CHESSNOID

I read a great article in Business Week discussing when will the stock markets bottom out.  No one really knows ever until we are passed that timeframe.  However,  you have to make choices based on observations if you don’t want to miss the next bull rally.  Yes, I do think we will have one eventually when this bear market has petered out, but that seems to be a long ways away.

Business Week:

The 53% plunge in the Dow Jones industrials since October 2007 has wrecked the college- and retirement-savings plans of millions of investors. It has permanently lowered the long-term investment projections of private endowments and pension funds. It has sent corporate compensation experts scrambling to figure out how to reward top employees. All told, more than $10 trillion of stock market wealth has vanished, and with it the confidence that springs from financial security.

While 17 months may feel like an eternity, it could turn out merely to be a prequel. The questions on the minds of investors, money managers, and corporate executives are threefold: How much longer will the bear market last? How low will the averages go? And when might investors get their money back?

…

The credit bust has rendered other trusted market indicators useless—most notably monetary policy, or the Federal Reserve’s raising or lowering of its benchmark interest rate. Before the current slump, the federal funds rate was a reliable indicator in all but one bear market since World War II, says James B. Stack, president of InvesTech Research and Stack Financial Management. When the economy slowed, the Fed began cutting rates to turn the business cycle back up. After the second cut came, investors stepped in to buy, anticipating higher corporate earnings. But the Fed has cut rates 10 times since August 2007, to essentially zero, and yet the economy and stock market keep sliding. “The Depression is the only parallel for the lack of effectiveness in monetary policy,” says Stack. It is failing because too many borrowers don’t want to borrow and too many lenders don’t have the capital or courage to lend.

…

As long as investors are worried about their own incomes, he says, the money seems most likely to stay right where it is. TrimTabs’ Biderman, who tracks how investors move their money among asset classes, says he doesn’t see much chance of this cash flowing into stocks with the job and housing markets so weak. He figures investors have been taking more money out of stocks than they’ve been putting into their cash accounts. “Some people are being forced to sell stocks to eat,” Biderman says. “They are certainly not going to buy Google (GOOG) here.”

I personally don’t think we can have any type of recovery until the housing bust is allowed to settle to where it needs to go. The Federal Reserve and US Treasury has made this recession worse by manipulating interest rates and printing up money excessively beyond the capacity of what our GDP will support. The current Obama administration is pushing our country in to a depression with massive deficit spending and even bigger bailouts. Who would of thought that we would get a new President that would make it worse for our economy than Bush?