Wall Street Ready To Tank Tomorrow

[mefford76]

An alternative to a CD would be some high-quality high-yielding dividend stocks in sectors that don't have a lot of volatility (e.g. utilities and tobacco). You get favorable tax treatment on your dividends (15%) and cap gains rate when you sell. Altria (MO) and Vector (VGR) in the cigs; ConEd (ED) and Duke Energy (DUK) in the utilities. These stocks have fairly narrow trading ranges. On an after tax basis your return could be significantly greater compared to a CD. The CD is risk free (at least in theory) whereas common stocks always have some risks. A price decline can eat up the dividend yield, but you also have some upside price appreciation as well (risk/reward). These stocks have predictable cash flows and a history of paying quarterly dividends (otherwise there would be no reason to own them). I like all four but everyone needs to do their own research.

i'll look into that. thanks for the tip

[Mr. X]

You might be sorry you got out of Mosaic. I have insider information! <G> Hey, people all over the planet need fertilizer, ya know. It'll come back, watch and see.AnnE in MN who bought when it was $13.25. <g>

Mosaic was down 41% today. Three months ago it was around 160; today it closed at 39.65. I thought commodities were close to a bottom a couple of weeks ago. Today that market sector got brutalized. Maybe there is no bottom. Man ... what a short strange trip it's been on Wall Street.

We might get a little bit of a snap-back rally tomorrow or Monday assuming the Rescue Plan passes the House tomorrow. It's not a Bailout Plan for Wall Street; it's now become a Rescue Plan for Main Street. As the Oracle of Omaha said yesterday the Rescue Plan is imperfect but it's better to be imprecisely right than to be precisely wrong. I agree with him. Easy to agree with Buffet. Despite having a lot of reservations about the terms of the plan I don't think we have the option of not passing it.

Speaking of Warren Buffet, GE was down almost 10% today. Not even his announced $3 billion investment in GE could keep it from getting dinged up pretty good.

When you get your 401K report for the 3rd quarter it would be best to be sitting down before you open it up.

[Hunter Morrow]

Any thoughts on the new "bailout" plan?
The way our government works nowadays I can just imagine that the Piper will be begging more payment before a year is out on it.

[Mr. X]

Any thoughts on the new "bailout" plan?The way our government works nowadays I can just imagine that the Piper will be begging more payment before a year is out on it.

I think framing the plan as a bailout of Wall Street is the wrong way to look at it. The Treasury is not giving money away in the form of subsidies. They now have the authority to purchase distressed assets, hold them and then resell them as market conditions warrant. It's not $700 billion going down a black hole to never be seen again. There are many very well regarded financial players (e.g. Bill Gross who runs the world's largest bond fund) who thinks there is a better than 50-50 chance that the Treasury will make money out of this in the end. Of course the devil is in the details and the biggest unknown right now is what will be the pricing mechanism for the purchase of those distressed assets.

Wall Street is certainly deserving of a lot of blame for the subprime mess but what rarely gets discussed is the other side of the transaction. It takes two to tango. What about the significant segment of the US population that was living way beyond their means, buying homes they could not afford, and agreeing to adjustable rate mortgages that were predicated on both a continuation of historically low interest rates and a continuation of unprecedented price appreciation of their real estate? Did they all get duped? Hardly. Perhaps they were just as greedy as those on Wall Street.

[PurpleMustReign]

What about the significant segment of the US population that was living way beyond their means, buying homes they could not afford, and agreeing to adjustable rate mortgages that were predicated on both a continuation of historically low interest rates and a continuation of unprecedented price appreciation of their real estate? Did they all get duped? Hardly. Perhaps they were just as greedy as those on Wall Street.

I just wanted to add a comment here... I do think that a LOT of the population did get duped because the mortgage companies would do such a good job selling them on the face that the payments would be so low. They never warned anyone of the fact that they would eventually have to pay the rest of the mortgage back. You know what I mean? I'm not saying they are all to blame, but they do deserve some of it., I think a lot of people forgot that old phrase, "If it sounds too good to be true, it probably is." I guess I can agree with the "greedy" label but at the same time, the mortgage companies do deserve a large chunck of blame.

[Hunter Morrow]

Also, "subprime lending"?
"Liar's Loans"?
This is exactly the sort of thing that shouldn't have been offered in the first place.

[S197]

It's about personal responsibility. We can point our fingers at CEO's, Wall St., and predatory lenders all we want, but the fact is our country as a whole has become entirely too greedy, over leveraged and living well beyond our means.

This is not a subprime problem. This is a $200 jeans, 9-mpg SUV, million dollar McMansion problem. Credit is a privilege, not a right and it was widely abused and so now it will be taken away. Our savings rate is zero. Our debt is higher than ever in history. That's not people getting duped, that's people being irresponsible. It's simply an unsustainable situation.

This is a problem that concerns everyone, whether you have a cent in Wall St. or not. I think we haven't come to that realization as a country yet and we don't have a whole lot of time to wait for that light bulb to go off...

[PurpleMustReign]

This is a problem that concerns everyone, whether you have a cent in Wall St. or not. I think we haven't come to that realization as a country yet and we don't have a whole lot of time to wait for that light bulb to go off...

It better happen soon. I'm sure it will take awhile tho.

[WVBCC-9]

It better happen soon. I'm sure it will take awhile tho.

With as apathetic as this country is, sure will.

[Mr. X]

"Is it too late to sell?"

LOL

8 trading days ago the Dow closed at 11,143; today it closed at 8,579. Had you talked to a professional financial planner at anytime during the interim an overwhelming number of them would have advised you that it was too late to sell. That was the conventional wisdom because at 11K the Dow was down about 25% from its high from a year ago when it was a little north of 14K.

I don't know where the bottom is but I'm almost sure we dip below 8K some time soon. This thing is getting scary. I'd like to think that at some point we get a rip-your-face-off type rally but it might be wishful thinking at this point.

Have you seen what's going on in Iceland? Amazing. They are so over-leveraged that the entire country is standing by to go under. Their currency is now just slightly higher than Botswana.

[PurpleMustReign]

"Is it too late to sell?"

LOL

8 trading days ago the Dow closed at 11,143; today it closed at 8,579. Had you talked to a professional financial planner at anytime during the interim an overwhelming number of them would have advised you that it was too late to sell. That was the conventional wisdom because at 11K the Dow was down about 25% from its high from a year ago when it was a little north of 14K.

I don't know where the bottom is but I'm almost sure we dip below 8K some time soon. This thing is getting scary. I'd like to think that at some point we get a rip-your-face-off type rally but it might be wishful thinking at this point.

Have you seen what's going on in Iceland? Amazing. They are so over-leveraged that the entire country is standing by to go under. Their currency is now just slightly higher than Botswana.

So what happens if everything keeps dropping? Like I said before, I know almost nothing about economics, so what happens if say the Dow closes at like 6000? Why is everything dropping so much?

[S197]

I went to 70% cash at about DOW 13K. Thank you Mr. Roubini and the METAR board (see links on my initial post).

I think we could see another 10% down on momentum alone but I think the fundamentals are priced in. I'm slowly starting to average back in, some stellar companies are selling at what look to be bargain basement sales.

It's definitely a scary time, but panic is where you can make the most money, it just takes nerves of steel.

[S197]

Why is everything dropping so much?

The short answer is no one trusts each other. Banks will not lend to each other let alone to consumers. There's a total lack of transparency. Basically no one knows what each other is holding and is hoarding cash instead of loaning it out which would help to unfreeze the credit markets.

Hard to go deeply into it without breaking the "no politics" rule we have here so that's my short answer.

[Hunter Morrow]

The reason everything is dropping?
Globally there is about 60 TRILLION dollars of pigs-with-lipstick-on investments going on, and they are all going sour, and everybody was selling those lipstick investments to everybody else.
So, all these enormous loaning institutions don't trust each other, and since so many are tanking and being bought out they don't trust enough to lend money to themselves and other people, because the business or the person could be unable to repay that.
Plus, to get a small profit after inflation these institutions need to hand out short term loans with interest rates going at about 10 percent, and nobody friggin' wants that, so they can't get anybody to give them money to invest with.
This industry, worth tens of trillions of dollars, is so mindscrewed that it has started to cannibalize itself.

[Mr. X]

"Is it too late to buy"?

The short answer: yes.

The dow had it's largest single point advance today closing up 934 points to 9387. Just as there was panic selling last week there was panic buying today. We gapped about 300 points at the open. I tried to fade the open but that didn't work. When we were up 500 around noon I threw in the towel and sat it out.

Buying tomorrow is a sucker's play. We're already in a recession and things still look awful for the near term. I'm guessing that we retest 8000 on the Dow sometime before year end (emphasis on the word guessing). Those cheap PEs that got more expensive today are likely to get a lot less expensive when we see future earnings statements.

Hope nobody started a position in GE. In a market where practically everything was up; GE declined by more than 2% to close at 21. That stock is going to 15 (or lower) before it sees 30. Having said that if I could get Warren Buffet's terms of 10% perpetual preferred with a 22 strike price I would mortgage everything I have and double down. What GE did was pay Buffett a huge premium for an advertising deal. Trying to piggyback on Buffet isn't going work on this one (unless you have a very long term horizon).