Are too many people predicting Dow 6000

[short&naked]

Quote from stock_trad3r:

if the dow went to 6,000 stocks would be sickly undervalued.

No. Incorrect. At 6000 it would be just a bit under fair value.
Can your crumpet of a mind wrap itself around the following chart?

 

[AK100]

"if the dow went to 6,000 stocks would be sickly undervalued. "

Yes, if using the valuation levels of today. But possibly no if using the valuation levels of the future.

Anyway, that quote reminds me of some bubble head sprouting off on CNBC.

How many times do you think that channel has had guests on (over the last 12 months), or the hosts themselves have suggested that 'now is the time to buy, stocks are looking good value going forward'?

About 10 times on average per day.

They'll be right one day

 

[AK100]

Plus of course asset prices can remain undervalued for long periods of time.

Just as they can remain overvalued for long periods of time.

Just because it's undervalued, doesn't mean it's going up.

Plenty of great antiques for example are starting to sell as crazy values, well under what they're really worth but the market still (and rightly so) is going lower.

They're not so much antiques per se but stone aged tools circa 5000 BC are great bargains right now, they're almost giving them away.

 

[R. Raskolnikov]

You have to also keep in mind that stock_trad3r is a college student so he doesn't have much life experience and even less market experience so he doesn't fully understand all the angles. We should cut him a little slack.

 

[jjf]

Quote from R. Raskolnikov:

You have to also keep in mind that stock_trad3r is a college student so he doesn't have much life experience and even less market experience so he doesn't fully understand all the angles. We should cut him a little slack.

ST is an even bigger mess than you describe.
He/she is upside down.
He/she is long in a falling market and short in a rising one.

 

[c.chugani]

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.

This scenario sounds very plausible in the near future, after China has dumped most of its holdings in US treasuries.

 

[sobemark]

Quote from stock_trad3r:

if the dow went to 6,000 stocks would be sickly undervalued.

using what metric ??

the s and p is now grossly overvalued.

earnings are forecast to be $42 for the sp500 for 2009 .. That number will obvioulsy come down .

at spx 800 with $40 in earnings .. brings the p/e of the sp500 to 20 !!

way to high .. p/e for the sp 500 should be between 12 -15 in this environment .. which is 580-650 .. that's fair value ..

 

[R. Raskolnikov]

He's a kid in school and he is a hobbyist trader so its clear he doesn't have a lot of money riding on what happens. Youth and inexperience will lead to bold and, well, not so bright decision making. But he'll learn (hopefully)

P.S He never goes short, you know that right?

Quote from jjf:

ST is an even bigger mess than you describe.
He/she is upside down.
He/she is long in a falling market and short in a rising one.

 

[milktruck]

Quote from Topsurfi:


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.

I was living, but not trading, In Argentina in 2002. The best pickup line was joked to be "I have an offshore bank account" as the peso crashed to, um, where it is again today. This time there is no offshore. real estate held up waay better than cash but people couldnt get loans to buy it (obviously a 3rd world thing in general, but it was even harder from what I anecdotally heard).

A lot of people lost a lot.

 

[stock_trad3r]

the dow will never see 6000