Well, there is no doubt we are in a critical mass and investors are becoming if not nervous,but extremely swayed by all the negativity...
As I have mentioned in previous postings,this market is going through a healthy dose of a major shake and bake...I have been in this market for over 30 years and have been through 4 major declines.One in the 70s,the mid 80s and one in the 90s.Now, in the year of 2002,this appears to be a significant decline and probably in terms of severity, will go down as the worst....
Most of this came from the over exuberance of the 90s when many companies came out of the explosive growth of the .com sector with nothing more than an idea and a computer that commanded huge market caps.This was not only piloted by greed,but expectations of results that would eventually have to come to an end.Then bubble popped and better for sooner then later,it is for this reason why this shake out is necessary...Of course one of the main drawbacks is the corporate greed that spawned from this and is prolonging the turnaround...
The economy figures got revised with a worse case then expected,but I believe this has been factored in for sometime and now it's just that investors have a real issue with honesty and naivety of markets and what one can expect.
Most of the investors came in the stock market within the last decade of the 90s when things were just fine..Everybody was making huge profits and expected this to go on forever...Market corrections happen all the time,but major corrections or severe bearmarkets happen almost timely about one in every 10 years...When this happens, it's based much on the new industries and innovations with startups of IPOs that become part of the stage that makeup the free fabric arena of the stockmarket....
Once these so called startups and new industry sectors have been run through the gauntlet, the weed out period starts...
In the 70s what caused a major downturn in the markets was the middle east with the oil embargo,but the main effect was the financial sector and the massive bank defaults and mergers including a major effect on Real Estate ..Every mom and pop had a bank and was giving loans with nothing much in the way of collateral than a handshake...In the 80s,was the collapse of the South Eastern Asin markets mainly Japan and European markets..Japan today is still not recovered and has been in this slump.Their problems is primarily based on too much government intervention and not free market ideology for self correction..It is this that has me concerned here in the US with the Congressional oversite with regards to the accounting and new laws that stemmed from these corporate malfeasance..I am a firm believer that our free market system has built in mechanisms for correcting itself,but although certain obvious loopholes or procedural systems have to be corrected with fraudulent behavior giving jail time, is a must.The main one being,that accounting and auditing which has always been in competition with each other,should be a separate and under a different firm altogether.In the corporate structure of compensation,the options program should most definitely be applied in the column as earnings and a must for shareholder approval..
The major decline in the 90s was the explosive growth of the technology sector and the internet...Here is a classic case of similarity like the coming of the television age...This changed the way we conducted our daily lives and moving from a paper trail to electronic forum...Almost everyday a .com company was introducing their idea and a new IPO with little capital or real assets other than the monies received from the initial stock offering was entering the free market arena of capitalism...It was no wonder that after a couple of years these companies or internet startups with nothing more than a smart looking website without substance would eventually fall on it's own...As long as everyone was making money except the companies you invested in , just didn't matter...Boooooooom,and now they all fell like dominoes and most are nonexistent or sold their 2 computers.These same employees that invested in these same firms are wondering how it could've happened and investors are blaming everyone but themselves...
One area of concern and not immediately,but eventually will be the over stated worth of the Real Estate market..With interest rates certainly attractive and has sparked a homeownership where otherwise was unobtainable, is now available to almost everybody...Here is where I see a problem...Demand is starting to overtake availability and available lots is becoming scares and what is available is so over priced that the only bearing factor is demand without regard to worth....In California, around the technology area of Silcone Valley,what was once a nice middle class moderate priced home, is now going for 50 times more than it's actual value..The problem here is not that these homes are worth that much,but the incomes that employees from these .com companies and their huge compensation programs have put this market totally out of whack...The folks that were in these homes made out,but the people buying these homes will never be able to retrieve their value....
I live in the mountains and our main industry next to logging is tourism....Because of the low interest rates, we experienced a building boom for second homes around a huge lake and ski resorts....What is starting to happen after these 1/4 million dollar homes have been built and the boom has shot these home prices through the roof,many are now up for sale and prices are starting to drop off.One reason is that this area,which you don't move too unless you're retired.The only satisfaction of a nice expensive so called "cabin in the woods" is only visited a couple of months out of a year and then sits while you pay....People that bought into a low Real Estate market for their second piece of property are finding it very difficult to unload it at their entry level.Now that is just this area,but eventually,it will dribble down until the realistic real prices fall back inline...This is the over exuberance of the Real Estate market and may have dire consequences when more and more peoples 401K not having the expectations and with their retirement being put off another few years.They will be forced to sell these second homes at firesale prices and great losses...
So in closing,if you do anything,start buying up major companies in the big caps...This market is giving you an opportunity at fire-sale prices.We still have time on the technology sector...
Snooze you lose....
Well, enough said..
You all have a good weekend...
As I have mentioned in previous postings,this market is going through a healthy dose of a major shake and bake...I have been in this market for over 30 years and have been through 4 major declines.One in the 70s,the mid 80s and one in the 90s.Now, in the year of 2002,this appears to be a significant decline and probably in terms of severity, will go down as the worst....
Most of this came from the over exuberance of the 90s when many companies came out of the explosive growth of the .com sector with nothing more than an idea and a computer that commanded huge market caps.This was not only piloted by greed,but expectations of results that would eventually have to come to an end.Then bubble popped and better for sooner then later,it is for this reason why this shake out is necessary...Of course one of the main drawbacks is the corporate greed that spawned from this and is prolonging the turnaround...
The economy figures got revised with a worse case then expected,but I believe this has been factored in for sometime and now it's just that investors have a real issue with honesty and naivety of markets and what one can expect.
Most of the investors came in the stock market within the last decade of the 90s when things were just fine..Everybody was making huge profits and expected this to go on forever...Market corrections happen all the time,but major corrections or severe bearmarkets happen almost timely about one in every 10 years...When this happens, it's based much on the new industries and innovations with startups of IPOs that become part of the stage that makeup the free fabric arena of the stockmarket....
Once these so called startups and new industry sectors have been run through the gauntlet, the weed out period starts...
In the 70s what caused a major downturn in the markets was the middle east with the oil embargo,but the main effect was the financial sector and the massive bank defaults and mergers including a major effect on Real Estate ..Every mom and pop had a bank and was giving loans with nothing much in the way of collateral than a handshake...In the 80s,was the collapse of the South Eastern Asin markets mainly Japan and European markets..Japan today is still not recovered and has been in this slump.Their problems is primarily based on too much government intervention and not free market ideology for self correction..It is this that has me concerned here in the US with the Congressional oversite with regards to the accounting and new laws that stemmed from these corporate malfeasance..I am a firm believer that our free market system has built in mechanisms for correcting itself,but although certain obvious loopholes or procedural systems have to be corrected with fraudulent behavior giving jail time, is a must.The main one being,that accounting and auditing which has always been in competition with each other,should be a separate and under a different firm altogether.In the corporate structure of compensation,the options program should most definitely be applied in the column as earnings and a must for shareholder approval..
The major decline in the 90s was the explosive growth of the technology sector and the internet...Here is a classic case of similarity like the coming of the television age...This changed the way we conducted our daily lives and moving from a paper trail to electronic forum...Almost everyday a .com company was introducing their idea and a new IPO with little capital or real assets other than the monies received from the initial stock offering was entering the free market arena of capitalism...It was no wonder that after a couple of years these companies or internet startups with nothing more than a smart looking website without substance would eventually fall on it's own...As long as everyone was making money except the companies you invested in , just didn't matter...Boooooooom,and now they all fell like dominoes and most are nonexistent or sold their 2 computers.These same employees that invested in these same firms are wondering how it could've happened and investors are blaming everyone but themselves...
One area of concern and not immediately,but eventually will be the over stated worth of the Real Estate market..With interest rates certainly attractive and has sparked a homeownership where otherwise was unobtainable, is now available to almost everybody...Here is where I see a problem...Demand is starting to overtake availability and available lots is becoming scares and what is available is so over priced that the only bearing factor is demand without regard to worth....In California, around the technology area of Silcone Valley,what was once a nice middle class moderate priced home, is now going for 50 times more than it's actual value..The problem here is not that these homes are worth that much,but the incomes that employees from these .com companies and their huge compensation programs have put this market totally out of whack...The folks that were in these homes made out,but the people buying these homes will never be able to retrieve their value....
I live in the mountains and our main industry next to logging is tourism....Because of the low interest rates, we experienced a building boom for second homes around a huge lake and ski resorts....What is starting to happen after these 1/4 million dollar homes have been built and the boom has shot these home prices through the roof,many are now up for sale and prices are starting to drop off.One reason is that this area,which you don't move too unless you're retired.The only satisfaction of a nice expensive so called "cabin in the woods" is only visited a couple of months out of a year and then sits while you pay....People that bought into a low Real Estate market for their second piece of property are finding it very difficult to unload it at their entry level.Now that is just this area,but eventually,it will dribble down until the realistic real prices fall back inline...This is the over exuberance of the Real Estate market and may have dire consequences when more and more peoples 401K not having the expectations and with their retirement being put off another few years.They will be forced to sell these second homes at firesale prices and great losses...
So in closing,if you do anything,start buying up major companies in the big caps...This market is giving you an opportunity at fire-sale prices.We still have time on the technology sector...
Snooze you lose....
Well, enough said..
You all have a good weekend...
An average family with combined income of 120K cannot even afford a decent house anymore. 