Friday, October 03, 2008

Bailout passes Congress - Market falls to new low

How about that? Congress passed the $700 billion bailout bill, the President signed it ... and the S&P 500 fell below 1100 to a new bear market low anyways.

It's time to repeat some talking points:
  • A bear market is a bear market is a bear market.
  • I never go long (I don't invest in stocks, SPY, etc.) during a bear market, even if short-term indicators say that a rally is on the way.
  • I never let big news items influence my investment decisions. The only information that matters comes from the stock market itself.
By the way, today's close of S&P 1099 is only a 14% drop away from my January prediction of S&P 940. The Dow meanwhile is 18% away from my prediction of 8500.


Tim said...


Given the fact that the index PE ratios move higher and dividend yields continue to move lower is there a chance that you lower your target numbers? If so what metrics will you use?

Jody said...


My long term forecast is purely an experimental exercise.

As far as the P/E ratios and dividend yields go, have a look at an earlier post, Fools, Fundamentals and Fibonacci.

Dan said...

It is interesting to compare prior stock market crashes, i.e. 1929, 1987 etc. to the one we are currently experiencing. Is there some connection considering that people really never have changed and that the past is used to predict the future? There are websites that overlay the previous crashes to this one and the similiarities are curious.

Jody said...

You just said a mouthful, Dan. It is my firm belief - and I see it validated in many contexts - that basic human nature is unchangeable. Greed, fear, panic and complacency will always affect markets, no matter how "advanced" civilization becomes.

Anonymous said...

My hat off to you. S&P is 950 as of 3 pm, October 9th. The scary thing is that nobody is saying that this is the bottom.


Jody said...

Thanks Oleg! The S&P is at 938 as I type this...