Posted on 03/23/2008 7:37:19 PM PDT by shrinkermd
DESPITE THE BEAR STEARNS BAILOUT AND THE FED'S rate cut, a sense of foreboding is still abroad on Wall and Main Streets. Few investors feel good with an economic slowdown gathering force, the dollar in the dumps and contagion threatening to hit financial sectors previously unscathed or not even suspected of being at risk.
This in mind, we contacted James Finucane, a 67-year-old stock strategist who now works as a consultant in West Lafayette, Ind., home of Purdue University...
...To him, we're now at yet another extraordinary low, especially with the unprecedented actions taken by the Fed of late to offer liquidity to investment banks and to commercial banks stuck with mortgage-backed securities of uncertain value. In fact, he foresees an explosive rally, with the Dow rocketing to 18,000 to 20,000 within a year from its current 12,361. The climb, he says, might begin imminently or take a few months of backing and filling before the market takes off.
Finucane argues that financial crises invariably yield spectacular buy points, especially when they reach crescendos. He points to calamities such as the 1970 Penn Central bankruptcy, the 1984 failure of Continental Bank, the 1994 Mexican peso devaluation and the 1998 collapse of the Long Term Capital Management hedge fund. Each time, important lows were made either simultaneously or within a month of the crisis.
...In Finucane's estimation, months of stock liquidation and cash buildup, horrible sentiment and a bailout that could alter investor psychology have lit the fuse for an explosive rally. It will be ignited by one of those mercurial shifts in mood from abject fear to tentative confidence and, finally, wanton greed. "The setup is perfect," he asserts, using a pool-hall term. And he's confident that investors won't end up behind the eight ball.
(Excerpt) Read more at online.barrons.com ...
Well, it’s inevitable, given time.
Ah yes, the crack-up boom.
sure, why not. but don’t get rid of those “Dow 10,000” hats.
It’s either Dow 20,000 or Dow 2,000. Let’s hope it’s 20,000.
I do think we are at a low and headed up slowly, but I think the author’s estimates of an 18-20,000 Dow within a year, are overly Polyannish and unrealistic.
BS
67 years old and still working for someone else as a financial wizard ?
Nice read.....
Good luck hitting 20k with many of us spending all of our discretionary income on energy.
Not a word about global warming? We are DOOMED!(/S)
I think his target estimate is conceivable, but I’m more than a bit dubious of the timetable he forecasts.
I am not sure Dow 20k means very much. They keep moving stocks in and out of the Dow 30 all the time. It was not that long ago when Bethlehem Steel and Woolworth’s were both in the Dow. When they take out companies that are headed for bankruptcy or a cheap takeover and try to replace them with winners, then you are going to get a Dow average that politicians and economic cheerleaders can boast about. Market pros watch the S&P 500 to gauge the strength of the economy as it relates to corporations. As a trader, I do like the Dow 30 and only trade one stock outside the Dow 30. But I do not take Dow moves as seriously as the S&P moves.
This market isn’t for you. Get out and get out NOW! Sell everything. You just can’t hack it. You simply don’t have the nads. Pick something you can rely on - like BINGO. Again, good luck.
The Bear Stearns bailout ain't the end of the crisis, not nearly. It's the beginning of a new round, and not the last round.
This is based on all the new production and alternate sources coming on line during the next five years. There is plenty to be developed out there at $50 a barrel.
Short interest is at an all time high, and that is a bullish sign in itself.
Further, I think that a lot of the doomsday prophecies are being overdone for political considerations.
I wouldn’t be suprised with a strong move in the markets this year.
Way too many bills to pay before the DOW could even THINK of making that kind of progress.
Exactly. Just watch how quickly the media turns the economy around if a Democrat wins in November.
More so than ever before, US companies are selling into foreign markets. The profitability of those operations, measured in dollars, may increase sharply. To the extent that companies are international in their customer base, the fed is no longer such a driving force in what their business levels are or in what their future prospects look like.
The example I like to use is Caterpillar. Sales are rising in foreign markets and it will still be some years before buyers like China or India will have local sources for such products. The earnings in dollars of such companies can rise to match the inflation of our cheapening currency.
DOW at 20,000?. Yeah maybe 20-30 years from now. For the next 5-10 years, I expect to see 8000- 12,000. All the stars are lining up for some tough times ahead.
Good point on the continious shifting of the DOW 30 components. Believe me, they shuffle the deck in a way that puts the best light on the market.
I have 25 years to go until I retire.
The Dow’s at roughly 12,000 now.
Even if the Dow averages an anemic 4% growth a year, that means in 25 years it’ll be around 32,000 in 25 years.
If the Dow averages 7%, it’ll be around 65,000 when I retire.
I could care less about these short-term fluctuations. I buy quality, diversify, hold on, reinvest dividends and rebalance. Lather, rinse, repeat.
I would gladly settle for 15,000 by the end of next year.
Dent is one of my favorites. In the early 90s he predicted that DOW 10,000 was coming, and caught a lot of grief (until it came, a few years later). The title of that book was “The Great Boom Ahead.” His forecasting technique is similar to my method for analyzing local real estate development trends.
DOW at 20,000?
Of course it will.
And a loaf of bread will be $5.00 - $10.00.
Milk will be $10.00 - $15.00 a gallon.
A stripped down, entry level economy car will be $40,000 - $50,000.
Steak will be $25.00 a pound at the supermarket.
A Quarter Pounder will be $10.00 and small fries only $5.00 more.
Could you provide a list of the new production and alternative energy sources? I have heard of new discoveries in Brazil and the Gulf of Mexico. I think it will take longer than 5 years to develop these sources. Although the 2007 Energy Act mandated large increases in biofuels, I do not see any biofuel that is economically viable at this time. Corn-based ethanol is just a new entitlement for the corn belt.
I don’t think within a year. Maybe two or three years, though. The money that came out of the market in 1999-2000 went into real estate, and then when the real estate bubble popple, into commodities. Now that the commodity bubble has popped (or is at least popping), I think a lot of that money is going to go back into stocks.
to be read later
I’m allergic to milk, I don’t eat much meat, and I’m looking to put in at least another 100,000 miles on my Honda Civic.
Now, if you’re talking about the rent or health insurance premiums skyrocketing, you’ve got my attention!
There’s a fellow here who thinks the next bubble will most probably be in alternative energy. Get on board early!
http://www.harpers.org/archive/2008/02/0081908
I am ready, unfortunately I do not expect to live until 2050.
Don't forget you will pedal bicycle to work (motorized bicycle with little 50cc engine if you are affluent and can afford $20.00 gallon gas).
1 euro will be $10.00, so movie "European vacation" will attain science fiction status, average Chineese riding bicycle 5 years ago will come shopping to US 5 times a year, you won't even be able to go to vacation to Mexico, since $1.00 will equal 1 peso.
Yep. There is one stock, and only one, that has been in the 30 industrials from the beginning. Care to guess which one? No fair looking it up. Anybody can do that.
Standard Oil...Esso...Exxon...ExxonMobil?
A T & T?
Barrons is a contrary indicator... always has been.
The ability to convert biomass to biodiesel is being pursued from several different directions, with promising early possibilities. There is the solar to biodiesel via algae potential, and of course the great potential to convert coal to liquid fuel, at about $40 per barrel.
I agree that the ethanol program is mostly a boondoggle.
We are well on the way.....To the $5 and $10.
The government is out of control - both parties.
$30 billion for African AIDS programs, $30 billion to Wall street to guarantee near worthless Bear Stearns securities.
Over $2 TRILLION wasted on the UN to date.
Billions and Billions in Earmarks and Pork: 2006 Pig Book Summary, 2007 Pig Book Summary
The Founding Fathers would take one look at the thousands of political idiots in Washington, DC and have them all shot for treason.
......Finucane.....
When I was a kid, as punishment, my mom made me learn and reccite the Finucane boy names in order. There were 10 boys and finally, one girl.
Standard Oil...Esso...Exxon...ExxonMobil?
A T & T?
Actually, that's three guesses, but who's counting. And, no, it's not any of those three.
Charles Dow started his list of stocks in 1884, but in 1896 the transports were separated from industrials, so that's when "the Dow," meaning the DJIA, is considered to have begun. There were 12 stocks on the first list, which I have shown below. Automobiles were very scarce back then, so the oil companies had yet to become behemoths. I'm sure you can spot the only one that remains today.
May 26, 1896 (First all industrials list -- 12 stocks)
American Cotton Oil
American Sugar
American Tobacco
Chicago Gas
Distilling & Cattle Feeding
General Electric
Laclede Gas
National Lead
North American Company
Tennessee Coal & Iron
U.S. Leather pfd.
U.S. Rubber
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