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Why Stocks Could Fall by 50 Percent
Slate ^ | 08/01/2014 | Henry Blodget

Posted on 08/01/2014 7:10:26 AM PDT by SeekAndFind

After meandering higher for most of the year, the stock market is now sputtering.

That's triggering chatter about a minor "correction," which many people believe is long overdue.

And maybe that's what we're at the start of — a minor "correction." Or maybe this is just a blip and the brilliant and prudent Jeremy Grantham is right that we're on the cusp of a new bubble that will take the S&P 500 up another 10 percent to 15 percent over the next year to 2,250. (As a stockholder, I sure hope so!) Or maybe we'll get both—a minor "correction" and a new bubble spike. Or maybe we're just in the middle years of a fantastic bull market.

I don't know. (Neither does anyone else, by the way.) I'm also not predicting a crash.

One thing I do know, though, is that stocks are extremely expensive on every valid historical measure I know of. In the past, this level of overvaluation has presaged poor long-term returns. So I'm not expecting my retirement account to do well from this level over the next 7-10 years.

(Excerpt) Read more at slate.com ...


TOPICS: Business/Economy; Society
KEYWORDS: crash; stockmarket

1 posted on 08/01/2014 7:10:26 AM PDT by SeekAndFind
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To: SeekAndFind

For the life of me I have no idea why:

A) CNBC puts him on the air given his past

B) How anyone takes him seriously


2 posted on 08/01/2014 7:13:07 AM PDT by LRoggy (Peter's Son's Business)
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To: SeekAndFind

Because yesterday’s events proved that the tide is turning against the Chamber of Commerce and in the future they are unlikely to be able to just march up K Street and buy whatever they want.

THAT did not sit well on Wall Street apparently.


3 posted on 08/01/2014 7:29:17 AM PDT by Buckeye McFrog
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To: SeekAndFind

Why is market up from 6547 after 2008?
Fed has been printing dollars. Once created those dollars have to flow someplace, and stocks have been where they went.

Now Fed is talking about slowing the printing, and stocks are correcting to reflect the decreased flow.

HOWEVER, US GOVERNMENT HAS LOST ALL CONTROL OF SPENDING!

Notice, even the far right has stopped any talk of a balanced budget! The bottom line is that not enough dollars exist to cover all of the entitlements.

THOSE ON FIXED INCOMES, AND LOWER TO MIDDLE CLASS WILL GET HURT THE MOST! Inflation will eat up the government handouts. But it is beyond me why they continue to believe the democrat lies and vote them in.


4 posted on 08/01/2014 7:29:49 AM PDT by jonose
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To: jonose
Fed has been printing dollars. Once created those dollars have to flow someplace, and stocks have been where they went.

Wrong. Since 2009, by a 5-to-1 margin inflows have gone to bonds over stocks. Why? The Fed has been keeping the bond markets afloat with their asset purchases. The worst thing that could happen to the bond markets (and the financial markets in general) is a failed Treasury auction. As the deficit declines (and it has been), the asset purchases have slowed... they've simply been monetizing our debt and making sure there is a market for new government issues.

5 posted on 08/01/2014 7:34:04 AM PDT by pgyanke (Republicans get in trouble when not living up to their principles. Democrats... when they do.)
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To: SeekAndFind

I think Blodgett may be right.

Just look at his track record: the guy has predicted all fourteen of the last two bear markets.


6 posted on 08/01/2014 7:38:04 AM PDT by Nervous Tick (Without GOD, men get what they deserve.)
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To: jonose

Life on entitlements (plus whatever is gleaned under the table) apparently is now sufficient for a good proportion of Americans. Obviously that’s a sign that our society has deteriorated significantly.

I’m actually old enough to remember when being “on the dole” was considered a bad thing by most folks.


7 posted on 08/01/2014 7:39:11 AM PDT by nascarnation (Toxic Baraq Syndrome: hopefully infecting a Dem candidate near you)
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To: jonose
Notice, even the far right has stopped any talk of a balanced budget!

Um, excuse me.

Just who and what is the "far right?"

8 posted on 08/01/2014 7:40:14 AM PDT by Las Vegas Ron ("Medicine is the keystone in the arch of socialism" Vladimir Lenin)
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To: jonose

>> Inflation will eat up the government handouts.

That’s why they cannot allow inflation to happen.

Look instead for a “one time” (heh heh, yeah right) wealth tax that will simply confiscate 10 to 12 per cent of household and corporate wealth.


9 posted on 08/01/2014 7:40:18 AM PDT by Nervous Tick (Without GOD, men get what they deserve.)
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To: SeekAndFind

Great ... I hope we don’t have a replay of 2000-2001 when we all saw the signs of a stock market crash coming at the end of Clinton’s presidency and into the beginning of W’s. W got the blame. If the market crashes, I hope it happens before the next election so blame will fall where it should.


10 posted on 08/01/2014 7:40:26 AM PDT by al_c (Obama's standing in the world has fallen so much that Kenya now claims he was born in America.)
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To: SeekAndFind

Doesn’t the Federal Reserve control the markets now? I’m sure, tucked away in some sleet secret Homeland Security bill, there is language that gives the Fed ultimate control over the markets.


11 posted on 08/01/2014 7:41:46 AM PDT by Sawdring
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To: Las Vegas Ron

>> Just who and what is the “far right?”

Put it this way: you and I (and most freepers) wrap the needle around the peg on the right-hand side of the scale.

“far right” on their scale is your karl roves, your john boners, your john mccains.

Hillary, Obama, Holder, Gina McCarthy, Lois Lerner are centrists. Well, ok, maybe SLIGHTLY left of center.

Clear as mud? :-)


12 posted on 08/01/2014 7:43:52 AM PDT by Nervous Tick (Without GOD, men get what they deserve.)
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To: LRoggy

Absolutely stupid article.

It may go up, it may go down, it may sputter, it may not do anything.

That about covers the range of possibilities so why bother to even comment?

Stupid and without any merit.


13 posted on 08/01/2014 7:44:52 AM PDT by Sequoyah101
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To: jonose
"Inflation will eat up the government handouts."

That's the only way the statists can cover a fraction of the $150 trillion in unfunded mandates.

14 posted on 08/01/2014 7:46:09 AM PDT by uncommonsense (Liberals see what they believe; Conservatives believe what they see.)
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To: jonose
But it is beyond me why they continue to believe the democrat lies and vote them in.

If you think the Republicans are any better when it comes to printing money out of thin air, you're sadly mistaken.

15 posted on 08/01/2014 7:52:10 AM PDT by EricT. (Everything not forbidden is compulsory.)
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To: Nervous Tick

Funny.


16 posted on 08/01/2014 7:54:50 AM PDT by crusty old prospector
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To: jonose
"But it is beyond me why they continue to believe the democrat lies and vote them in."

Becasue Wal-Mart still accepts EBT cards and the banks still cash disability checks. Once that is no longer true it's time to find a secure, well armed place to hole up.

17 posted on 08/01/2014 7:56:36 AM PDT by circlecity
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To: SeekAndFind

Too many people in the market looking at the EPS (Earnings Per Share) that has been rising. Of course, they fail to consider that one version of the equation has EPS rising because the number of shares has been going down due to corporate buybacks.

At some point, with further weakening of the economy (not that it doesn’t suck already), the cash won’t be there to prop up EPS from buybacks and the castle will start to crumble.

Even stores such as Wal-Mart, and other “low cost” retailers have mentioned the lack of traffic and sales. Shopping malls and other areas of mainstreet are feeling the crunch. But as long as the financial wizards can play their games and manipulate reality, things will continue. Every charade at some point comes to an end and it will be more than the 10-20% correction some talk about.


18 posted on 08/01/2014 8:01:21 AM PDT by voicereason (The RNC is like the "One-night stand" you wish you could forget.)
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To: SeekAndFind

Useless article.


19 posted on 08/01/2014 8:10:31 AM PDT by Resettozero
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To: Las Vegas Ron

>>Just who and what is the “far right?”
Moving target! I think JFK would now be considered far right:)
His ask not speech would be considered far right today!


20 posted on 08/01/2014 8:18:54 AM PDT by jonose
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To: Nervous Tick

Yep. They have to control inflation to keep handout growth in check. They also have to keep interest rates near zero due to interest on the debt. If interest on debt were to double or triple it crowds out budget available for their entitlement spending. When interest rates and inflation both rise (inevitable) they are screwed.


21 posted on 08/01/2014 8:19:36 AM PDT by plain talk
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To: uncommonsense

Where did the 150T number come from?


22 posted on 08/01/2014 8:25:24 AM PDT by Ghost of SVR4 (So many are so hopelessly dependent on the government that they will fight to protect it.)
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To: SeekAndFind
The Stock Market has nothing to do with company value any more. So trying to bet the market is a sucker's game right now.

It could go down or up or totally collapse or stay the same. But it has more to do with the Fed's money policy than anything else...

23 posted on 08/01/2014 8:29:19 AM PDT by Mad Dawgg (If you're going to deny my 1st Amendment rights then I must proceed to the 2nd one...)
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To: Mad Dawgg

Stock Market is up because frankly people don’t know where else to invest anymore.


24 posted on 08/01/2014 8:30:13 AM PDT by dfwgator
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To: dfwgator
"Stock Market is up because frankly people don’t know where else to invest anymore."

yep, cuz the fed keeps printing money and it keeps interest rates low...

Its the only way left to try and stop inflation from eating up your cash...

25 posted on 08/01/2014 8:34:56 AM PDT by Mad Dawgg (If you're going to deny my 1st Amendment rights then I must proceed to the 2nd one...)
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To: Buckeye McFrog
Because yesterday’s events proved that the tide is turning against the Chamber of Commerce and in the future they are unlikely to be able to just march up K Street and buy whatever they want. THAT did not sit well on Wall Street apparently.

And even as there are stories about the big money getting out as Main Street finally gets sucked in, there continue to be opinion pieces encouraging the little guy to get in while the gettin's good....

26 posted on 08/01/2014 8:47:54 AM PDT by trebb (Where in the the hell has my country gone?)
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To: pgyanke

bump


27 posted on 08/01/2014 8:47:55 AM PDT by Pelham (California, what happens when you won't deport illegals)
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To: pgyanke
Wrong. Since 2009, by a 5-to-1 margin inflows have gone to bonds over stocks. Why? The Fed has been keeping the bond markets afloat with their asset purchases. The worst thing that could happen to the bond markets (and the financial markets in general) is a failed Treasury auction. As the deficit declines (and it has been), the asset purchases have slowed... they've simply been monetizing our debt and making sure there is a market for new government issues.

Outstanding post. Didn't the monetization occur after Deutsche Bank downgraded us? It was a brilliant move by the Lear Deader, if we can't expand Gov't because of our Fiscal House is not balanced, and we will verbally bludgeon the GOP if they try to go their, and we would have to pay a higher coupon because the world knows we are a higher risk, then heck with it! We will print to Fund the Welfare State ( he sort of controls the FED ), sell to the Fed from Treasury ( one pocket to the other ) and keep this game of Musical Chairs internal and not have to expose ourselves to the real world, and make believe like it is no big deal.

Seniors will take it on the Chin because of ZIRP, or they will have to flock to Divi type Stocks for Yield to play golf in retirement and he also gets the win-win of the Stock Market looking good but the real reason everyone is their is because even Bond Ladders at these Rates make no sense, their is no real Yield Curve anymore of a sane Maketplace.

Beck has noted ( and CFP types I know ) this will work good until inflation kicks in and the Deficit balloons and we have a wip-saw effect that no one get away from it and it's backlash...

A penny for your thoughts on my Analysis....

28 posted on 08/01/2014 8:57:40 AM PDT by taildragger (Not my Circus, Not my Monkey ( Boy does that apply to DC...))
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To: SeekAndFind

Notice it is the liberal publications that promote the idea of a stock market collapse. Obama would love to see an economic collapse. Just imagine what he could do after imposing marshall law.


29 posted on 08/01/2014 8:58:12 AM PDT by aimhigh (1 John 3:23)
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To: aimhigh
Notice it is the liberal publications that promote the idea of a stock market collapse. Obama would love to see an economic collapse. Just imagine what he could do after imposing marshall law. taking advantage of the Crisis and allowing a Teresa Ghilarducci type swap of your 401k etc for a new Gov't Type Annunity ( SSI on Steriods ) and now have total control of that part of your life....

Their, fixed it....

30 posted on 08/01/2014 9:02:20 AM PDT by taildragger (Not my Circus, Not my Monkey ( Boy does that apply to DC...))
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To: Ghost of SVR4

A couple places - The Dallas Fed president put it at $100T in 2008 before the crash and Fed “twist” (use Ixquick, not Google, to search “Storms on the horizon” - by Richard Fisher). There was another financial article in the last 2 years that added up all of the Fed and unfunded state debt that will go onto the Fed balance sheet that put it at $150T.


31 posted on 08/01/2014 9:52:06 AM PDT by uncommonsense (Liberals see what they believe; Conservatives believe what they see.)
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To: SeekAndFind
https://www.google.com/?gws_rd=ssl#q=bible+predicts+economic+collapse
32 posted on 08/01/2014 9:55:16 AM PDT by SkyPilot
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To: nascarnation

33 posted on 08/01/2014 9:57:03 AM PDT by SkyPilot
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To: aimhigh

Notice it is the liberal publications that promote the idea of a stock market collapse. Obama would love to see an economic collapse. Just imagine what he could do after imposing marshall law.

<><>><

Obama will make us watch Australian TV shows?


34 posted on 08/01/2014 10:00:40 AM PDT by dmz
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To: taildragger

What has been set up is very similar to the 1970s. Whereas we were finishing with Vietnam War then at a great cost relative to GDP, we are now dealing with the entitlement state while fighting a multi-front war. Whereas we had a stagnant economy with high inflation (stagflation) then we run that same risk today when inflation heats up and the economy stay soft or stagnant. Whereas we had limited availability to information then, we now have so much information it’s difficult to separate what is useful.

I think we are more likely to see a repeat of the 1970s than total economic shutdown. Remember the basics of economics... supply and demand. Money has to be somewhere. Where it goes it will drive asset values. Markets move not on the basis of economic growth but rather on the movement of capital. Economic growth invites capital investment, not the other way around.

Thank you for the penny.


35 posted on 08/01/2014 10:09:52 AM PDT by pgyanke (Republicans get in trouble when not living up to their principles. Democrats... when they do.)
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To: taildragger
...taking advantage of the Crisis and allowing a Teresa Ghilarducci type swap of your 401k etc for a new Gov't Type Annunity...

I really don't see them being that brazen. What is a real possibility, though, is to declare that stocks are too risky for retirement assets and require a significant portion of all retirement accounts be in government issues. Bingo... a market for government debt.

36 posted on 08/01/2014 10:12:33 AM PDT by pgyanke (Republicans get in trouble when not living up to their principles. Democrats... when they do.)
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To: aimhigh

Marshal Law is an English-language superhero comic book series created by Pat Mills and Kevin O’Neill.


37 posted on 08/01/2014 12:17:03 PM PDT by B4Ranch (Name your illness, do a Google & YouTube search with "hydrogen peroxide". Do it and be surprised.)
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To: pgyanke

Why give them ideas about how to control us? Pull that post immediately!


38 posted on 08/01/2014 12:21:23 PM PDT by B4Ranch (Name your illness, do a Google & YouTube search with "hydrogen peroxide". Do it and be surprised.)
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