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Posted: 12/29/2002 5:46:41 PM EDT
I've been in the stock market for years.  I didn't get out in 2000 like I should have but I'm wondering if one should get out now?  I'm in the market for the long haul, another 20-30 years but with possible war on the horizion and a possible big increase in gas, should one get out now?

If I were to get out now, even though I've lots tons since 2000, I'm still ahead.  I will have to pay capital gains (I hate Capital Gains.)  So I'm debating on what to do.

Anyone else thinking about staying in or getting out?
Link Posted: 12/29/2002 5:50:36 PM EDT
When I worked for a broker, she always recommend cutting back if you wanted to get out but it's the buying low that saves your ass in the long run.  If you think that major blue chip companies are going to fold, then get out of them.  Right now, if you are NOT willing to lose it you need to be in some stable companies {I'm in defense contractors now BTW --CACI, SAIC, etc} or Coca-Cola, Ford, GM, etc.

Or go in on bonds if the stock market is tanking the bond market should be stable to perform.

Link Posted: 12/29/2002 5:55:51 PM EDT
Before you look to professional analysts and other "experts", read this:

"Early in the year 2001 twenty-two "expert" Wall Street analysts from Louis Ruykeyser's "Wall Street Week" gave their estimates as to where the Dow would be at the close of the year. The estimates ranged from 11,400 to 12,300. But the actual Dow close was 10,021. Not one of the 22 panelists guessed that the Dow would close under 11,000.

"Again, early this year the same twenty-two top analysts gave their estimates as to where the Dow would close in 2002. The estimates ranged from 10,750 to 12,100. As of today, the Dow is at 8,460. Not one of the 22 experts saw the Dow closing below 10,000.

"How can this be? My answer is that none of these analysts is able to recognize change. Although we are in a primary bear market, evidently NONE of these experts understands what this means. Either that or they are so inculcated with the optimism of the last 25 years that they are not able to envision an extended, disastrous bear market."

Then comes Business Week. We are told that BW "polled some of the smartest players on Wall Street." They polled 67 analysts. Only 3 see the Dow going down. A different group of three see the S&P going down and only 2 see the NASDAQ going down. Some of the predictions are interesting. Bernie Schaeffer, for instance, sees the Dow slipping to 6000 by mid-year to rise back to 8500, roughly where we are today. Not a bad guess. I could see that happening. But he also forecasts a rise in the NASDAQ by over 50% to 2200!!! I suppose this will be led by Cisco and Sun? The P/E ratio is going back to 60? What am I missing? (I wonder at what price Bernie would sell me a call at 2200?)

Over 80% of "the smartest players on Wall Street" predict at least a 10% gain for Dow, and the average prediction for the NASDAQ is 20% (or so) rise by this time next year. Should we listen? Should we shut our eyes and buy Vanguard 500 and Janus 20?

Before leaping in, we might want to see how this group did last year. With a little effort, I found the 2002 predictions of 54 of the best and brightest in the last issue of Business Week in 2001. The results suggest we should look a little deeper before plunging back into the market based upon their recommendations.

Of the 54, only four were within 5% of the where the Dow is today. (Schaeffer to his credit was one of them.) Over half thought the Dow was going over 11,000 and a few saw 13,000!!! None of the 54 saw a NASDAQ dropping below 1500 (it is at 1367 this minute), and the average prediction was 2236, or almost 900 points and a 40% difference from where we are today. None saw the S&P below 900.

How could this be? How can the "smartest players on Wall Street" be (1) so wrong and, (2) so consistently wrong as a group? A reasonable person would assume their should be some more randomness - a balance -- in the predictions.

These "smartest players" did not change their views in mid-year. They remain bullish. Yet the stock market tanked. If everyone is so bullish, then who sold? What mass hallucination made these people into raving bulls?

A partial answer is in the make-up of the group. As you look at the firms for which they work, there is a pattern: they are mostly "sell-side" firms. They are in the business of selling stocks or investments to the public. Business Week and Wall Street Week don't go outside this rather self-interested world.

If they had asked Russell, for instance, who has been making rather good forecasts for 44 years, he would have said "down." You don't see a lot of newsletter writers in these groups. I know a number of hedge fund managers who were (and are) quite bearish. You hardly ever see a hedge fund manager in these groups.

We once asked Arthur Bell, my CPA and friend, about where to get a legal opinion on a certain matter. He asked us whether we wanted a positive or a negative opinion. It seems in a lot of fields the answer you get depends upon whom you ask. These polls essentially ask people who are in the business of selling stocks what they think their business will look like next year.

If you are forecasting a down or flat year, there is not much reason to buy if the only way you can profit is for the market to go up. Bearish predictions do not help sales. Do I think these analysts consciously alter their predictions trying to lure the unsuspecting investor? No, I don't. But I do think they look for reasons the market will go up and ignore reasons which suggest it will go down."
Link Posted: 12/29/2002 5:56:52 PM EDT
I should have included the stocks I have.  Sheesh, just looked at them and they are way down.  

Basically just tech stocks.  I'm not getting out of my Mutual funds.

Intel, Microsoft, AOHell, Cisco, Dell
Link Posted: 12/29/2002 6:02:29 PM EDT
You look OK for a 20-30 year horizon.  You might want to get some diversity there though, or are the funds taking care of the other side?  

MS and Intel are basically monopolistic....unless you see someone like AMD suddenly cange their market share I'd stick with Intel.  I got out way to soon and eventually bought back in.

My only worry is that the gov't has taken a liking to kicking at MS's door.  Profits go down, etc etc....

Sounds like you might be OK.  Got any real estate, CD's etc?  If so, you sound all set for a 20-30 year plan.  Just my "semi-educated on the subject matter" opinion.


Link Posted: 12/29/2002 6:10:01 PM EDT

Wait 'til stocks are really expensive again, then buy!

Link Posted: 12/29/2002 6:10:06 PM EDT
If no one is there to buy stocks, their prices tend to fall under their own weight.  That's the situation we have now, and it's coupled with high P/E ratios and a crummy economy and a public distrustful of the market.

Under these conditions, I cant see any compelling reason for stocks to rise. If you ARE in it for the long term, I would go into cash and wait for stock values to get to a point that makes them attractive and likely to rise.

Another option would be to go into gold stocks.  While the S&P 500 is now ending its 20 year primary bull market, the price of gold and gold producers are coming out of the 22 year bear market they have suffered while stocks soared. Gold looks good because:

1.  It looks like it's going into a bull trend after being in an unreleting bear trend since 1982 or so.

2.  Except for maybe real estate NOTHING in the investment world is in a bull trend.

3.  The $US has been weakening badly with foreign investors pulling out of US investments, low interest rates, and the Fed rapidly expanding the money supply.

4. Strong interest in gold as currency from the Islamic world, and newly legalized ownership of gold bullion by the Chinese.  A new gold exchange opened in Shanghai this month.
Link Posted: 12/29/2002 6:30:47 PM EDT
Well, Alan Greenspan and the Federal Reserve Board must want you to keep piling your hard-earned money into the stock market.  That, after all, is one of the reasons they dramatically lowered interest rates this last twelve months or so.

In my opinion, there are still many "Enron stories" yet to be uncovered, and they won't breed confidence in the market.

If you do invest, don't invest in the flavor of the month.  Do your homework and invest the old fashioned way; invest in a company because you believe there will be long-term growth not only in the economy, but in the field the company is in.  

A lot of people got in the stock market during the Clinton administration for a couple reasons.
One is that they saw people investing short term in computer related companies and having the value of their stock go up a lot.  Another reason people who didn't normally invest in the stock market did so is, interest rates were so low that they couldn't make money on their money and had little choice but to "take a chance" at something they knew little about.  Brokers were more than happy to see these "new" customers.[:D]

A lot of these people lost a lot of money that they may never get back and bringing these people back to the stock market is going to be hard.

With interest rates so low right now, there isn't much choice if you want to make any money on your money.  Just don't invest too much would be my advice and remember even good companies are going to lose money too.  My family's story is a long one.  We didn't bite when the stock market went up dramatically during the nineties, we had stock already, but rest assured we got bent over by the stock market [i]and[/i] the government in our deal and this was in a long term (over 30 year) investment.
Link Posted: 12/29/2002 6:38:53 PM EDT
"Losses" today are only on paper, if you honestly believe that Intel and MS will be around on your investment horizon, then you sit tight and buy low amounts as it is attractive to do so.

Look at the lifelong graph of the market, even including the depression the stable companies were there and persevered.

Again, YMMV.

Link Posted: 12/29/2002 6:42:19 PM EDT
I'd stay in unless there were a capital loss tax write-off possibility that you could take.  Stocks will eventually by-pass the bubble highs, just might take a few years (or maybe just a year).  Right now stocks are about where they should be if you went back to the late 1980s and calculated 10 percent gains per year.

Link Posted: 12/29/2002 9:39:14 PM EDT
you are going too eventually pay Capitol Gains...now or later as a sole propreite,. Try too roll your stocks into a Corp, start a LLC or S-corp, then you will only pay 15%tax, vice 30%tax.

Im in the same barrel as you... [V] I will probably just remain out of the market until something exciting happens.

Remember The golden rule:
~The market will fluctuate.~
Link Posted: 12/29/2002 11:39:09 PM EDT

BUT, I'M BUYING..........
Link Posted: 12/29/2002 11:56:32 PM EDT
The only investment stuff i'm doing is looooong term. I recently bought into the market as much as i could afford w/ my IRA. Mostly index mutual funds but i did get some oracle. But then again i'm 21 so i have the luxury of giving the market a long time to develop.
Link Posted: 12/30/2002 6:11:57 AM EDT
If we eventually do go to war, will defense stocks go up or down?
Link Posted: 12/30/2002 6:51:41 AM EDT

If we eventually do go to war, will defense stocks go up or down?
View Quote

 The short answer to this is that generally you can make money or you can make war, If the war starts out well and continues to go well then you will see the stock market go up slightly. When the war starts the stock market will most likely dip. If all hell breaks loose and the middle east collapses into complete and utter chaos and war then all bets are off and the stock market will plumet, but the whole worlds will at the same time.  The broader picture is better though.  And just as in World War II, It took the war to lift America out of the depression , but the real benefits didn't start until after the war ended as fighting men returned home to buy goods and services and work their asses off.

 We are still not spending as much on defense as we did during the mid 80's (84,5,6,7,8) where yearly defense budgets exceeded 350 billion dollars and peaked at a little over 400 billion a year. And that is 84/5 dollars.

 So even though the defense budget has been raised it is still between 80 to 125 billion dollars a year less then what it was during the 80's.  If there is a relationship between the defense budget and defense industry stocks then you might see a slight rise in their value.  If America rebuilds its arsenal over 5 years then you might see a slight upward trend in defense related stocks.

The money maker from the defense point of view will be the Star Wars program (to use the old term) So check out Ratheon, Lockheed, Boeing, or in other words Aerospace contractors. McDonnald Douglas, Pratt & Whitney,

With the introduction of Lasers into the American Military say within the next 5-10 years then you might start checking into who is going to be building those. They will probably be hugely expensive and will highly priced as the company who sales them will be trying to recover the cost of the R&D for multi-megawatt carbon dioxide lasers that can be mounted into planes and perhaps even in the long run space based platforms.

The cool thing about Defense Contractors is they are always playing with coolest toys and ideas.  Remember the Defense Industrial complex is responsible for not only America Highway system but also the Internet (DARPA) the Computer on your desk (the first processors were used by the space program on Rockets built by Aerospace companies).  The Defense Industrial complex is the backbone of America's industrial might. You probably won't make a bad move in this day in age by buying defense related stocks, but don't in no way expect huge volume or swings or any of the sheenanigans you saw in the Tech Sector as NEWBIE business men fresh out of college with no realworld experience tried to con their way to fortunes made of nothing but bits.

The defense sector has stock floats with literally billions and billions of dollars in value with it spread through every pension fund in America. They are extremely strong and the most money you are likely to make from a long term investment would be when they go ex-dividend and pay their share holders.
And the value you will accumulate over time as you keep buying their stock and it goes up over the 20 year period.

Link Posted: 12/30/2002 7:11:55 AM EDT
After victory isn't there usually a war victory rally?  Could be substantial.  I remember in the run-up to the Gulf war in early 1991 that the stock market had real problems, but that changed after victory.

Link Posted: 12/30/2002 7:13:39 AM EDT
Bail out.....buy toilet paper, lots of it. Most of the posters here are gonna need it!
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