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Holy bulls and bears, the stock market is like a run away roller coaster these days.  I thought this all was bad.   The drop in oil prices and China’s economy are seen as the main culprits.  Who knows.

Actually the stock market is pretty much like a giant roulette wheel in many cases.  You never know what really spooks it on some days.

A couple of my friends sell the instant they see a down turn.  That sure isn’t what the experts advise.  I hunker down.  It will stop falling when it stops.  Not much I can do about it.

Who has some sage advice to give?

(or just blame Obama)

22 thoughts on “How about them bulls and bears?

  1. Ed Myers

    During Obama’s first term gold prices shot up from around $700 to $1900 on fears that the world economy would end under Obama mismanagement. Today gold is under $1100 and trending down. I guess since Obama was pretty incompetent at ruining the economy even with help from Congress, fear has subsided and produced a 4 year bear market for gold.

  2. Starryflights

    RBS Warns: Sell Everything

    TPG/Zuma Press
    RBS economists have urged investors to sell everything except high-quality bonds, warning of a “fairly cataclysmic year ahead.”

    Writing in a client note dated Jan. 8, the bank’s European rates research team said that clients should be concentrating on return of capital, not return on capital, and that an ominous outlook to the world economy “all looks similar to 2008.”

    The Key Points

    The note is particularly bearish on China and global commodities, and predicts that oil could fall as low as $16 a barrel.

    In a grim set of predictions, Andrew Roberts, head of European economics, rates & CEEMEA research said that the world has far too much debt to be able to grow well.

    He also warned that advances in technology and automation are set to wipe out up to half of all jobs in the developed world.

    The note says equities could fall 10% to 20%.

    It predicts the year will be spent focusing on how to exit positions that have benefited from long-running QE, including emerging markets, credit and equities.

    “The world is slowing, trade is slowing, credit is slowing, we are in a currency war, global disinflation is turning to global deflation as China finally realizes what it needs to do (devalue soon, and sharp) and the U.S. then, against ALL THIS countervailing pressure, then stokes the fire by hiking rates,” Mr. Roberts wrote.

    http://blogs.wsj.com/moneybeat/2016/01/12/rbs-warns-sell-everything/?mod=trending_now_2

    That’s scary!

    1. I don’t look at those doomsday articles from stock prognosticators. If it happens, it happens. Those kinds of articles are fueled by fear.

      I bet RBS has a fix for it all too.

  3. Cargosquid

    @Ed Myers
    Gold is being manipulated heavily by the major banks.
    The issue of GLD shares greatly outnumbers the amounts of physical gold.

    If you follow the price of gold regularly, you will see periodic shorting of gold to slam the price down sharply, followed by an immediate buy on physical gold, which brings the price back to about $1000-1200 range. Anytime the price exceeds that, gold is sold…..

  4. Maximus Meridius

    Anyone who tries to predict markets is delusional. RBS says the world is coming to an end but others, including Goldman Sachs and Jeremy Siegel, say the S&P 500 will return ten to twelve percent in 2016. The fact is that no one knows. Do the following and you will be fine.

    Hold a balanced, diversified portfolio of investments that reflects your tolerance for risk and needs for cash flow over time.

    Don’t panic when the markets are down.

    Don’t get greedy when the markets are up.

    Move along. Nothing more to see here.

    1. I still say the blue chips are your safest equity investment.

      Maximus…thanks for your words of wisdom.

  5. Steve Thomas

    Ed Myers :
    During Obama’s first term gold prices shot up from around $700 to $1900 on fears that the world economy would end under Obama mismanagement. Today gold is under $1100 and trending down. I guess since Obama was pretty incompetent at ruining the economy even with help from Congress, fear has subsided and produced a 4 year bear market for gold.

    Ed,

    You seem like a pretty smart guy…maybe a bit whacky sometimes, but no dummy. You must know that “market dynamics” are just code words for “calm vs. panic”. Gold and Bonds do well, when people are looking for stability, protection. Stocks do well when people are willing to take a risk. BUT…and it’s a big Kardashian But…this was a “bubble market” stimulated by artificially low interest rates…and this bubble is popping. I don’t blame Obama one IOTA. I blame the Fed for keeping rates artificially low…and China, for manipulating its currency…and Saudi…for flooding the market with oil. Obama could neither cause nor prevent this from happening.

  6. Maximus Meridius

    @Moon-howler
    Moon, you are correct that blue-chip, large-cap U.S. stocks is the safest place to be in the equity market but they are susceptible to losses in down markets also. They have a place in virtually every portfolio except the most conservative ones. Those would be people like elderly widows living on Social Security and their savings.

    I agree with Steve partly. However, the U.S. stock market is not and has not been in a bubble. A bubble is defined as something selling for far more than its intrinsic value. For stocks, value is usually measured as the price/earnings ratio. The P/E on the S&P 500 is now below its more-or-less thirty year average.

    The Chinese stock market has indeed been in bubble territory as the Communist bureaucrats have been manipulating its price far higher than it should be. That bubble is bursting and causing angst in the rest of the world. Central planners are once again finding that their ability to control things has an expiration date.

    Bernanke and Yellen have done a great job keeping the economy from going into a depression. Had Bernanke not done what he did in 2008 and 2009 most of us would likely be living in shelters and eating from soup lines at the moment. I have a great deal of respect for both of them and their ability to navigate what has been the most challenging economic environment since the Great Depression. Obama claimed credit for the economic recovery and stock market rebound last Tuesday but he had little to nothing to do with it. His smartest move was keeping hands off the Fed, letting them do their job, and replacing Bernanke with someone of similar mind.

    1. I have a great deal of respect for both Paulson and Bernanke. I think Paulson saved this country’s bacon, so to speak, with the way he handled things in the middle of the crisis. Bernanke stayed the course. I was sorry to see him go. I don’t know much about Yellen. I am assuming she is ok.

      You are right about the blue chips. I am suffering today and the blue chips are right on up there taking the hits. I think long range however, blue chips are the place to be if you don’t need instant money. I could be wrong…but we shall see.

      I have a not huge 4.5% guaranteed account. Those don’t exist any more. I probably got it 25 or 30 years ago through my employer. I am looking fondly at that thing these days. Its about the only thing I have not going way south.

      Make it stop!!!

  7. Steve Thomas

    @Moon-howler

    One set of stocks have been soaring for quite some time: Gun and Ammo manufacturers. Wonder why this is? Smith & Wesson, Sturm-Ruger, Winchester-Olin. I guess this proves that sometimes, “Lead is worth more than Gold”.

    1. Yes, I have been watching the Smith & Wesson stock. I consider it to be a flash in the pan. (as in evaluating whether to buy some now)

  8. Steve Thomas

    Moon-howler :
    Yes, I have been watching the Smith & Wesson stock. I consider it to be a flash in the pan. (as in evaluating whether to buy some now)

    Have you looked at the 5yr histories of these stocks? Steady gains on an upward trends (Near vertical since early 2009). Flash in the pan? Hardly. The real question is where is the ceiling, and how will the next 12 months affect the market demand for these manufacturers’ products. Could drop off with the election of a pro-gun Republican, or go straight up with the election of an anti-gun democrat (all three contenders are vocally anti-gun, only differing in minor degrees).

    1. Notice my caveat. Actually, the stock is too politically tied for my tastes. It’s also doing the nose-dive thing like everything else at the moment.

      What’s going to happen if you get a 2A president? Would you expect the stock to drop? I confess I have eyed it. I feel like I would be buying high. Remember, I am the person who only buys stocks of things I like. (learned that from my stepson) I also have caught myself buying high….sigh. I would probably only buy S & W. That’s the only one I have followed. But…I wouldn’t be buying because of 2A.

  9. Steve Thomas

    @Moon-howler

    If a 2A president is elected, the stock will most certainly drop, as will sales & profits. Like anything else, it’s tied to market demand. You might be buying high, or, as the campaign continues, and the rhetoric increases, the stocks will continue to rise through November. After November, the rise may continue, or, the stocks might drop, depending on who gets elected to the White House, and if the Dems manage to retake the Senate. Politics effects the consumer market, which affects the stock market.

    1. Right now, I can’t get any cash out to buy something else. Grrrrrrrrr…….

      At least this drop isn’t over something totally stupid.

      I don’t feel that most stocks are all that reflective of politics. I tend to lean towards blue chips though. There is less risk.

  10. Pat.Herve

    Trump does well at Republican Debate – DJIA plunges 500 points.

    Is there any correlation?

  11. Wolve

    Nah, Pat. Somebody burped in Beijing.

  12. Steve Thomas

    @Pat.Herve
    Two biggest factors: Chinese chickens coming home to roost, and the collapse of the price of oil to recessionary levels. Many factors contributing to oil’s decline, mostly the Saudis maxing production and flooding the market, to hurt both Iran and ISIS. Hurt our energy sector too.

    1. I guess it depends on who you are.

      I think its nice to see gas priced at $1.63, especially for commuters.

      Supposedly it will hurt the job market. I haven’t read how.

  13. Starryflights

    This is not 2008—it’s actually worse

    The S&P 500 has begun 2016 with its worst performance ever. This has prompted Wall Street apologists to come out in full force and try to explain why the chaos in global currencies and equities will not be a repeat of 2008. Nor do they want investors to believe this environment is commensurate with the dot-com bubble bursting. They claim the current turmoil in China is not even comparable to the 1997 Asian debt crisis.
    Indeed, the unscrupulous individuals that dominate financial institutions and governments seldom predict a down-tick on Wall Street, so don’t expect them to warn of the impending global recession and market mayhem.

    But a recession has occurred in the U.S. about every five years, on average, since the end of WWII; and it has been seven years since the last one — we are overdue.

    But this one will be worse.

    Globe with market prices
    The market will drop 20% in 2016: Pento
    A major contributor for this imminent recession is the fallout from a faltering Chinese economy. The megalomaniac communist government has increased debt 28 times since the year 2000. Taking that total north of 300 percent of GDP in a very short period of time for the primary purpose of building a massive unproductive fixed asset bubble that adds little to GDP.

    Now that this debt bubble is unwinding, growth in China is going offline. The renminbi’s falling value, cascading Shanghai equity prices (down 40 percent since June 2014) and plummeting rail freight volumes (down 10.5 percent year over year), all clearly illustrate that China is not growing at the promulgated 7 percent, but rather isn’t growing at all. The problem is that China accounted for 34 percent of global growth, and the nation’s multiplier effect on emerging markets takes that number to over 50 percent.

    Therefore, expect more stress on multinational corporate earnings as global growth continues to slow. But the debt debacle in China is not the primary catalyst for the next recession in the United States. It is the fact that equity prices and real estate values can no longer be supported by incomes and GDP. And now that the Federal Reserve’s quantitative easing and zero interest-rate policy have ended, these asset prices are succumbing to the gravitational forces of deflation. The median home price to income ratio is currently 4.1; whereas the average ratio is just 2.6.

    http://www.cnbc.com/2016/01/15/a-recession-worse-than-2008-is-coming-commentary.html

  14. Steve Thomas

    @Starryflights
    Good article Starry. I wonder if the IMF/World bank will admit it was a mistake to grant China special drawing rights and the Renminbi (ain’t that a silly name?) reserve currency status? 300% of GDP?

  15. Starryflights

    It’s not just China. Oil prices are the other factor.

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