linear.
11. As I have repeatedly told, stock market predictions are about probabilities, odds if you prefer.
12. Now give me the narrowest 95 % prediction interval for the DOW to 2015. A 95 % prediction interval implies that the interval has a 95 % chance of covering the price trajectory to 2015.

I love being corrected on my English. My son say that my English is terrible, so don't worry.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

No not at all. I would not use WPW to improve my English skills. That is far from true, Tubby.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

And actually on a side note, my 'pen pal' from when I was a kid is a 'Geophysiker' (siesmologist) from Germany (now in Switzerland) who works at the 'sister' institution in Switzerland (this ETH or something). I know nothing of earthquakes, but they still have difficulty predicting WHEN, of course the 'WHERE' is a little bit better known now (along fault lines, ie. San Andreas fault)

And nine years ago, I could at least attempt to construct such a confidence interval, but today, December 26th, 2008, for purposes of a blog, I don't think that is going to happen! hehe

You have to remember that at this juncture my life has diverged from that industry. You are very well steeped in it and that is to your credit, but I could just as well ask you to explain the rationale behind Federal preemption of NY's vicarious liability laws.....you see my point?

__________________

And I still stand by that post. I think you misconstrue it a little bit. My point in October is that when the market is looking for a 'bottom' eventually the underlying assets are going to start to appear 'cheap'

With respect to Microsoft, Microsoft had a local high of 40 and a low of 15 (+/-) - when I wrote the post, MSFT was at 26.....

Just looking quickly at the EPS you see that MSFT is actually earning $1.90 per share and actually pays a dividend of .56 per share.

$1.90/40 = 4.75% (attractive to the market?, apparently not!)
$1.90/26 = 7.30% (attractive to the market?, I guess not!)
$1.90/15 = 12.66% (attractive to the market?, I guess so, the price 'bounced' off of this level)

Just on a dividend basis:

.56/40 = 1.4%
.56/26 = 2.15%
.56/15 = 3.73%

That was my point, as the market corrects, the price of assets does drop, but eventually as the prices continue to drop, the asset itself becomes increasingly more valuable on a cash flow basis, until the market finally acts and buys it because the asset is actually a good value again.

With respect to companies that are LOSING money, the analysis is more difficult, but if the company could cease operations, sell off all of its assets and pay all liabilities and still have assets greater than its current market capitalization, well, I would say that is a 'good value' (of course if the company decides to simply continue operations and bleed assets, its not going to help you!)

__________________

Yes, partly I do, but I am an economist with a specialization in mathematical finance.

No I only report facts.

1. Penny stocks may also seem cheap, but if the company go broke, you have lost all your money.
2. Go to page 5 bottom: http://multifinanceit.com/Litteratur...detsmusikk.pdf. Never forget that price chart. The volume data show when the panic starts. People put their pension money in Enron.
3. There is something about Coke (aside for refined sugar that can hurt the company) and Mc Donalds.

Great point.

You made similar statments about GM before the bailout.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

The 'cheap' was in " / " quotation marks. Yes, a penny stock (or Ford 'F', for that matter) is cheap in absolute terms. I put 'cheap' in quotation marks for a purpose. Context is everything.

Cheap is a funny word in English.

A person can be cheap (meaning he's not willing to pay for things)
A product can be cheap (and depending on how you say it, it could mean that the product itself is of low quality and not worth the price or the product exceeds your expectations and you're surprised that the price isn't actually higher)

Now, for purposes of illustration only, let's assume that Microsoft sold for $1 per share earning $1.90 EPS and .56 dividend. That would be so 'cheap' that it would be ridiculous. You'd be earning 56% on your money based only on the dividend!

Your point about the company going into bankruptcy is valid for Ford, but Microsoft is currently profitable.

__________________

My bolding.

I agree.

And as far as I have understood Ford is more solid than GM and Chrysler.

When the economic conditions require adaptation and adjustment, the least you need are leadres not being able to see the new enivironments. The law of economics are the same. Look at free cash flow. Hopefully it is sustainable and increasing or at least not decreasing.

Nothing tells me that a bottom has been reached, but I may be wrong. (Obama and his economic team may introduce an expanded flat correction).

Again, no investment or speculation advice.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

The 401(k) accounts have naturally gotten hammered during the recent meltdown as well.

The mantra that equities will return 10% per annum may fall on deaf ears. I have heard many stories of people losing substantial value in their 401(k) retirement accounts.

Many people have switched from investing in equity mutual funds to what are called 'safe funds' - this may persist for some time, so even if you find a bottom, I wouldn't expect a quick rise back to the top, quite a bit of capital that was used to fuel the growth of the last growth spurt in the market likely will not be there. (at least in the short to medium term).

__________________

Yes, I know. Your pension system is very related to the stock market. Putting money in the stock market in a secular bear market is risky busniess, even if you have a long horizon. Dollar cost averaging now in cheap index funds is the best I can recommend if you don't make your own analysis of individua stocks. Se above regarding an over and undervalued market. If some of the bigger bears (go back to the start of this thread) are correct, we are far from the final bottom. But the correction downward is not linear. It is more like waves on a beach. They rise with the tide, the flow (and storms) and decline with the ebb. Some call this market a tsunami. The overall corrective wave of the highest degree is an A down, a B up and a C down. There are some variations of this main pattern that you must understand. As the wave unfolds, some patterns (wave counts) become more probable while other less probable. A zigzag is ruled out and an expanded flat has a positive probability. Compared to the 2000 top, the 2007 top for the DOW is such an expanded flat so long. Make a quick chart at BigCharts and watch for yourself.

EWI predicts, as far as I remember that the bottom of the corrective C (or E ...) wave shall take place between the 1929 top and the 1933 bottom. In other words between the Dow price in 1954 and the 1933 bottom since it took 25 years for the DOW to reach the same nominal value as in 1929.

My bolding. So you await an U (or W) and not an V shaped correction.

1. Don't confuse B, D, ... waves with a new secular rise. It may though be charactericed as a cyclical bull market, and those that are aware of this corrective pattern may prosper. Corrective patterns are richer and more complex than motive. I have always meant that those who understand corrections best will make most money in the long run. Note that Warren Buffett is by some called the greatest market timer. He also concentrates his investments on a few very well analyzed companies whose business model he understands.
2. There are always stocks that go against the wind. The problem is that it is more difficult to find them in bear markets.
3. A thorugh fundamental analysis is requried if you will identify these stocks. Complement that with a technical analysis. A technical analysis can give early warnings.
4. Bottom fishing is as risky as being 100 % invested in stocks near a cyclical top. The train may leave the station without you. Your above point regarding cheap stocks is partly correct. You may be correct that we are close to the bottom of an A wave. Also note:
   - Put options are insurance against being in the market. They are relatively cheap when the market trends upwards.
   - Call otions are insureace against being out of the market. They are relatively cheap when the market trends downward.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

Another very relevant book for the student:

The return of depression economics (Note the term "depression economics")

by 2008 Noble prize winner in economics, Paul Krugman.

Related:
The Official Paul Krugman Web Page

Op-Ed Columnist - Paul Krugman Blog - NYTimes.com

He has written some articles on deflation that may be worth reading.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

I had too look up what I wrote above, in the Book by Robert R. Prechter (Year 2000 edition): "A the crest of the tidal wave" with subtitle "A forecast for the greatest bear market."

Page 12:
<cite>
The ability of an analyst to identify the relevant pattern, interpret them properly, and anticipate the ones that follow is another matter. That task is exceedingly difficult, ...
</cite>

Page 14:
<cite>
..., it is well to keep in mind that wave analysts have been wrong on markets at times, sometimes very wrong.
</cite>

Page 14.
<cite>
The onset of the severe economic contraction will be signalled by a downturn in the stock market's blue chip averages.
</cite>
My boldings. I told you above. Financial market crashes are not very different from earth quackes. You get minor and increasing earthquakes before the final big one. Again, if I remember correct, Elliott himself predicted a top in 2012. The downturn in the Dow in 2000 was not so dramatic as it is now. Go to bigcharts:
1. Symbol DJIA.
2. Custom time frame: From 1/1/95 to 12/29/2008
3. Frequency: Quarterly
4. Chart style: Candlestick
5. Draw chart.


Page 18:
<cite>
The downside target zone would be the price area (ideally near the low) of the previous fourth wave of lesser degree, wave (IV) which fell from 361 to 41 on the Dow.
</cite>

That is what I have stated above. "Ideally near the low". The low is 41.

If you assume a general defationary depression that forecast is no longer that wild. But I repeat:

Page 14:
<cite>
..., it is well to keep in mind that wave analysts have been wrong on markets at times, sometimes very wrong.
</cite>

So don't miss the train. Dollar cost average (save monthly) in cheap (broad is most secure) index funds, if you can afford it. And as the market fall further increase the monthly amount by x (e.g. one) USD. Some recommend investing in inverse index frunds, that is funds that increase in value as the index fall. Then you have to have a strong opinion that the market shall fall further and you must close the fund when the market bottoms out. That can be difficult.

Don't rely on my wave labelling. You have to see what Prechter writes and updates in his monthly "Elliot Wave Theorist".

This is no exact science, and the patterns become, as I have told, more and more identifiable as the waves unfolds.

Page 12.

... the Wave principle provides some advantages that most forecasting methods lack. For instance, it provides a method of ranking alternative possibilities. Also important, it forces the analyst to look at the big picture. A proper long term perspective elevates the wave analyst above the cacophony of daily news.

My bolding.

Who has said that the medical science is easy? Who has said that financial analysis is easier?

The main site of the EWI Principle / Fractal:
Elliott Wave International: Expert Market Forecasting using the Elliott Wave Principle

Related socionomics sites:

Socionomics Institute

Socionomics Foundation - Advancing the Science of Social Prediction

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

jobless claims are lower than expected
oil is nice and low (less money for gas out of people's pockets)
mortgage rates hit a nice low (If troubled mortgages can refinance or if those who are solvent refinance, it should put some disposable income back into the economy)
stock market seems to have stabilized

Couple of months ago there wasn't ANY good economic news, it was all bad.

Now of course we're starting to get the first peeps of good news.

So, Happy New Year!

__________________

Or trading sidewise is another word. Volatility has also declined. Clear signs that the market is looking for a direction.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

Obama say that an USD 1 trillion deficit will last for years. It should already have been discounted in the market.

May be real Keynesian stimulus policy is necessary for a long time.

The market is trading slowly lower. Interesting to see what happens on 20th january. My prediction is that not much will happen in the short run. As indicated above, the market is forward looking. Obama's policy is known by the market.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

If this recession is similar to the early 80's recession (in terms of severity), then I think Obama's plan is about on target in terms of its scope. I know that once you start throwing the 'trillion' dollar word around people get a little fidgety, but as a percentage of GDP, the stimulus seems to be about the same size as Reagan's plan (which was essentially cut taxes, run deficits and jam money into the military), except of course instead of having a 500 ship navy, let's hope we actually get put onto a transformative path.

If this is the 'Great Depression' then I fear that the plan may not actually be bold enough.

I looked up some figures
US GDP (1930) = $91.2 billion (government = $10bn) = 10.98% of GDP (+/-)
US GDP (1940) = 101.4 billion (government = $15bn) = 14.79% of GDP (+/-)

Essentially FDR's New Deal wasn't large enough to get the engine running again. It wasn't of course until WWII (government military expenditures as a percentage of GDP shoot through the roof sopping up virtually all unemployment and giving the demand side a massive kick in the rear)

One of the premises of Keynesianism is the presumption that, when times are good, the government will run some kind of a surplus (last seen briefly under Clinton). The government seems to run deficits good times and bad...eventually a time could come when people will balk at lending money....

January 20th, 2009 will be remembered, its going to be a 'feel good' day. I agree with you, as far as the markets are concerned, President Obama already is the President.

Unfortunately for him:
"Transition officials said Friday that President-elect Barack Obama's mother-in-law, Marian Robinson, is moving into the White House to join Michelle Obama and their two children." - I bet you he didn't bargain on that one! Personally, I'd resign. Or even better yet, I'd make the mother in-law ambassador of the Seychelles or Honorary Inspector of all Federal facilities in Nome, AK.

__________________

Craig, excellent post. If I had time, we should have written a book together.

Have you read the last chapter of Keynes "General Theory"? I can recommend it.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

Yes, quite literally 19 years ago in 1990 as a freshman. Once I declared economics as a major, they recommended that you take an 'Economics History' class and both Smith, Friedman and Keynes are, naturally, required reading. We can write it, as long as you agree to call it 'Harry Potter's Economic Theory' - might not make much sense, but it'll sell a million plus copies

I have to find those books now. I put them away in a crate, left college, brought them home, moved twice since and now I have to relocate them.

__________________

Signed.

Then you have to start with a content layout.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

Clear message from Ben Bernanke - Wikipedia, the free encyclopedia .

It is unacceptable that the big companies that now ask for government bailout were among the biggest risk takers during the boom period.

Alcoa Q4 loss 1.8 Bn USD, worse than the Wall Street Journal expected.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

Yes, that was always the problem with the bailout. My support for the bailout is only based on the fact that the alternative is worse; not on the fact that I actually like subsidizing poor risk taking.

__________________

Great reply again.

I also note that the US Car industry seem to adapt relatively fast.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

1. Additional bail out requirements from US banks.
2. Short selling again allowed in UK.
3. New financial term that I have never heard of before mentioned on Cnn: Dead bubble.

A bubble that has stopped increasing or ...

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

The Bailout continues in Europe when markets are closed in the USA

• Britain launches new bank bailout to boost lending.
  
• Related: RBS crisis: Royal Bank shares plummet after biggest loss in UK history - Scotsman.com Business
• Oil falls towards $34 on gas deal
• One of Obama's main challenges will be the US / China relations.
  - The danger of rising protectionism in both countries
  - Currency manipulation.
  - Big US debt.
  - The heavily interdependent economies.

Summary:

• There are too many banks.
• The government will try to establish pre bailout state for UK banks.
• Ukraine has to pay double price on gas compared to earlier.
• Ukraine will still get 20 % discount on Russian gas compared to the market price if I heard correctly on Cnn.
• Sochi, January 9 (Interfax) - Ukraine was selling gas to its domestic consumers at an excessive price.

Related (propaganda or news? So different from Cnn): EU Demands Russia Turn Gas Back On

Own analysis:
Time for a new oil price low tomorrow or during this week? If US stock prices ends higher this week (friday close) despite the negative European momentum, that is a strong signal.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

Yes, because to be frank, China has (a significant percentage) of the dollars the government has been borrowing and will continue to need to borrow.

Obama is what I would call a 'fair' trader.

"This is the moment when we must build on the wealth that open markets have created, and share its benefits more equitably. Trade has been a cornerstone of our growth and global development. But we will not be able to sustain this growth if it favors the few, and not the many. Together, we must forge trade that truly rewards the work that creates wealth, with meaningful protections for our people and our planet. This is the moment for trade that is free and fair for all."

But it remains to be seen how this will ultimately develop. Over the course of the campaign he did waffle on NAFTA. He has referred to NAFTA as a 'mistake' but has since backpeddaled to: "opening up a dialogue" with [Canada and Mexico] "and figuring to how we can make this work for all people."

U.S. Trade Representative under Obama will be Ron Kirk: a free trader who is pro-NAFTA

Obama has made some relatively anti-NAFTA statements: PolitiFact | Obama's been critical of NAFTA

Campaign rhetoric. I really don't know.

The debt in absolute terms is of course very large. As a percentage of GDP, it is in line with many other Western economies, but with looming deficits, this cannot get out of control. At some point, local, state and Federal governments are going to have to start acting in a fiscally responsible manner.

And this realization, I think, will make enacting any type of protectionist policy very difficult. Automakers might desire tariffs on imported vehicles, but not on steel. The same people screaming for protection will be the same people seeking free access to global markets.

Yes. Without question. Anecdotally, just travelling around, there are bank branches EVERYWHERE. They're as uniquitous as Starbucks. If you stumble, you'll fall into a bank. In the town I grew up in there are 6 banks and 3 pizzerias for 12000 people. In NYC there seems to be one on every corner.
Yes, I read this. Lesson to learn is to make sure that gas contracts end in the summer. Nothing worse than bartering for gas when you're cold.

Yes, I heard this too:

"$199 per 1,000 cubic metres of gas in 2009 under a formula reached in a deal with Russia to restore flows of gas to Europe, an aide to Ukrainian President Viktor Yushchenko said on Monday.
"Given the ... conditions of determining the price for Ukraine proposed by the Russian side with a 20 percent discount on the market price, the average price for Ukrainian consumers at the border should have been $199," Bohdan Sokolovsky said in a statement on the presidential Web site."

For purposes of comparison, the market price in the US is $5.00 per 1,000 cubic feet.
1 cubic foot = 0.0283168466 cubic meters
Pacific Energy Acquires Natural Gas Properties

Highlighting yet again that the US should convert to metric, if, for no other reason, than to understand complicated volume/pricing agreements and whether the price is high or low. $5.00 per 1000 cubic feet converts to about $176.57 per 1000 cubic METERS. <---that is not the price for residential delivery.

To complicate it further, Natural Gas Futures Prices - NYMEX

They apparently price it in Btus (British thermal units) as well. The next time the heating bill comes I will have to look at it to see what I am paying. I went to PSE&G's (local utility company) website and you can look up everything except actual prices that they charge you!

Well, that is what the Russians are saying. Indeed, is it true? The Russians are alleging: "we were supplying gas to Ukrainian consumers at $179.5, the same gas was sold to the Ukrainian consumer at $320 per 1,000 cubic meters."

In the US, we call that reselling. If I resell something, the minimum markup is times 2, if I manufacture the item, the retail is times 5, wholesale times 2.5 cost to produce.

I empathize with the Ukrainians. Nothing worse than to be beholden to somebody for anything in this world. When it comes to food and energy, I am an autarkist.

__________________

Fiat to Take 35 Percent Stake in Chrysler - AOL Money & Finance

FIAT? I just cannot fathom how they think this is actually going to work. VW can barely make it here and suddenly FIAT is going to be Chrysler's savior? FIAT lost its goodwill here. I just don't understand why they think all of a sudden they think they can compete with Honda/Toyota....

__________________

To get an access to the most competitive market in the world?

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

Well, I think Chrysler wants to take advantage of FIAT's distribution network as well, although I don't think Europeans are going to buy that many Sebrings or Dodge Ram Pickup Trucks (I could see them buying a couple of Jeeps as a niche). FIAT already has a damaged brand name in the US, perhaps you don't know what it stands for here FIAT='Fix It At Tony's' - they don't have a good reputation here. I honestly don't see this working well.

I don't see the FIAT 500 beating Corolla, Civic, much less the Cobalt or Focus

__________________

I know that. Fiat is not my favorite Italian car. But money speaks more than words.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started

The market is awaiting earnings reports.

Big blue have already published theirs and beaten expectations.

Cnn headline: Politicians square-off bailout plan. (What is the meaning of square-off?)

Obama suggest the following division of the bailout:

1. 1/3 in tax cut.
2. 2/3 in spending.

Republicans would as expected increase the share of tax spending. Some of them say that the lagged effect on the economy of spending on infrastructure is too long.

Source: http://www.webproworld.com/breakroom...tml#post402239

Some democrats seem to agree with you. They are worried that the bailout is to small.

__________________
Mini Network:: Financial information at your fingertips
Learn object oriented programming where it started