How low can it go ??

[kentuck]

I'm not talking about the approval polls of the Republican Party. I am talking about the stock market. Just over a year ago, it was sitting at just above 14,000. It was at an all-time high.

Then, when the bad news about the banks arrived at the door, the stock market started its dive into the dark unknown. At first, folks wondered if it would break the 10,000 mark? Then they wondered if it would break the 8,000. Today, it sits at just above 7100. Will it break 7000? Will it then break 6,000? How low will it go?

And, an even bigger question might be, what will keep it from going down further? Do we need to solve the mortgage problem first and then the market will go back up? Or do we need to resolve the bank problem first? Or do we need to solve both problems before the market will go back up? What exactly has to happen for the markets to have confidence that the situation is not only improving, but that, we are truly working toward a solution?

[Idealism]

1. People need to stop caring about the stock market

It has a negative correlation with the health of the middle class, and thus, the economy.

[kentuck]

4. But it's important to the wealthiest class...

Therefore the more it shrinks, the better it is for the middle and working class people in our country? You may be right? Don't worry about. Let it go to 1000. Why should we care? What correlation does it have to creating jobs and putting more money into the pockets of the middle-class working people? What is really the downside if the stock markets drops??

[Veritas_et_Aequitas]

6. Well, it would finish off the remains of 401ks.

I for one really don't want to see that. I don't want to have to support my parents in their retirement. I would, but I'd still rather not have to (especially since I don't have much of an income now).

[Idealism]

9. The only way most American's are tied to the market is 401(k)'s

Which have already lost, what, 60% of their value? It is an amusing scheme that gets people thinking "good market=good economy," simply because their retirement is tied to the market. Foolish thing, considering when businesses earn better than expected profits, their stocks go up, which mean your 401k goes up- but businesses often outsource jobs in order to earn those profits, thus you are putting people someone (potentially you) out of a job, but at least your 401k inches higher in value!

[nadinbrzezinski]

12. SHHH here is some of the connection people miss

the Stock Exchange is the place companies raise capital to ahem create jobs

So no, I don;t want this to go to 1000

Then there are the 401 Ks

[Two Americas]

15. that is pure free market right wing doctrine

I am sorry, but it just is. It the the core and the essence of the political position of the conservatives.

Wall Street produces nothing. Wall Street does not produce jobs. Capital does not produce labor, labor produces capital, according to any view that is even a millimeter to the political left.

Abraham Lincoln strongly disagreed with you, as have most Democrats traditionally over the last 80 years or so.

"Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration."

Abraham Lincoln

It is not needed nor fitting here that a general argument should be made in favor of popular institutions, but there is one point, with its connections, not so hackneyed as most others, to which I ask a brief attention. It is the effort to place capital on an equal footing with, if not above, labor in the structure of government. It is assumed that labor is available only in connection with capital; that nobody labors unless somebody else, owning capital, somehow by the use of it induces him to labor. This assumed, it is next considered whether it is best that capital shall hire laborers, and thus induce them to work by their own consent, or buy them and drive them to it without their consent. Having proceeded so far, it is naturally concluded that all laborers are either hired laborers or what we call slaves. And further, it is assumed that whoever is once a hired laborer is fixed in that condition for life.

Now there is no such relation between capital and labor as assumed, nor is there any such thing as a free man being fixed for life in the condition of a hired laborer. Both these assumptions are false, and all inferences from them are groundless.

Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. Capital has its rights, which are as worthy of protection as any other rights. Nor is it denied that there is, and probably always will be, a relation between labor and capital producing mutual benefits. The error is in assuming that the whole labor of community exists within that relation. A few men own capital, and that few avoid labor themselves, and with their capital hire or buy another few to labor for them. A large majority belong to neither class--neither work for others nor have others working for them. In most of the Southern States a majority of the whole people of all colors are neither slaves nor masters, while in the Northern a large majority are neither hirers nor hired. Men, with their families--wives, sons, and daughters--work for themselves on their farms, in their houses, and in their shops, taking the whole product to themselves, and asking no favors of capital on the one hand nor of hired laborers or slaves on the other. It is not forgotten that a considerable number of persons mingle their own labor with capital; that is, they labor with their own hands and also buy or hire others to labor for them; but this is only a mixed and not a distinct class. No principle stated is disturbed by the existence of this mixed class.

http://www.infoplease.com/t/hist/state-of-the-union/73.html

[tama]

20. SHHH

another missed connection is that most simply thinking, stock market is device of the parasitic class that does nothing productive but plays games of money and power, to gain and get rich and powerfull from the labour of others in form of dividends. Like from children in sweatshops. Shhh, don't tell anyone else, let's keep this most simple truth a secret between us... because it might offend the parasitic class of stock holders...

[nadinbrzezinski]

25. Ah the simplistic coupon cutting thinking

fact is that the stock exchange is WHERE COMPANIES get capital from ahem INVESTORS

This money is lent to them on the promise of sharing the profits, aka dividends

But the Stock Exchange is the place where the money, err capital, needed to build factories and create other jobs comes from

We could as a society come with another mechanism. I guess we could all root for the STATE and a quinquenal plan

Truth is, either extreme does not work well, and the best we have found is a MIXED economy.. ergo our pure reliance in the market works just as well as the other system... which is not so well... in fact it is disastrous for the working class either way.

SHHH don't tell that to the readers of that wonderful tract written in or about 1909, by a man who's first name was Vasily and his second was Ilych, complete the rest.

[tama]

26. Simple is good

I don't need no fucking Lenin to tell me that dividends are form of theft and slavery.

And who needs jobs? Put it this way, who needs servants-slaves and who needs servitude-slavery?

In a free society, if there's necessary work that needs to be done it will get done. If it doesn't get done, it's not necessary. Simple as that.

[nadinbrzezinski]

27. In an utopia perhaps

but simple truth is humans have developed economic systems going back thousands of years.

ALL of them imply a relationship and in fact one that is a relationship of power. Whether this is a hunting gatherer society or outside my door.

But the coupon clipper allusion, thank Lenin for that one... hell of a writer by the way.

But way too simplistic, and meant for workers who really were not ready for the complications that was the real economy, and were just coming out of slavery.

CONTEXT always helps

[tama]

29. Will to Power

Nietzsche saw to the core of Western "metaphysics". Will to power surpassing natural survival instinct - God is dead, I wan't to be God in God's place, all-powerfull!

Projecting Western metaphysics of power to hunter-gatherers, whose way of life is founded on sustainability and balance, not power, is just... projecting.

Lenin and Trotski were very talented slaughterers of anarchists and other true revolutionaries who took the maxim "all power to the counsils" for real. Commies allways betray the revolution, that is their ideology and modus operandi.

Ideology of growth and greed is ideology of suicide. Context indeed helps.

Utopia is a play with words, outopos - 'no place' and eutopos - 'good place'. The society described in the book was founded on real life example of a tribe living at the coast of what is today Brazil.

Problem with cynical dystopians is that they tend do get what they both wish for and fear most. Plus imposing their dystopia of death and misery and slavery on everybody else too.

[Idealism]

28. The stock market is not the end all of raising capital

or else you wouldn't see all these privately held companies thriving, like Cerberus, Koch Industries, Bechtel, Cargill, etc.

Companies get credit/capital from banks as easily as IPOs on stock, and the private companies don't have to fork over voting rights to outside investors.

[TheWraith]

19. Uh, there's a hell of a lot of people with investments in the stock market.

Actually it going down hurts them more than it does the people with money, since those people tend to have MORE money.

[Two Americas]

21. ROFL

Yes, people will be hurt because they were suckered into putting their savings and retirement into the stock market. Their gains came at the expense of others suffering depressed wages and lost jobs, and loss of protections of the public through de-regulation, and loss of access to resources. It was a very poor bargain. We call that approach "Reaganomics," and it has failed and the people have thoroughly and utterly rejected it now.

People with more money are not hurt more, all things being equal, because they can afford to lose more. The stick market was never a guaranteed return it was always a gamble. The general public should not be forced to pay for the gambling losses of the few.

What you are advocating is the prime rationale and essential foundation stone of the Reaganomics approach that got us into this mess.

[TheWraith]

22. Oh please. Can the chest-thumping.

You can go ahead and pretend that wiping out the retirement savings of millions of people is some great triumph and win against the capitalist oppressor if you like, but I doubt you're going to get much help hoping for a worldwide financial collapse. Hey, I've got a great idea, why don't we nuke all the cities? That would show those capitalist scum! :sarcasm:

[Two Americas]

23. absurd

Respond to what I said, not to what you want people to believe I said.

[Idealism]

24. You miss the point, sir n/t

[Fovea]

2. 4800.

all that will stop it will be a couple years of high employment with national healthcare and a milIntel budget around one tenth it's current level.

[seemslikeadream]

13. That's my guess also

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=389&topic_id=4298663


Oct. 21 2008
Two of the best minds on the planet, Nicholas Taleb and Benoit Mandelbrot told NPR this week that this is the toughest period in America's history not since the Depression, but since the American Revolutionary War.

[Veritas_et_Aequitas]

3. How low *can* it go? To zero.

How low will it go? Anyone's guess. I was hoping against hope it would stop at 7000, but that's unlikely now. I've seen projections putting it in the low 6,000s before leveling off. Someone around here was saying he thought it was going to drop all the way to 4,000.

How to stop it? I have no idea. This has become something far worse and different than anything I've studied, and I'm too young to have much practical experience in the matter. What I can tell is that there's so much going on right now (failing banks, failing manufacturing sector, credit crisis, housing crisis, inflation/deflation fears, rising unemployment, rancorous Republicans) and that our monetary policy policy has failed to contain the problem.

I'm honestly not sure there's any direction we can move in that won't cause us to get worse than we currently are. We're going to have to grin and bear it for a while longer, particularly if the Republicans keep undermining investor confidence by screaming bloody murder about Obama's economic policy (that's what undermined the market in 1937 after the New Deal was struck down). Hopefully the stimulus will at least slow the fall when it goes into effect.

Sorry that's probably not an answer you wanted, but it's my honest thoughts.

[kentuck]

7. Unemployment is the barometer...

An average of more than 500,000 workers per month have lost their jobs in the last four months. When the work begins on the infrastructure, then we will have to look very closely to see if the employment numbers go up, or at least, stop their dramatic drop? That is the only true way to measure how our economy is doing. How many people do not have jobs?

We will know within a year, would be my guess - and it's nothing but a pure guess - whether or not we are in an improving economy? If they are not, then we will have to push our government to spend more on job creation. That is the only thing that will make this "depression", if indeed we are headed in that direction, different from the other Depression. It is of paramount importance that we put people to work and that we create jobs. In the 1930's, people built dams, roads, bridges, trails, parks, etc. But they built stuff that the people needed or could use to make their lives better. That should be the model we use if we have to start creating jobs...

[Jeep789]

5. Need to guarantee jobs to stop it

People won't buy squat if they don't know if they will be employed tomorrow. Jobs are more important than the mortgage or credit crisis now.

[kentuck]

8. I agree, Jeep789.

Jobs should be of paramount importance at this time. That is the only true barometer that we have.

[leftofthedial]

10. Zero. 0,000

gone.

[tama]

17. Yup

The way it is measured and counted. If counted otherwise, like multigenerational debt to our children and grandchildren, whose livelihood debt-economy is sucking and destroying, debt to Mother Nature, it would be obvious that stock market is well into negative.

When stock market is no more, life will get better. Seed banks (co-ops, really) are much more important.

[4lbs]

11. Well, as bad as it seems, I am sort of glad it's this low.

I've long believed that the tech bubble, which started in 1997 when the DOW was around 7000, artificially inflated the values of stocks and caused unrealistic DOW and NASDAQ numbers to prevail.

I was seeing P/E ratios of 100 or 200 to 1 at the height of the tech boom, which is insane. It was fueled by the "Tech IPO of the week" craze back in 1998 and 1999. A sound P/E ratio for a stock should be no more than 15 to 1, with 10 to 1 preferable.

We're now back to more sane levels, although a lot of people may have lost most of their 401k's value built up over the last decade. I cashed out my 401k in 2003.

Microsoft (MSFT) has a current P/E ratio of 9.22. That is excellent. That means that Microsoft stock is a great deal right now, with good Earnings Per Share and dividends/yield ratios.

Google (GOOG) is at a P/E of 24.79 right now. Much better than the 60:1 it was two years ago, but still a little high. Current stock price is about $330 per share. With recent earnings at $13.31 per share, a P/E ratio of 15 would mean the stock price should really be no more than $200.

Home Depot (HD) has a P/E of 10.54. Another great number.

Apple (AAPL) has a P/E of 16.54. Slightly higher than desired, but still good.

Pfizer has a P/E of 11.05. Extremely good considering that the dividend and yield numbers are great ($1.28 and 9.3% respectively). This is a great stock to have for sustained quarterly dividends.

[GoesTo11]

14. historically, compare DJIA against GDP in millions

Before the 1929 crash, it was about 3:1. After the crash until WWII (1941) it was a little over 1:1. During the war and through 1955 it was 0.7:1, back around 1:1 through 1969. Then drops quickly to 0.7:1 and then to about 0.3:1 from 1979-1985, up gradually over the next decade. Jumps again to about 0.9:1 in 1998 - 2008. Now it's dropped back to 0.5. I can see it dropping back to 0.3, but that doesn't seem like a permanent place. Typical seems to be between 0.5 and 0.9 (0.7 = Dow 10000). Floor seems to be 0.3 (which would be Dow 4200).

Why does this measure make any sense? Because if corporate profits as a share of GDP stay about constant, this number ought to stay about constant. If the economy is restructured so that a lower or higher proportion of economic activity ends up as profit, then the ratio would change.

[Greyhound]

16. 4400 - 4600 by October. n/t

[Two Americas]

18. the stock market

The stock market goes up when we are put out of work or otherwise made miserable.

This is not secret. For years on NPR I heard every night - "the stock of such and such company soared today on the news that they are reducing their work force..." Outsourcing? The stock goes up up up. Importing cheap contaminated products from China? The stock goes up up up. Raising fees on consumers? Up up up. Engaging in usury? Up up up. Blowing up other countries and handing out no bid contracts? Up up up. Making the world safe for exploitative corporate behemoths by smashing opposition to that with the US military? Up up up. Setting up sweat shops in poor countries? Up up up. Sprawl, and speculation, and development and environmental destruction? Up up up. Crushing organized Labor? Up up up. Driving wages down and eliminating benefits? Up up up. Deregulating industry so there are no health and safety inspections to protect the public? Up up up. Privatizing the public infrastructure and resources built and maintained and paid for by the citizens, for the benefit of the few to exploit and profiteer on it? Up up up.

Out sourcing, figuring out ways to manipulate money and rip the people off - that is what drives the stock market up. Why anyone here would be looking at the stock market and thinking that is the economy, and cheering Wall Street on is a profound mystery to me.