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The Panic of 2006

Old 06-12-06, 03:03 PM
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The Panic of 2006

Let's see what they will call this stock market in a few years. Dow went below it's 200 day moving average this afternoon and everything broke down from there. Not a bear market yet, but we are getting there.

The charts should look worse, but Yahoo's 1 year charts aren't very good.







Old 06-12-06, 03:08 PM
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Just wait til the Fed decides to stabilize rates. The market jumps up in a hurry.
Old 06-12-06, 03:13 PM
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Originally Posted by WildcatLH
Just wait til the Fed decides to stabilize rates. The market jumps up in a hurry.
When is this going to happen ?
Old 06-12-06, 03:35 PM
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Originally Posted by Struz
When is this going to happen ?
When they realize the economy is flattening out. So far Bernanke hasn't indicated he sees this though. I could defintiely see him holding rates at current for a bit though and the market will react to that. They're begging him not to raise them any further by this activity I think.
Old 06-12-06, 04:28 PM
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YES!!!! Finally, my decision to pull money out of the market 2 years ago is paying off! Suck it!!!!
Old 06-12-06, 04:30 PM
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Originally Posted by VinVega
When they realize the economy is flattening out. So far Bernanke hasn't indicated he sees this though. I could defintiely see him holding rates at current for a bit though and the market will react to that. They're begging him not to raise them any further by this activity I think.
i have to double check, but i'm pretty sure AG raised rates in the 1980's as the economy slowed but inflation grew
Old 06-12-06, 05:54 PM
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Originally Posted by al_bundy
i have to double check, but i'm pretty sure AG raised rates in the 1980's as the economy slowed but inflation grew
That's because inflation was really a problem back then. Drastic measures had to be taken, even putting the economy into a recession was better than what was going on.
Old 06-12-06, 06:17 PM
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Originally Posted by Struz
When is this going to happen ?
right before election day
Old 06-12-06, 07:33 PM
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Originally Posted by X
That's because inflation was really a problem back then. Drastic measures had to be taken, even putting the economy into a recession was better than what was going on.

what about now?

a lot of people are willing to pay high energy costs and other high costs to live their choice of lifestyle and cut back on other things. It's always about the government changing people's mentality rather than anything economic
Old 06-12-06, 08:00 PM
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Originally Posted by al_bundy
what about now?
Now isn't 5% as bad as it was in the late '70s, early '80s.
Old 06-12-06, 08:05 PM
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economists are still scared of what happened in the 1970's and how the fed turned a blind eye to inflation in the late 1960's

I reread parts of Bob Woodward's Maestro, about greenspan's fed and Greenspan believed that he had to pop asset bubbles or what he believed to be asset bubbles because they made people feel wealthy and willing to spend more money for the same product thereby increasing inflation. Back in the late 1960's the CPI was what it was now before it exploded and i'm pretty sure BB will raise rates until commodity prices come down, a lot.
Old 06-12-06, 08:56 PM
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If you haven't noticed, commodity prices have come down a lot.
Old 06-12-06, 09:05 PM
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I'd be surprised if they stop raising rates anytime soon. With rates going up in Europe and Japan, and our government's deficit spending and trade, it seems they will need to continue raising rates somewhat the keep the dollar from sliding more than it has.

If prices sharply rise from energy costs and the dollar's value sinks further, they may have a situation on their hands.
Old 06-12-06, 09:13 PM
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Originally Posted by naitram
I'd be surprised if they stop raising rates anytime soon. With rates going up in Europe and Japan, and our government's deficit spending and trade, it seems they will need to continue raising rates somewhat the keep the dollar from sliding more than it has.

If prices sharply rise from energy costs and the dollar's value sinks further, they may have a situation on their hands.
The dollar has been rebounding recently and given what's happening in other countries there's no reason to think the dollar will sink precipitously. Other countries have worse economic effects from the price of oil than we do.
Old 06-12-06, 09:19 PM
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japan is saying they will start raising rates soon

this can take capital away from the US and put it into japan or europe because the ECB is raising rates as well and this will put a lot of pressure on the dollar
Old 06-12-06, 09:34 PM
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Japan's discount rate is around 2% and its prime rate is 1.38% (unless I'm missing something that doesn't look so healthy). Our discount rate is 6% and prime rate is 8%. Japanese 10 year notes are yielding around 2%, ours are yielding around 5%.

What do you think Japan is going to raise its rates to?
Old 06-13-06, 09:04 AM
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their rate increases will depend on growth and inflation. the risk is that if they do increase than it's going to take capital away from the US and raise people's borrowing costs here as well.
Old 06-13-06, 09:26 AM
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BUY! BUY! BUY!

Or sell.
Old 06-13-06, 10:33 AM
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Originally Posted by al_bundy
their rate increases will depend on growth and inflation. the risk is that if they do increase than it's going to take capital away from the US and raise people's borrowing costs here as well.
When Japan's notes are currently paying about 2% (they dare not raise it much more than that, say 2.5% to be extreme) and their economy is growing about 2% per year (and that's extremely good for them now) and the yen has been falling relative to the dollar what advantage is there investing in their notes compared to the safest investment in the world paying 5%, double Japan's?

Obviously some money flows to government bonds when they raise their yield, the question is how much and at whose expense. So what I'd like to know is how much money will flow out of U.S. treasury notes and into Japanese notes and what will it do to the dollar (and what are the negative ramifications of that) and ultimately our economy?
Old 06-13-06, 02:17 PM
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nasdaq just took out the October 2005 lows, someone is desperate to sell


here is the reason

http://biz.yahoo.com/ap/060613/stock...uits.html?.v=2

Pension Funds Suing Companies on Options
Tuesday June 13, 3:02 pm ET
By Marcy Gordon, AP Business Writer
Pension Funds Suing Dozens of Companies Over Stock Options Timing

WASHINGTON (AP) -- Big pension funds in the United States, Europe and Australia are suing dozens of companies over the timing of stock options grants to their top executives, an attorney for a firm that is filing the suits said Tuesday.

The pension funds, which hold shares in the companies and include several union-employee funds in the United States, are using a prominent law firm specializing in class-action suits against public companies to bring their cases.

In expanding investigations, at least 39 companies are under scrutiny by the Securities and Exchange Commission or federal prosecutors for possible manipulation of the timing of options grants so that executives could reap a profit.

Pension funds "are completely beside themselves and outraged over the self-dealing that has gone on," said Darren Robbins, a partner in the San Diego-based firm Lerach Coughlin Stoia Geller Rudman & Robbins LLP.

The suits target company directors for allegedly failing in their role as watchdogs. The aim is "to recover the monies that were diverted from the corporate till," Robbins said in a telephone interview.

Among the companies and their directors that have been sued: security-software maker McAfee Inc., which recently fired its general counsel; technology company Juniper Networks Inc. and American Tower Corp., which owns towers for broadcast and wireless services. They are among the companies under investigation for timing of stock options grants.

Spokesmen for McAfee, Juniper Networks and American Tower didn't immediately return telephone calls seeking comment.

The pension and retirement funds filed suits in a wave in about 72 business hours in federal courthouses in several cities, and more cases are being prepared to target a total of at least 34 companies, Robbins said. The plaintiffs include a Teamsters fund, a heavy and general laborers' fund, a fund for public employees of Pontiac, Mich., and one for employees of New South Wales in Australia.

The suits were first reported Tuesday by The Financial Times of London.

Similarly, lawsuits by shareholders over the stock options timing have been filed against a number of the companies under investigation.

On Monday, the parent of Internet job-search site Monster.com announced that it had received a subpoena from the U.S. Attorney's Office in Manhattan regarding its stock options grants and had opened an internal investigation. The news came after The Wall Street Journal published a report that Monster Worldwide Inc. often gave top executives options that were dated at low points in the stock price -- just ahead of steep increases.

That raised questions of whether the option grants from 1997 to 2001 were deliberately timed so that the executives could reap a bigger profit when they eventually sold their shares, with no connection to the executives' performance.

At issue in most of the cases so far is whether executives manipulated option grants by backdating them to a point where the company's stock was at or near a low point, boosting the value of those awards.

Stock options are generally issued with an exercise price equal to the current market price, and therefore have no immediate value. By choosing an earlier date when the stock was lower, the options are instantly worth the difference between the strike price and current price.

While stock options are used as an incentive for executives to boost a company's performance and stock price, improper backdating can mean that executives reap bigger profits with no relation to their individual performance.

While backdating of options can be legal if properly disclosed to shareholders, SEC Chairman Christopher Cox said last week that companies may have broken the law if there wasn't proper disclosure or the options weren't accounted for correctly.

Last edited by al_bundy; 06-13-06 at 02:28 PM.
Old 06-13-06, 09:31 PM
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Temp setback, the Dow went under it's 200 MA 6 times since May of 04. I don't see why this is going to be any different. I'm just glad I pulled all my 401k back to safe investments 3+ weeks ago after the two big hits. I lost some but I am still up for the year, I could not say that if I would have stayed in. We were due for a correction so I'm really not worried.

There won't be any good coming from the markets until the Fed stops raising rates and we get leadership from the NASDAQ and S+P 500 and I don't see any of that happening soon. I do expect a good bounce when this is all over and done with so I'll just wait with my money till then.
Old 06-13-06, 09:57 PM
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Originally Posted by Lateralus
I'm just glad I pulled all my 401k back to safe investments 3+ weeks ago after the two big hits. I lost some but I am still up for the year, I could not say that if I would have stayed in. We were due for a correction so I'm really not worried.
Ya...

"Personal Rate of Return from 01/01/2006 to 06/12/2006 is -4.6%*"

Well... at least I have another... 45 years to invest
Old 06-13-06, 10:14 PM
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Originally Posted by Lateralus
There won't be any good coming from the markets until the Fed stops raising rates and we get leadership from the NASDAQ and S+P 500 and I don't see any of that happening soon. I do expect a good bounce when this is all over and done with so I'll just wait with my money till then.
Don't be too quick to toss in your cash when the Fed stops.

While there is almost always a temporary bounce, not all pausing periods lead to market runs. Of the last eight rate plateaus, the periods between rate increases and decreases, four have led to market declines.

A major reason for this is that the end of the hikes now puts the focus on the economy and the impact the hikes have had on it. And as we all know the fed often goes too far in both directions.

There are still some legs to this sell-off. IMHO.
Old 06-14-06, 07:43 AM
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Originally Posted by lordwow
Ya...

"Personal Rate of Return from 01/01/2006 to 06/12/2006 is -4.6%*"

Well... at least I have another... 45 years to invest
Exactly. When you're in for the long haul, you don't want to micromanage your portfolio. All those stocks that are sucking right now are also cheaper to buy more shares and will provide more gains when the market rebounds, whenever that is.
Old 06-14-06, 08:35 AM
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Originally Posted by Corleone
Don't be too quick to toss in your cash when the Fed stops.

While there is almost always a temporary bounce, not all pausing periods lead to market runs. Of the last eight rate plateaus, the periods between rate increases and decreases, four have led to market declines.

A major reason for this is that the end of the hikes now puts the focus on the economy and the impact the hikes have had on it. And as we all know the fed often goes too far in both directions.

There are still some legs to this sell-off. IMHO.
I've been doing some research and William O'Neill is right on. The way you know a rally is happening is two big up days on higher than average volume with the second day being higher volume than the first. First up day is around 1% gain on all the indexes and the second should be between 1.5% and 2%.

Here is the kicker though. 1990 and some other years all the indexes were like a V. They went down, then the down volume decreased and then a rally. All in unison. Some other years the Dow made it's low first and then when it made a second higher low that is when the SP500 and nasdaq made it's lows and took off from there. 1994 they went down again, but May was the lowest point. And the uptrend didn't start on the high volume rally days. there was a small rally of around 1% on low volume, then once a higher low was made and resistance set up at that higher low only then did the real rally start. The late 2002-2003 rally saw a small uptrend for a few months until we crossed the Iraqi border and things looked good.

I've been in 100% since the SP500 was at 1301. Took my wife out at around 1285. The risk is that we'll miss a few points on the uptrend but the way this thing is looking, we should get back in low enough to make some nice profits. And we are still up 5% to 10% for the year so if a rally happens later this year it will be a good year for us.

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