A good solid S&P fund is a good, solid long term investment.  But if you have the stomach for a little more volatility, a good diversified fund will likely outperform the S&P over the next 10 years.  Most diversified funds will have a portion in an S&P fund, and some in small cap fund, and some possibily in international funds.  

Micro,

Your advice over the long-term may prove to be sound, but recent

projections on oil prices or stock indices has been something less

than stellar. Although I certainly hope things will improve over time,

the current situation is unprecedented in our lifetime. "Leverage"

has put us in a situation that my result in the next Great Depression.

Although I believe we will get through this, suggesting that people

invest at the front-end of a recession is irresponsibe. We have some

ways to go before equities are a bargin.                  

Geez Kent; I really trust a lot of what you say, because it aligns with what I have learned in some recent courses. I am no where near knowledgable to make predictions myself. I have feared that what you just stated might be on the horizion and now my stomach is doing flip _ flops. You are not the chicken little type, and my worst fears are being vailidated  :-/

Suggesting that there may be a depression is, in my opinion, nonsense. Our economic situation scarcely resembles the economic realities of 1929. Unlike during the Great Depression, our GDP is up. Industrial production is down only a tiny fraction of what it was in the early '30s. It might be worth mentioning that our economy is far more diverse than it was in 1929. Then industrial production was the principal portion of our economy, now it represents about 10% of our economy. And even though production is down a little, exports are way up. During the depression, exports were down 70%. Unemployment rates are a fraction of what they were during the depression, and no one is suggesting they will approach that level again. And don't forget today that we have FDIC, trading triggers, a far greater money supply, and free-trade agreements with everyone and their brothers to ensure our exports will not be choked off as they were in the early '30s. In short, we are not heading towards depression. Recession, yes. Depression, phhhhpppt.

With respect to equities investments: neither you nor anyone else knows where we are in this recession, how deep we will go, or when the economy will turn around. But it will turn around. And it will be well on its way to a recovery before 99.999% of people recognize it. As Warren Buffet says, "if you wait for the robins, spring will be over." Your advice is tantamount to "waiting for the robins."

It is certain that stocks are a bargain now. They may be a bigger bargain tomorrow. And even bigger next week. But right now stocks are cheap. And investing for the long term is a process, not a one-time event. Prices for certain sound funds are lower than they have been in a decade or more. Not availing yourself of obvious bargains is simply unsound.

History has shown that trying to "time the market" is a recipe for missed opportunities and poor returns. Buying and holding will, without question, yield higher returns. Buying now, and buying until it's clear the bargains have passed, and holding those acquisitions is the proven strategy for long term results. But I understand most people won't see it that way. That's the reason those people (most people) won't build the type of wealth of those that do.

Correction:  GDP is down 1/10%.  (During the Depression is was down 50%)

Cosumerism is what was fueling this economy, and it is gone. If moeny doesn't start flowing, and the banks do not "trickle down" that capital and Paulson is not corraled we are in trouble

Let me ask you a question, when Paulson yelled FIRE and called attention to the fact that svings accounts over 100 G's were not safe, but the money market was, do you think he helped banks,  ddo you think he did not know the potential of fueling a run on banks,do you think he didnt know that people would get thier accounts down to under a 100G's and feed those money market accounts ?

What has this got to do with the precious stock market? The same caliber of shoe salesman and thieves are running the game over there, and they have decieved America, they are no longer trust worthy. It is too easily manipulted from TV guru's yelling Booyah to falisifed balance sheets from these mega corporations, they are no longer credible and to be trusted. The rules have chaged.

Lack of confidence, lack of a credit flow much longer and the collapse of major corporations along with the resultant decline of real estate and building can put this country into a depression

Granted I am not an expert and just learing about all this stuff, But back in the spring when I dared print the word recession I was called chicken little here, so my fears are not different from many other blue collar guys Forgive me if I do not post here anymore , on this thread, I need to walk away from this as to not get too edgy, I stated my point and I am going back to the business of TEAM DEPENDS! :

That's why FDIC coverage was recently increased from $100,000 to $250,000. And smart people spread their cash out among multiple accounts, and didn't leave it in single accounts.

The FDIC didn't exist during the Depression. And the government didn't have the expertise to take quick action to stave off the effects of panic. That exists today.

Panic and irrationality will damage our economy more than anything else.

Thought about it overnight, Muddy, and I agree.  I'm backing off, too.  But entirely from these cut-n-paste current event threads.  Multiple threads on oil, stocks, DJIA, etc.  You can speculate all day long on what it all means and where its all going and the truth is no one really knows.  "Experts" predicting $7/gallon gas, people predicting "depression."  It's all gotten very silly and the accuracy rate of the "experts" predictions leaves a lot to be desired.  

Having been wrong so consistantly, perhaps your observation is a bit bias.

"Gas will never again be $2.00 per gallon.

I suspect oil may stabilize at around $85.

I think gas will drop to about $2.75. I think

that's a low as it will ever go again."

Maybe you should be paying attention to what is going on in the "real world".

Leverage is the biggest issue we are dealing with. When the world

economy is strong and growing, borrowed money exaggerates

profitability. When business turns sour, debt becomes a heavy

burden. To the extent that the introduction of derivative debt

instruments has exploded in recent years, 250 - 350 TRILLION

dollars must be "unwound". The world has never faced such an

enormous challenge.

:

To the extent that the introduction of derivative debt

instruments has exploded in recent years, 250 - 350 TRILLION

dollars must be "unwound".

Are you saying that all derivatives will be unwound and cease to exist?  What would be the reasoning behind that?

No, not total liquidation, but this is the dark cloud hanging over the markets.

No one knows the value of the underlying assets, but the losses may be staggering.

No, not total liquidation, but this is the dark cloud hanging over the markets.

No one knows the value of the underlying assets, but the losses may be staggering.

The uncertainty is what is really killing everyone.  Mortgage backed securities is a prime example.  No one really knows what the default rate will be on each asset.   This unknown has led to a virtual elimination of demand for purchasing them.  This causes all of those securities to be marked to market at an extremely low value, because no one is buying so market price is very low.  However, many of these assets will end up with positive value over the pay back period.  The problem comes in identifying which is going to be positive and which is going to be worthless.  

Leverage took this fear and multiplied it a number of times too.  There's nothing like buying a CDO and levering it up to get "stock" returns and then having that asset tank.  The CDO doesn't have to fall far before the investor has lost EVERYTHING.

This is just one example of the current state of fear that is driving the market into massive amounts of volatility and treasuries to their lowest yield ever (less fear).  This fear is permeating most sectors (banks, manufacturers, commodities, etc).  Until this fear works itself out the equity and debt markets are not going to function rationally.

I'm with Micro in thinking that a depression is HIGHLY unlikely.  I don't know that I'd be plowing money into the stock market now though.  I'm probably a little more risk averse than he is.

called attention to the fact that svings accounts over 100 G's were not safe,

The 100G limit on insurance on deposit accounts is well known.  I can't imagine anyone having that much money in a simple savings account and not being aware of this limitation.  They publish it EVERYWHERE.

As we approach the end of the quarter/ end of the year, rebalancing and fund dispersements come into play. As the market continues to deteriorate, there

will be a buying opportunity!

When should the market trend higher? There is no magic number,

but it comes with a twinkle of light at the end of the tunnel. You will

miss the bottom, but can still pick up great prices. There is better

value and less risk when the general market is on the way up, rather

than on the way down!

** NOTE **

This morning's "dead cat bounce" has been very disappointing:

DJIA -72 @ 7480

S&P -8 @ 744

Oil $48.56

8-)

We will be in the 7k's by wednesday. Gman

So how close was I.

This thread and the oil thread have taught me alot about stocks and commodities.  Thanks guys. 8-)

called attention to the fact that svings accounts over 100 G's were not safe,

The 100G limit on insurance on deposit accounts is well known. I can't imagine anyone having that much money in a simple savings account and not being aware of this limitation. They publish it EVERYWHERE.

I am not an idiot, I know this is posted in my bank also. It is how he made his remark, enough to have to answer to congress for making said remark. Thats funny , because I watched Sen. Dodd,Casey and some fella from Arizona grill him on why he said this and the cause it had the next 2 days with'"Subtanial amounts of money going from savings to CD instruments" Maybe it's just me , I thought they might know what they were talking about.

I have watched almost every hearing on these matters for the last several week.

What they were talking about was a remark Paulson made, where he questioned weather FDIC could actually back up all those accounts, considering the times we are in. The next 2 days, there was a considerible run and in order to aliviate fears the FDIC upped the ceiling to 250,000.

As for the loans all the Harvard suit guys made: Trying to Identify what and where these, and I love this term for tanked loans:Risky instruments ;D is extremly hard as the were fractured and sold over and over again

Like I said I am no expert, but I have known Kent for a long time and he is a knowledgable and sucessful man, so I will put my trust in what he has to say.

BTW Tyrius: What is it that you do for a living?

Maybe it's just me , I thought they might know what they were talking about.

I think you'll find that some senators do NOT always know what they are talking about.  

These current times have caused a lot of people to question everything.  Most people never even thought twice about their large bank going under so they probably didn't care about the FDIC limit.  They knew it was there, but disregarded it.  When the banks started failing then they got a wake up call and started moving their money around to make sure that it was insured.

Earlier you mentioned money market funds and now you're referencing CD's.  Money markets initially weren't covered by the FDIC as they are typically investements in commercial paper, short term bonds, etc.  A CD is still a bank deposit and was always covered by the FDIC (up to $100,000).  The biggest confustion (that I'm aware of) came with people thinking that the Money Markets were covered when they weren't.  I think that the change that raised the FDIC limit also changed the FDIC to temporarily cover money market accounts.

Like I said I am no expert, but I have known Kent for a long time and he is a knowledgable and sucessful man, so I will put my trust in what he has to say.

He definately seems to know what he's talking about.  Doesn't he work in Finance/Investment Banking?

I am not an idiot,

Never said you were and never meant to imply any such thing.  

Also, no fair changing your post while I was replying to it!!!!  

As for the loans all the Harvard suit guys made: Trying to Identify what and where these, and I love this term for tanked loans:Risky instruments ;D is extremly hard as the were fractured and sold over and over again

These Collatorized Debt Obligations (CDO's) are incredibly complex.  When I worked for Arthur Andersen (YEARS ago) I did the due diligence on some of them (basically assessing whether or not the make up of the securitization was as described in the offering).  Taking thousands and thousands of mortgages and putting all of them into one pile and then slicing that pile up into thousands of investment vehicles leaves some muddy   waters.  Who really owns each mortgage?  Can individual mortgages be modified?  Who has to approve the modification? and on and on ad infinitum.  It basically boils down to the individual CDO investors were not purchasing specific mortgages, they were purchasing portions of a traunch of the CDO that had been rated AAA, A, BBB, or whatever by the rating agencies.

BTW Tyrius: What is it that you do for a living?

I currently work in internal audit for a medium sized corporation.

Thanks, I did not mean that hostile, just a Brooklyn response NO BD. I am gald you work in the field and have experience > I hate getting tied up reading arm chair experts. I really appreciate the explanation, because these mooks at he hearing do not seem to know where they are

Thanks, I did noit mean that hostile, just a Brooklyn response NO BD. I am gald you work in the field and have experience > I hate getting tied up reading arm chair ecperts.

I know enough to make it look like I know what I'm talking about and to know that I should never invest in anything that I don't fully understand.

I'm far from an expert though.

8-)

I really appreciate the explanation, because these mooks at he hearing do not seem to know where they are

You'll find that alot.  Did you listen to the congrssional hearings on steroids in baseball?  That's a prime example of them not knowing anything about the subject.

Did you listen to the congrssional hearings on steroids in baseball? That's a prime example of them not knowing anything about the subject.

Now, that was money well spent... :

Maybe it's just me , I thought they might know what they were talking about.

I think you'll find that some senators do NOT always know what they are talking about.  

I don't think ANY of them know what they're talking about, EVER!

** NOTE **

This morning's "dead cat bounce" has been very disappointing:

That cat's showing signs of life!

Well, the DJIA was down about 45 points with 40 minutes left in the session. The new Secretary of Treasury was announced and sparked a 500+ point ralley to close at 8046, up 494 points.

Go figure...

Having been wrong so consistantly, perhaps your observation is a bit bias.

"Gas will never again be $2.00 per gallon.

I suspect oil may stabilize at around $85.

I think gas will drop to about $2.75. I think

that's a low as it will ever go again."

Maybe you should be paying attention to what is going on in the "real world".

...

Thanks for the research, Kent. Obviously, you seem to be bothered immensely when someone disagrees with you. Don't take it so personally.

Whether or not my guesses about the cost of oil and gasoline were right or wrong does nothing to blunt the point that your tactic of trying to time the market, trying to guess where things are going to bottom out is, and has always been, an effort in futility (sort of like guessing where gas will go). You may get it right, but it's just dumb luck. You ought to know that the term "bargain" is relative. You seem to suggest it's at a point, and I feel it's in a window. Good luck guessing the "point." And if you ever do get that sort of guessing down, you are going to be in great demand. (I think it would be cool if you did. Then we'd have the greatest financial mind in the history of history right here as a moderator on BR.)

Leverage is an issue. That's nothing new. And it will never go away. To suggest that leverage is the economy's ultimate problem is overly simplistic. Because it ignores the fact that there is an appropriate level of leverage for any company, and that many companies exist that are appropriately leveraged. Leverage grows capital. Capital allows for expansion. Expansion allows for a greater return on equity. Sure, too much leverage can start to eat away return on equity. But most companies can scarcely grow without acquiring debt. Investing in a leveraged company has its risks. Over leveraged companies have a greater risk of going bankrupt. But risk is "the risk" one must accept for a good long term return. Stocks in general are down. Stocks in appropriately leveraged companies represent extraordinary bargains right now.

And avoiding debt financed companies in favor of equity financed companies has its own set of risks. New companies most commonly employ equity financing, and most new companies fail. Most never act in the best interest of their investors. New business owners often don't realize they are no longer enjoying a hobby. Sure, some do. And investing in small or new businesses can be very rewarding. But you had d**n well better do your homework. Equity financed companies, companies that avoid debt financing, are hardly immune to economic downturns.

In short, leverage is necessary. Some companies that are over leveraged are going to go out of business. But some companies that are over leveraged are going to survive, emerging with new business models, and their stocks, as well as stocks for companies that are appropriately leveraged, represent tremendous bargains.

You said...

I don't know when the best time to buy will be,

but if I'm pressed, I'll pick 7000. When you re-enter,

pick a broad based fund.

I feel for any long term investor that decided not to ride it out, and pulled out when the floor gave way. Most likely, they will realize a loss that will never be recouped. Holding those shares, and increasing acquisitions of shares while the market is in a slump would have been wiser.

7,000, hmmm? We'll see. I'll be there with you buying, since I started increasing my rate of acquisition at 7,600 back in October. And we may get there. I'm optimistic about more pessimism. Best time to buy is when people are pessimistic.

HEy Micro, let's go fishing  ;D

HEy Micro, let's go fishing ;D

I went fishing today.  And I'll be off fishing Monday through Wednesday of next week.  Come one down to Virginy!  We'll wet a line