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10% correction, or not?

Discussion in 'Financial Cents' started by gunbunny, Aug 19, 2009.

  1. gunbunny

    gunbunny Never Trust A Bunny

    I just got done reading a thread on Google Finance forum and read a very good entry by a poster named Bonerici. I hope he doesn't mind me taking his post and posting it here! The thread was about a 10% correction forcast by MSNBC and how most people thought it was bull-malarky, considering that MSNBC also states that the market will rise at the same time. Talk about covering your back!

    Anyway, Here's Bonerici's post: "if you look at the p/e ratio, the average p/e is like 15 for the s&p
    500. but after a really bad bubble, typically markets overshoot and
    it will drop by a factor of 5 or 6, and then return back to 15. Right
    now it's at 17. That's impossible. What are the odds that the stock
    market after a bubble went down to EXACTLY the average and didn't
    overshoot and will now turn into a steady bull market for the next 20
    years. The only thing that makes sense is for the market to drop
    another 50%.

    So when CBNC talking heads say 10% pullback they are praying that's
    what it is. Because deep down they all know this is all fake, no
    jobs, the banks are still holding toxic assets and due to mark to
    market changes, all these assets worth 5 cents on the dollar are
    currently valued at 100% there are more real estate foreclosures to
    come, somewhere around 30% of the real estate market is currently
    underwater and all of these people will eventually walk away from
    their homes when it becomes clear that they are unable to refinance
    (the banks can't refinance because that would ruin their books -- it's
    better to let the homeowner walk away, keep the house at 100%
    valuation and never sell it, use the capital to leverage OTHER assets,
    like chinese financials which they can buy and then pray these other
    assets pull them out of the hole).

    they know the entire finance system stinks to hell, and it is not
    fixed and won't be fixed and when they say "We have a bottom" it's a
    prayer, not anything based on real life.
    What happens the first time the fed raises rates? Are they going to
    keep rates at 0% for the next decade? We are in an impossible
    situation. The big banks have to be dismantled by the FDIC, thrown
    into bankruptcy and broken up into bits that are safe to the economy,
    and nobody in washington has the balls to say no to goldman sachs and
    the masters of the universe. "

    I'm sorry if I offended anyone by posting someone else's thoughts, but I thought this guy was quite articulate and knowledgeable. Moderators, please erase if I've broken any plagarism or legal rules.

    The whole thread is: http://finance.google.com/group/google.finance.983582/browse_thread/thread/e15e8b96cddaf1f9
  2. kansasrebel

    kansasrebel Monkey++

    the guys on urban survival are saying pretty close to the same thing, that the market is in for a major correction. and they are saying it's might drop WAY down.
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