DJIA Down 390 points
This is getting bad. I have to admit I am starting to get nervous, as my IRA is down 15% from where I started it.
I am in it for the long term (the market), but this is the worst I have seen things since the junk bond era.
Having said this, I think many other areas of the economy are in good shape. Real Estate, Consumer Spending, etc. are all decent. I think people have simply lost confidence in corporations. Inflation is low, interest rates are low; isn't it just a matter of time 'til it turns?
My understanding of our economy is that when the short term discount rate stays low, it has the effect of pumping money into the system, since banks can borrow at a low cost. I have to assume that since rates have been so low, it will have the desired affect.
This BLOWS.
I am in it for the long term (the market), but this is the worst I have seen things since the junk bond era.
Having said this, I think many other areas of the economy are in good shape. Real Estate, Consumer Spending, etc. are all decent. I think people have simply lost confidence in corporations. Inflation is low, interest rates are low; isn't it just a matter of time 'til it turns?
My understanding of our economy is that when the short term discount rate stays low, it has the effect of pumping money into the system, since banks can borrow at a low cost. I have to assume that since rates have been so low, it will have the desired affect.
This BLOWS.
Comments
This is getting bad. I have to admit I am starting to get nervous, as my IRA is down 15% from where I started it. <hr></blockquote>
Sucks to be you.
But that's good - you want to BUY low, right? As long as you're not selling, you're in good shape. The lower the better, as far as I'm concerned, at least in my retirement accounts.
And you shouldn't expose your short-term money to stocks much anyway, right?
1) The markets are still coming back to realistic levels from the .com and tech boom. This is only a part of what is going on.
2) This is the bigger contributor. Basically, people are losing confidence in corporate America. Enron, Worldcom, Qwest, etc. are all hurting the economy because people are afraid to invest in large corporations. The Bush administration can only do so much and changes will not happen immediately, contrary to people's wishes. Companies were allowed to run wild in the mid and late 90's and this is the result. I think the crackdown that is beginning to happen now will probably expose more cases like Enron BUT in the next few years people will be more confident in big business and you will see the markets reflect that. Unfortunately, people don't like to wait a couple years. The American people expect immedieate change, which simply is impossible.
Things should get really fun if either the economy keeps stalling and the fed can't lower rates any more than they already are or the dollar gets weak enough and inflation starts to kick enough that they have to raise rates while the economy is stalled out.
I personally think we're in for either a double dip recession or some good old 1970's style stagflation, but that's just me.
I would be very very careful with the analyst koolaid. The DJIA can break through 8000 like a hot knife though butter. It's just a number. At some point in time (8000, 7500, 7000, 6500, who knows), there will be more bargain hunters, the market actually performs, and companies can show growth, then the market will go back up again. The problem is the analysts won't know any better than anybody else on when that happens.