Are too many people predicting Dow 6000

[Specterx]

Quote from Topsurfi:

exactly.
thats the point 99% of all ET members will never understand.
At a certain point when the FED and governemt continues to act this way stocks will rally despite bad data and near zero earnings and will leave them in worthless cash and bonds.
This rally will outperform any rally seen before because it will not be driven by greed but by fear.

If I understand this view, you're saying that general inflation will take hold equity prices will inflate along with everything else. I question this; Why does money need to be warehoused in equities, rather than precious metals, commodities, or some other asset?

Also, inflation suggests that earnings will be rising (even if not in real terms) and we would therefore see a fundamental reason for higher share prices.

 

[Specterx]

The question posed by the OP basically explains why I'm expecting a tremendous bear market rally. If we get back up to 10k on the Dow/1k on the S&P you will be seeing substantial bullishness everywhere, here on ET and especially in the media. Lots of people would be sucked back into the market thinking that dollar cost averaging/"the market always goes up" has worked its magic yet again. The coming frenzy of action by the Obama administration could provide the psychological and fundamental basis for this.

Once the die-hard bears start to doubt themselves, that's when we'll see the big drop to the 6's.

 

[Topsurfi]

Quote from Specterx:

If I understand this view, you're saying that general inflation will take hold equity prices will inflate along with everything else. I question this; Why does money need to be warehoused in equities, rather than precious metals, commodities, or some other asset?

Also, inflation suggests that earnings will be rising (even if not in real terms) and we would therefore see a fundamental reason for higher share prices.

of course also precious metals will rise among other commodities.
But there is simply the question of availability. Did you try to buy physical gold recently ? There is a wait time of 2 weeks for normal bullions here in Germany. There is no question that buying physical gold will be no option in a "real" crisis because you simply cant get it somewhere. The most liquid market to hide your money against devaluation is the stock market.

I therefore expect the stock prices to rise without any fundamental reason, even against shocking fundamentals. This must not happen now or even soon, since it depends mainly on how long people are ready to trust the system. But it will happen.
At the same moment where people don't believe in the AAA rating of USA any more the game is over within 2 or 3 months. Nobody can exactly forecast when this will happen. Have a close look at the CDS of treasuries and you will see that although its not discussed openly in the media more people seem to share my view.

And it will be a shock for all those bears here because they would be proven right about there economic forecast but completely wrong about the decision they made.

 

[Lucrum]

Personally, I think too many people are predicting...period.

 

[ammo]

Quote from Topsurfi:

of course also precious metals will rise among other commodities.
But there is simply the question of availability. Did you try to buy physical gold recently ? There is a wait time of 2 weeks for normal bullions here in Germany. There is no question that buying physical gold will be no option in a "real" crisis because you simply cant get it somewhere. The most liquid market to hide your money against devaluation is the stock market.

I therefore expect the stock prices to rise without any fundamental reason, even against shocking fundamentals. This must not happen now or even soon, since it depends mainly on how long people are ready to trust the system. But it will happen.
At the same moment where people don't believe in the AAA rating of USA any more the game is over within 2 or 3 months. Nobody can exactly forecast when this will happen. Have a close look at the CDS of treasuries and you will see that although its not discussed openly in the media more people seem to share my view.

And it will be a shock for all those bears here because they would be proven right about there economic forecast but completely wrong about the decision they made.

intresting analogy ,what about the fear to trust the stock market after its wiped out every job and 401k plan and savings account and a large chunk of americas entrepreneurs? And if that were to happen wouldnt the smart money ,the bottom fishers,the propheteers in this event,wait and buy at that moment?

 

[Topsurfi]

Quote from ammo:

intresting analogy ,what about the fear to trust the stock market after its wiped out every job and 401k plan and savings account and a large chunk of americas entrepreneurs? And if that were to happen wouldnt the smart money ,the bottom fishers,the propheteers in this event,wait and buy at that moment?

I think only few people will buy at this moment. One of the reasons is what you said, that people don't trust the stock market so they will not change their paper money into other assets. They will change their IRA accounts from stocks to cash in the worst possible time.

The reason is that we are all experienced in stock market crashes, I have already taken part in the 1987.
But none of us have experienced a crash of the worldwide financial system (unless we live in Argentinia, that would have given us a hint of what can happen) and thus we may not be able to deal with this situation and 99% will loose and only very few will have the right mindset and the necessary tools to make money. I can not even tell you if I will make the right decisions, for me its more about rescueing as much wealth as possible into the time after that.
1923 (hyperinflation in Germany) the people who owned stocks needed a lot of time to recover from that loss but people who owned money and bonds lost it all.
That said of course its possible (in theory) to make enormous amounts of money into this coming stock market rally with out of the money calls just because so few people will understand the reason in the beginning.

By the way, this does not mean we can't see Dow 6000. Of course we can but in my view it will be the buying opport. of the livetime.

 

[c.chugani]

Quote from forextrades:

The masses aren't always wrong when it comes to direction. They're wrong when it comes to timing.

This i concur.

 

[ammo]

Quote from Topsurfi:

I think only few people will buy at this moment. One of the reasons is what you said, that people don't trust the stock market so they will not change their paper money into other assets. They will change their IRA accounts from stocks to cash in the worst possible time.

The reason is that we are all experienced in stock market crashes, I have already taken part in the 1987.
But none of us have experienced a crash of the worldwide financial system (unless we live in Argentinia, that would have given us a hint of what can happen) and thus we may not be able to deal with this situation and 99% will loose and only very few will have the right mindset and the necessary tools to make money. I can not even tell you if I will make the right decisions, for me its more about rescueing as much wealth as possible into the time after that.
1923 (hyperinflation in Germany) the people who owned stocks needed a lot of time to recover from that loss but people who owned money and bonds lost it all.
That said of course its possible (in theory) to make enormous amounts of money into this coming stock market rally with out of the money calls just because so few people will understand the reason in the beginning.

By the way, this does not mean we can't see Dow 6000. Of course we can but in my view it will be the buying opport. of the livetime.

you mentioned out of the money calls,if we are going to get a big swing either way ,you can sell large otm call and put sprds for low risk /high reward,the feb 780/700 spx call sprd for 70 for example

 

[AK100]

Be careful about the 'crowd'.

They're often right for long periods of time. It's at the extremes where they're often very wrong.

For example, the crowd mad a lot of money from stocks gains during the internet boom which lasted for several years.

Whether or not they kept this money or still have YHOO at £100+ is a different story

 

[AK100]

Don't know about 6000 but the market is going to 6437 for sure.

Why 6437?

Because it's the price when easy Alan said 'irrational exuberance'.

It's called KARMA