Co-Ed Naked Call Writing

[chequita guevara]

AUGH! Why does it always happen that as soon as I lose my job, my 401K tanks!?!

[Theben]

Originally posted by Zkribbler

If you need any money, I hear Theben's loaded.

Who lied to you?!

[OneFootInTheGrave]

did a .75 point rate drop help out today... this is like a free hand to get out while you still can to the initiated

[Drogue]

It helped the markets rise, and was a pretty decisive move. However an unexpected announcement that would aid business as much as a 3/4 of a point rate drop should have caused a much larger upswing. Either the market was going to utterly tank otherwise, or the base rate has little sway in the midst of a credit crunch. Or both, as is likely the case. This is not a good time for the US economy.

With monetary policy seeming half-impotent, you're going to get inflationary pressure without much of the economic growth benefits. You'll end up with a choice between rising inflation and a second recession (I think you'll hit at least a minor one whatever). Either you need high unemployment to keep wages and inflation down, or you're going to have a prolonged slowdown/high inflation until it does it itself.

Over here, as long as the Bank of England keep their nerve and keep an eye on inflation, we'll be sort-of ok. They seem credible so far, and as long as inflation expectations stay low, we'll have a dip, maybe a minor recession, but nothing too jagged or prolonged.

The only way out of a credit crunch is to restablish the link between the base rate and the rate banks actually lend at, which means tackling the root problem. You've got to remove a lot of the uncertainty over valuation, but making it clear what people hold and how risky it is. Then banks can price it, start lending at appropriate rates, and we can use monetary policy to keep inflation low and try to smooth the bump of an economic slowdown.

Alas, most bankers are cleverer than I, and will be trying to find a way to make a buck or two, either through hiding holdings, or bending the rules to make their bank seem safer.

[Kidlicious]

I don't remember the recession of 1991 too much. The recession of 2001 was not bad at all. This one coming (I think we can go ahead and make a safe prediction now), is looking pretty nasty. It might get as bad as the 1979 recession.

[DanS]

AO OA. I'm all for cheering on a bear market -- and a crash would be right down my alley -- but let's not get carried away with all this recession-as-a-foregone-conclusion talk.

Fact is, corporate America is in a strong position. Even considering some of the phantom profits that were shown on the books over the last several years, non-financial/real estates/construction corporations are still profiting at post-War highs. Low unemployment. Low inventories. Growing exports.

I'm optimistic about corporate America, but these prices to buy into corporate America are way too high.

As to real estate, I wouldn't be surprised to see a long and deep housing recession. The early 90s had a housing recession lasting six years or so, even though the excesses of the day weren't anything like the last several years. But housing in particular is just one small portion of the economy.

[DanS]

OK, so I closely follow S&P's estimates of S&P 500 earnings (linked below), which are updated about every week during earnings season.

Last week, 2007 core earnings were estimated at about $75.5 per S&P 500 share. This week, after the week's earnings reports were in, the estimate was reduced to $74.35 per S&P share. Overall, $74.35 represents an 8.2% decline in core earnings over 2006.

But what do we see so far this week? The S&P 500 advances about 2%.

http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS

[One_more_turn]

74.35, times a multiple of 15 (historical average), gives S&P a fair value of 1115.25.

But bear markets don't end at historical average, they often overshoot.

Stock market always looks ahead, it tanks months ahead of unemployment numbers. Thus by the time you are out of a job, your investment portflio has already been decimated, and most likely you won't be able to sell your house at a decent price either.

[DanS]

You would want to normalize that $74.35 to an average corporate earnings figure (probably around $55 off the top of my head). Then discount this stream of cash -- with reasonable annual increases -- using the historical equity risk premium plus the current riskless rate.

[One_more_turn]

Asian markets are crashing again, with Shanghai leading the pack this time.

Emerging market bubble seems to have finally burst.

When this bear market is finally over, foreign stocks will suffer the most devastation because that's where the hot money went to.

[notyoueither]

BBC World is blaming a 5% drop in some markets on a snow storm.



The grasping at straws has begun.

[Max Webster]

Originally posted by notyoueither
BBC World is blaming a 5% drop in some markets on a snow storm.

call in the army!

[pchang]

We all know

the 5% drop was due to some rogue French trader...

[chequita guevara]

Originally posted by DanS
I'm optimistic about corporate America,

That pretty much goes without saying.

[chequita guevara]

Originally posted by One_more_turn
When this bear market is finally over, foreign stocks will suffer the most devastation because that's where the hot money went to.

My "investments" in Europe seem to be starting to recover this week. I've got back about a third what I lost last week. Not that it's a terrible lot of money, but it's a security blanket in case I don't find a job soon enough.