Sky Falls on Wall Street

[WilliamPitt]

http://money.cnn.com/2006/07/14/markets/markets_newyork/index.htm?cnn=yes

Sky falls on Wall St

Major gauges tumble for the third straight session as record oil prices, Mideast tension and disappointing retail sales weigh on sentiment.

By Alexandra Twin and Jessica Seid, CNNMoney.com staff writers
July 14 2006: 1:31 PM EDT

NEW YORK (CNNMoney.com) -- Stocks sank Friday after oil hit a record above $78 a barrel and investors worried about escalating violence in the Mideast, sluggish retail sales and a lousy start to the earnings season.

The Dow Jones Industrial average fell (down 113.12 to 10,733.17, Charts) 1 percent with 2-1/2 hours left in the session.

The world's most widely watched stock market gauge has lost nearly 400 points since the close of trade Tuesday and is now within shouting distance of falling into the red for the year. The S&P 500 and Nasdaq composite are already in negative territory.

The broader Standard & Poor's 500 (down 9.47 to 1,232.82, Charts) index slipped 0.7 percent and the Nasdaq composite (down 18.65 to 2,035.46, Charts) slid about 0.9 percent.

The stock market has been tumbling since Wednesday, amid increased fighting between Israel and Lebanon's Hezbollah that's sent oil prices to record highs.

At the same time, investors are worried about second-quarter corporate profits, with the first big batch of companies due next week.

The latest selloff is part of a broader pullback that has socked markets since late May. After hitting a 2006 high on May 10, the Dow has now lost roughly 8 percent of its value, first on worries about a slowing economy and rising interest rates, and now on global concerns.

...more...

[wakeme2008]

1. I would bet it will break 10,000 this coming week

:grr:

[mom cat]

9. I was thinking about that too. If the mid east war heats up anymore,

I think that we will see it drop below 10,000 for a long while ... unless money printing gets out of hand ans a cup of coffee costs $1000.00.

[dpbrown]

2. Remember when we were at peace with a budget surplus?

Yeah, me too.

[soleft]

6. Maybe the 90's will be the new 50's

in terms of looking back on ideal times.

[milkyway]

11. Near the end of Clinton's presidency, I told a wingnut I work with that

people would look back on the Clinton years as the good ol' days. I had no idea it would happen so quickly.

[dpbrown]

29. Little did people know that the 1950s Republicans....

...were Red-baiting, screwing the people with a Constitutional amendment banning good Presidents from getting re-elected, setting the stage for the dismantling of our public transportation infrastructure by ushering in the interstate, unconstitutionally writing "god" into the Pledge and on our coins, drafting former Nazis into the nascent CIA under George H.W. Bush, and building up a false-front military industrial complex to suck all the money out of our economy for time immemorial by riding the Red-baited Cold War into untold riches for military contractors - forever bankrupting our children and our children's children.

But yeah, the 1990s were pretty damn good.

[mmonk]

3. No surprise there.

Bad high debt economic policy coupled with huge trade deficits, rising interest rates and compounded with lack of a foreign policy grounded in ensuring peace results in jittery markets.

[im10ashus]

4. But, but, wait!!!

Isn't the deficit lower than expected now due to all of the tax cuts for the rich?

:sarcasm:

[Skidmore]

5. I got my tiaa-cref quarterly report this morning, and I lost

over $2000 this quarter, all in the stock section of my portfolio. Every index. So I have no clue as to what to do to try to recoup it. I don't thinks shifting it between the indexes will help. It's all the retirement savings I have aside from some Ebonds and a savings account. I'm more than a little scared right now.

[Phillycat]

8. I was supposed to do the paperwork for my TIAA-Cref account

last year, and I've been putting it off and putting it off...and now I'm actually really glad. When one of the most respected investment firms on the planet is losing money for you, that's really freaking scary. I hope things get better for you soon. :hug:

[kittykitty]

13. My husband switched out of CREF, and put it all in the Money Market. At

least we didn't loose anything and had a modest GAIN. He did this around the beginning of the year.
TIAA is still doing OK, so far.

[Skidmore]

14. I'm actually considering doing the same thing. I wasn't sure

that they would let you do that.

[Mountainman]

17. Dig a hole in your back yard and burry it in a can.. Buy real estate,

Put it under your pillow, invest in art,

[Virginia Dare]

19. Do some research on inflation protected bonds....

They are what Dick Cheney and Bill Gates have been heavily investing in lately.

[Skidmore]

20. This retirement plan is vested and has been for years. I don't

think I can do anything but move the money around within their indexes and accounts. I'll ask to see if they have such a critter as an inflation protected bond though.

[Beetwasher]

27. They Have Inflation Linked Bond That Has Done OK Recently

Also, they have a Real Estate option too that's pretty solid and their Traditional option is a guaranteed return. I too have a TIAA-CREF account and about a year or so ago took most of my investments out of their equities options and put most into the above and my quarterly statements have been, while not earning aggressively, at least earning and I'm not seeing losses.

[Virginia Dare]

37. My fund has it (T.Rowe Price)...n/t

[Iowa]

34. A few thoughts on the market...

And I'm not just replying to you, I'm speaking to several people here who express alarm. So I'll reply to specific comments by you and others I have seen on this thread:

"Sky Falls on Wall Street"

The title of this thread is absolutely ridiculous. This little blip we have seen over the past few days doesn't even merit a mention. To refer to this tiny decline as "Sky Falls" displays a complete lack of understanding of the history of the financial markets.

I lost over $2000 this quarter, all in the stock section of my portfolio. Every index. So I have no clue as to what to do to try to recoup it.

You did not lose $2000. When you buy a stock or a stock fund you are buying shares of corporations. What others are willing to pay you for those shares will go up and down. You haven't "lost" anything unless you sell at a crappy price. You still own the same shares you bought. What someone is willing to pay today is irrelevant (unless you must sell today). There is nothing to "recoup" because you haven't locked in a loss. Just wait it out.

"When one of the most respected investment firms on the planet is losing money for you, that's really freaking scary."

They aren't "losing money for you". Stock prices go up and down. That's what they do. When you invest in the stock market you are investing for the long term. You must go into it expecting that over a 20-30 year period you will see declines of 50% or more at times. You must know that going in. And who cares what the price is today if you won't need the money for 10 years? Forget about it. Anyone who is likely to freak out if there are minor declines in stock prices shouldn't be invested in stocks at all. Many will actually welcome significant declines as buying opportunities - I have made a lot of money that way. The key here is to:
1) Control your emotions because you are your own worst enemy.
2) Don't put a penny into the stock market that you'll be likely to need in the next 5-10 years (I prefer 10).
3) Do not try to time the market, or place your money with any professional who tries to do so. It's a fool's game. If you want to invest in stocks, just plan to ride out the market declines - or better yet, buy more when the prices get so low that everyone is running for the exits.

Dig a hole in your back yard and burry it in a can.. Buy real estate, Put it under your pillow, invest in art,

This is possibly the worst personal financial advice I have ever seen - so bad that I surmise the poster is joking. Burying money in a can is a sure loser. Not only do you expose yourself to loss by theft, the value of the asset is exposed to the ravages of inflation. Art... the entire antique/collectible/art investment world is perhaps the sleaziest business known to man. An amateur would likely get eaten alive by the sharks in that world. And real estate in many parts of the country is WAY overpriced - this wouldn't be a good time to get in, IMO.

Do some research on inflation protected bonds....

Finally some good advice. Those who don't have the stomach for stocks or who believe that the future of stocks is likely to be much worse than their past would do well to look at TIPS and I-Bonds. I have both. I also hold stock funds. My current allocation is quite conservative: 33% stock funds (with 30% of that in the Vanguard International Index fund) -- 65% bonds (with most in long-term TIPS and I-Bonds, but a fair amount in CDs and short term bonds -- and 2% in cash. Inflation protected treasuries are solid investments - just be aware that the official CPI understates inflation - so you probably don't want to just dump everything there unless you have mass quantities of assets and can afford to take the long-term inflation hit. But long-term TIPS prices aren't too bad right now, and if the rate of LT TIPS exceeds 2.5%, those interested would be buying in at a fairly attractive price, IMO.

I'm a guy who has been investing for a long time and I wish all of you much success. The suggestions I provide here are the same I give to my adult daughters. Be careful out there - and be VERY slow to take any advice you see on any discussion board. Keep your cool, study personal finance, and if your plan was solid a year ago, it is probably still solid today. Just stay the course unless your circumstances change, and learn to tune out all the "sky falls" nonsense. Nobody knows what the future holds. Nobody.

[deaniac21]

35. You have 24 business hours to quit handing out the facts!

[Iowa]

47. Duly noted! My lips are "sealed". I will stand down.

[kineneb]

38. Geez, ya take all the fun out of satire...

but seriously... what advice do you have for those of us who must rely on Social Security? Buy seeds? Buy fertilizer? Grow vegetables? Get a few chickens?

Hubby's health has failed and we must live on his SSDI while I care for him.

[Iowa]

43. Hi kineneb...

Sorry to hear about your husband's health. It's real tough to make it on SSDI alone, as you probably know, and the costs of modern life are such that supplementing one's diet with a garden/chickens would be a drop in the bucket. But yes, I'd probably do it anyway.

But if you do have some investments/savings... what to do with it would depend upon how much you have. If you have only a few thousand, I'd be VERY reluctant to put any of it at risk. Just make sure you're earning a decent rate of return and keep it relatively liquid and safe. Don't accept less than a 5% return. You can get that right now in a liquid savings account online at Emigrant Direct - FDIC insured and completely liquid. View it as an emergency fund.

If you have enough to supplement your income over the long term... for example, if you have $50,000-$100,000 you could conceivably expect to bump your standard of living up by $150-$300 per month with a relatively conservative mix of stock funds, TIPS, and/or other bonds. $300 per month (or even $150 per month) could make a real difference to one's quality of life. So I'd probably try to do that. In other words, with a larger portfolio I'd probably view my assets as a source of income over the long haul. With a small amount I'd tend to crunch my living expenses down to the point where I could make it on SSDI (and maybe some part-time work when it's doable), and view my stash as a small safety net not to be touched unless absolutely necessary.

[bahrbearian]

45. One word "ENRON"

[Iowa]

46. One word: "DIVERSIFICATION"

Diversification: Rule #1 in Personal Finance 101.

And it wasn't just Enron. There was Worldcom, Global Crossing, Adelphia, HealthSouth, McKesson, Qwest and on and on and on. It wasn't the first time and it won't be the last. It all comes with the territory. Enron and all the others were barely a blip on the radar to those of us who were well diversified. In fact, when that meltdown occurred, I re-allocated (bought more stock), sat it out, and made a fair amount of money.

Enron and the like is a poor reason to avoid the stock market. Not understanding market's risks is a good reason to avoid it.

[Corgigal]

7. I wonder how

Bush's pig roast went? It's almost time for his vacation.

[Tierra_y_Libertad]

10. "It's not about oil." "It's not about oil." "It's not about oil."

Repeat as necessary until the obvious is obliterated or brain ceases to function completely.

[MADem]

12. Heh...only problem is, when they say that, we know that it really is

All About Oil...!!!

[Mountainman]

15. This is good news, I predicted a 700 point drop and it's only 400 points.

I predicted the temp would be 112 today and it is only 102, good news! I predicted gas would be $5.00 a gal and it is only $3.50, good news! I predicted oil would be $100 per barrel and it is only $78, good news!

[im10ashus]

18. I love your optimistic approach.

How many soldiers will die in Iraq today? :shrug:

[cantstandbush]

16. Thank you neocons and Israel!!! How do we ever repay you? nt

[huskerlaw]

21. Hahahaha

and my conservative stepfather recently tried to convince me that I was stupid for choosing the "safe" option on my TIAA-CREF account.

Looks like I wasn't so stupid after all, eh? :evilgrin:

[thatsrightimirish]

22. I can't get enough of

this booming economy!

[Swede]

23. Time to invest.

June's correction and this drop adds up to bounce coming. People still drink Pepsi and need tires for their cars.

[Gabi Hayes]

30. I'd wait til the full effects of the still-to-come oil price explosion are

felt.

there's plenty of room to go down.

I'm thinking Carter-era stagflation in the offing

right about now is a GOOD time to sell those arm-financed mcmansions, or any other heavily mortgaged property, if you can

I just paid off my 'armed' mortgage...it's gone up fifty percent in two years.

[RagAss]

44. yep...I'm thinking the dow 8,500

[Clarkie1]

40. I agree. nt

[young_at_heart]

24. There goes our retirement savings......thanks neo-cons!

The 1990's are sure looking good right now....they may hate Clinton for his immorality but the country was in much better shape.

[MazeRat7]

25. The markets are way oversold...

Of course as a quintessential bull, I believe (hope) we will see some positive movement next week. The henny penny traders are nervous and have oversold...

Lots of news next week in terms of the markets... it should be interesting.

MZr7

[Clarkie1]

42. I'll be buying on Monday. nt

[HereSince1628]

26. Pitt on the Stock Market? Stretching the expertise

into a new direction? Anyone know Pitts background in this area?

[MazeRat7]

28. Bahhhhhhhhhh

Link money.cnn.com and get 12 recommendations.... wow talk about sheeple and lack of critical analysis....

Oh well.. Its been a hard week and those of us with real money on the line are just a bit testy...

I apoligize now for my snarky remark.....but this post is like saying "hey... the sky is blue"... not helpful....

MZr7

[HereSince1628]

31. Well, I agree, but my question remains.

Does anyone know what Pitt's background is in the markets, economics or business in general?

[Emit]

32. What does Pitt's background have to do with the article posted? n/t

[Mayberry Machiavelli]

33. If you read it carefully you'll find he's posting an article by CNN

financial reporters.

Does this in any way either answer your question, or make it less relevant or important than you'd thought?

[Rosemary2205]

48. Why the bully post?

The article he posted speaks for itself. If you need to beat people up why not join the ultimate fighter show.

[im10ashus]

36. I don't even want to look at my quarterly statement.

I am pretty sure I am going to lose a lot. Relatively speaking, of course.

[Clarkie1]

39. Good buying opportunity right now.

We are having another test of the off-year presidential election cycle low. I would expect the S&P to rally at least to the mid-1300s by years end.

[bridgit]

41. come, come now mr. pitt, wall street likes eeeaaasy money the very...

very best :-) they're so chick-shit they'll dump unless profits are a forgone conclusion...they only really play 'slam dunk' capitalism