The Economy.. will hi end audio mfgs lower prices?

Okay Shadorne, so you were right. Tell us what's next. Will Dow go down to 4500 as some now predicts. Boy, it is going to take another 10+ years to recover if that happens.

I also took my money out of stocks and invested in gold about 3 years ago, this based on advice of economists predicting this very debacle. It was so easy to see, any of these financial service wizards could have told you if they had the guts. Always keep in mind these guys have no incentive to tell you the truth, it would undermine their livelihood. Can you imagine all these wizards advising their clients to get out of stocks, the stock market would tank, the golden goose would be cooked. I bet a lot of these guys got their money out, left their clients in.

Okay Shadorne, so you were right. Tell us what's next. Will Dow go down to 4500 as some now predict

I began buying back in when the market dropped close to 50% (bargain hunting). Right now I will continue cost averaging down as the market falls further (can't predict bottom) - still roughly 50% cash down from about 70% cash before this mess. I am also betting against 30 year T bills - I suspect we have a bubble and that yields will start to rise again back to historic norms. I like Canadian banks, pharmas, utilities with high dividends and of course gold, if you have the stomach for it, oil & gas shares (tend to always be cyclical and should come back) are very down trodden. Right now I'd guess it is two years to go before the market comes out of this funk - so utillities with high dividend yields are attractive too. Real estate will take a lot longer to begin to recover perhaps as much as 7 to 10 years but it should also bottom out in the next year or so. FWIW I am fearful of inflation ( I know this runs counter to what we are observing right now but it just feels likely with all this money being printed and increasing debt. ).

Things to watch for: Eastern Europe is in trouble. Russia also cannot survive a long credit crunch and low oil prices so definitely more headwinds out there. China seems well armed (wealthy) to handle things. However, I take comfort that Libor spread is not as big as it was - the healing has begun - credit markets are thawing.

Wish I had a crystal ball...Great Depression is still a possibility but I hope Governments are sush a large part of the economy that I think we should (if managed prudently) avoid that.

This is where we are.

02-21-09: Kwb
"High End" Manufactures of non-essential products will go out of business before they lower their prices to the point where people without a basic understanding of economics and general business could afford......

I don't agree. If your business is your only way out, what are you prepared to do. Look at Conrad Johnson for instance. They cut down on the number of products they manufacture. They have just introduced a preamp at a lower price with looks reminescent of their 1990 's units.

By the way, both CJ founders were economists before if I recall correctly.

lets hope mfgs dont. the last thing we need to see is price deflation becoming more commonplace.

and fwiw, i don't think we'll end up there. the obama housing plan is a pretty good one (though arguably its too early to introduce as prices are still too high vs rents / incomes), and clinton just went and secured a commitment from our bankers (CHN) to continue buying our debt, so back of yield curve should be supported w/o bernanke monetizing it. Shadorne noted Libor spreads are much better, Fed's B/S is coming down and the commerical paper mkt is easing.

i think volker is behind the curve. the reason for the massive global collapse in output is the saving grace here to preclude a depression: IT. w/ visibility throughout the supply chain, producers dynamically adjust output to reflect slowing sales...the INV / Sales ratio for Q4 ticked up a little, but if this were 1980 we'd see a depression as inventory would've exploded, prices collapse, deathspiral. but w/ integrated supply chain, we see rapid adjustment in factors of output, easier to work off inventories, and prices should be maintained.

(niche audio producers routinely operate w/ a backlog; i'm inclined to think they'll live leaner, but live. but of course, some will die, particularly the dealers. audiogon will help kill a lot of them, as audiophiles w/ jobs will keep spending as there's a psychological dimension to this hobby that keeps most on the merry go round, but the negative wealth effect will cause more judicious use of budgets---used gear will move, new gear will be tough to go.)

this was a global collapse b/c of the securitization mkt (america's preeminent export) and leverage, and now we're in a deleveraging cycle (which is very bad). industries that depend on leverage (autos, real estate, banking) are in deep trouble for a while, but other sectors will likely hold up (luxury goods at greatest risk of course per negative wealth effect). the B/S repair of the consumer of last resort (US) is a primary concern...if we see retail sales keep posting ok #s (jan was great, feb?), and unemployment doesn't spike 10+%, we'll be positive GDP by Q4, maybe Q3. if we see retail sales retrench & / or unemployment spikes, i'll feel much differently.

equity mkts have diff issues; they're not going to do a thing until non-US sovereign debt and corp debt yield spreads come in. 6-handle on the Dow is likely. and so is 9-handle (lots of cash on the sidelines. lots). key thing to watch for is when bernanke wins in weakening the USD vs LatAm & SEAsia currencies...then we'll see what i refer to as the 'bifurcation of inflation.' think core vs food/energy, and it will all come together.

frankly, i think the global element could work off w/ speed that surprises everyone. but i won't be surprised to see the US experience sub 3% growth for years...but its still growth in a mature mkt, and it'll be a good thing.

btw, anyone complaining about illegals is misguided. illegals are a drain on state & federal resources, but they're the disinflationary force that, along w/ CHN debt buying, kept you living high hog for years.