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blankseplocked How low will the stocks go?
 
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I'm RickJames
Posted - 2008.10.09 21:12:00 - [1]
 

I doubt there will be any actual professional comment in this forum, but it would be interesting to discuss.

I have a retirement savings, and for many years, I kept 1/3 of it in a cash account earning low interest, the other 2/3 have been in stocks, some in utilities. Now the stock markets are whipsawing all over the place, the well performing utilities have dived, and well, foreign, small business, everything is tanking.

I am tempted to sell the remaining amount of my mutual fund stocks to a cash account, in fact - have been tempted almost every day for months. But usually, shortsighted people sell on bad news as the market rebounds back. But the bad news just keeps coming, and every time I think the market has hit a bottom, it falls right out again. To paraphrase a Metallica song, the light at the end of the tunnel I keep seeing, it really a train heading my way.

Rubra
J. S. Bach In memoriam
Posted - 2008.10.09 21:19:00 - [2]
 

I haven't checked my 401k yet - frankly, I'm a bit scared to do so tbh.

As for your stock situation, I have some Wachovia stock that I should have sold a couple weeks ago when this was just beginning to unfold, but now it's tanked and I really dunno what I'm going to do with it.

Things right now are pretty uncertain and I honestly think that it's going to drop a lot lower. No clue where it will stop. I think your best bet is to hold on to what you have and see what happens.

Xordan
Caldari
Posted - 2008.10.09 21:20:00 - [3]
 

I see it a bit like this.

At some point in future they will recover. So if you're willing to wait long enough you will probably be fine.
If things don't recover then the world will be so neck deep your savings probably won't matter.

So it depends how long you can wait. If you're in utilities (big ones importantly) then it's unlikely they will fail because they provide a service that people need regardless of how bad the economy is.

I am not an economist.

Terail Zoqial
Caldari
Posted - 2008.10.09 21:24:00 - [4]
 

Originally by: Xordan
I see it a bit like this.

At some point in future they will recover. So if you're willing to wait long enough you will probably be fine.
If things don't recover then the world will be so neck deep your savings probably won't matter.

So it depends how long you can wait. If you're in utilities (big ones importantly) then it's unlikely they will fail because they provide a service that people need regardless of how bad the economy is.

I am not an economist.


Sound thoughts, i'd go through this route. Everyone who sells their stocks and shares atm are going to get such a massive boning, now is the time to buy, when prices are low...saying that, they still may go a bit lower.


Cmdr Sy
Appetite 4 Destruction
The Firm.
Posted - 2008.10.09 21:25:00 - [5]
 

Edited by: Cmdr Sy on 09/10/2008 21:33:43

Not a professional, but better clued up than most.

Better very, very late than never. I was wondering when the first such thread would show up.

We are going to retest dotcom collapse lows soon and probably fail them. Corporate bond markets will burn, Treasury yield curves may steepen and weaker economies will implode and/or suffer debt and currency crises. Commodities will tank. Precious metals too probably. What goes up? Your purchasing power if you have cash and minimal debt with variable interest. This crisis is money being destroyed. That is the key to understanding it. Valuations of everything, including equities, are propped up by debt dollars/etc being spent as dollars/etc. That's gone, the world is deleveraging.

Move to cash, avoid foreign currency risk - you need it where you are, you do not know who will collapse. Keep enough cash for some expenses around. For what it is worth, I put my money where my mouth is early this year. I wish I had done it earlier.

EDIT: Oh, and leave a few percent in what you have now to see what happens to it for ***** and giggles.

Irulan S'Dijana
Amarr
Drexler Burnum Inc.
Rising Phoenix Alliance
Posted - 2008.10.09 22:23:00 - [6]
 

Edited by: Irulan S''Dijana on 09/10/2008 22:25:09
Pro-tip for people like me: I am 22 year old, about to join the workforce. My retirement is around 40+ years away, but for the sake of planning, I assume it's 40 years. This also applies for people who have, say, 20 years before retirement.

Easy method: Buy stock. The market will recover in a few years, and we'll be back where we started. Perhaps not quite as high very soon, but considering how cheap stuff is, buying in now is good. Just make damn sure you buy based on strong fundamentals and secure cash flows. E.g. pharmaceuticals is good; people always need boosters.

More complicated, but better method: Write and sell put options on the open market with the exercise price below current market price, and expiry date in a couple months. Once again, only do this for solid companies (more important in this method, stuff like BHP, Goldmans is fine). This way if the market goes down a little more in the short run, you get the shares which you would've bought anyway at a cheaper price, but if the market improves a bit or stays steady, you get to keep your options premium, which amounts to around 10-11% return. Not bad in this market.

Using this method will not allow you to take advantage of large gains in value, but in this market, a large jump in price is not something I'd be counting on.


edit: forgot to ask OP...what exactly is your investment horizon? If you're planning to retire "soon", yes, withdraw the money if you can and put it into either cash or govt bonds. Of course, you really should see your financial advisor.

Fink Angel
Caldari
The Merry Men
Posted - 2008.10.09 22:31:00 - [7]
 

You only lose if you have to cash your shares in at a loss now, or the company you own shares in goes **** up.

Anything else is just a glitch on the balance sheet.

I wish I had spare cash lying around, because I'd be thinking about dumping a load of it into a spread of shares now.

Cmdr Sy
Appetite 4 Destruction
The Firm.
Posted - 2008.10.09 22:39:00 - [8]
 

Edited by: Cmdr Sy on 09/10/2008 22:44:22

Nice, though taking the easy method right now means buying all along a decline and buying a few eventual zeros. Rather than unnecessarily increasing your cost basis, just wait for the bottom, 20 week MA to cross the 50 week MA upwards by more than 1%, and that should be the start of the recovery. Your saved cash will buy more too. Exit is the same in reverse. Bear in mind it will be years. As for pharmaceuticals, just be sure to pay attention to government funding costs. The future of Social Security and Medicare is not looking good; I would not assume "people will always need..." is necessarily valid where major entitlement spending is involved. Generics, maybe. It only takes a few treasury auction failures and whoops, the US needs to find a trillion dollars in budget cuts. Same goes for everyone else needing foreign financing of government.

EDIT: Oh, disclosure, if you have not already guessed my thesis is a depression event.

Thorliaron
Brutor Tribe
Posted - 2008.10.09 22:43:00 - [9]
 

low

Irulan S'Dijana
Amarr
Drexler Burnum Inc.
Rising Phoenix Alliance
Posted - 2008.10.09 22:46:00 - [10]
 

I have to admit I'm in Aus, and we don't' exactly have big pharma in this country Embarassed.

For me anyway, I'd be getting into the miners, BHP, a couple of commercial banks which have such healthy balance sheets they're going on a buying rampage (Commonwealth bank is about to buy Suncorp from HBOS for under book value because HBOS is desperate for cash Laughing), biomed like Cochlear ear (world monopoly on ear implants, trying to develop artificial eye) and stuff like that.


 

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