So the Dow dropped below 8,000 today for the first time since early 2003, where do we go from here?
This mysterious 8,000 number has been fixated on by pundits and economists ever since the financial world started to fall apart. Is there another number you guys are hawkishly eyeing? Is it the unemployment rate? The countdown till Obama takes office? The latest astronomical layoff numbers at Citi? The amount Wall Street bonuses will get cut? The mpg on GM's next production car? The average SAT scores to get into Wharton?
Let us know.
I think 8000 is artificial and arbitrary. it's psychological more than anything. More bad news means the market will go lower. 8000 is just as much a "magical number" as 7000. or 6000.
I think if it breaks the 7500 mark set in 20-03, it'll go to 6500. Then pop back up in a V shape.
Just a gut feeling.
We finished pretty damn close today. If/when we go below that mark in '03 we'll be at a 10 year low.
My gut's telling me around 6500 for a low as well. There's just nothing we can do that's going to turn the market around anytime soon. Seems that there's three selloff days for every rally right now, and those rallies are coming from value investors.
Dude, I don't know why everyone has this thing for Wharton. I mean I'm at this school, but it's really not all that great. In reality if anyone still wants to do banking he/she should consider other schools where it's much less compeitive and will therefore w/ a good gpa offer a better opportunity than Wharton. In short, I'm definitely regretting choosing this *&%^& place over my other choices.
Choose a much less competitive school to get a better job... riiiiight.
You do realize recruiters aren't even going to these less competitive schools anymore, right?
As stated above, you obviously either don't go to Wharton and/or you have no clue what you're talking about.
You either 1) Don't go to Wharton or 2) Don't know what you are talking about
I've yet to hear a decent reason why not.
But I doubt the indexed book value of the Dow is that low. Would the index drop to below that? I'm not sure what the number would be, but if it is that low, the implications of the Dow dropping that hard...ouch, haha. We're already in for a hell of a ride. Not sure what that would mean.
I'll pull up the book value level of the index tomorrow when I have my bloomberg open.
The argument that was put to me on this point recently was that the market shouldn't go below book value because that is the level that individual stocks bounce off historically. Here are my counter-arguments:
1) Japan has already gone below book value quite recently and shows no sign of bouncing.
2) As the market incurs losses, book values fall so the line in the sand needs to be redrawn. These losses can come from unprofitable periods, or from writedowns (as has been seen with the banks for example).
3) (related to 2) Assets should be recorded at the lower of depreciated cost and net realisable value. Ordinarily, an auditor will be fairly relaxed about taking the company's depreciation schedules but this may shock to the system may force them to revise this.
4) Any market, bull or bear, will see asset values overshoot on the up or downside. This is why oil shot to $150 and house prices went to 10x income. Given the fear in the market, there's no reason why capitulation won't come.
Personally, I have been completely out of the market for some time. I've been fortunate to have had some good years and am modestly wealthy by average standards. Doubling my wealth would not really significantly change my life so why be greedy? I can afford not to be even more wealthy but I can't afford to be poor so why take the risk? This has undone a lot of my peers who were fully invested (either through shares in their employer or through PA positions) and are now "forced" to work for another 20 years before they can retire (if they are lucky enough to keep their jobs). I only "lose" if my savings cannot keep up with inflation and it's liquid enough that I can change tack if that becomes an issue. So I'll wait until we come out the other side and won't mind if I miss out on the first 25-50% as long as I can see the light at the end of the tunnel.
ps Why do I have a gold star next to my name? Am I teacher's pet now?
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