El Dow Jones se adentra en el Territorio del Oso

Las pérdidas financieras serán superiores a un billón de dólares

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Habrá más pérdidas en las aseguradoras monoline, en los créditos industriales, en los bonos empresariales, en los CDS... Las pérdidas financieras serán superiores a un billón de dólares

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Alvin Red dijo:

Un billon de dolares, o lo que es igual 1.000 millones de dolares, francamente ya les gustaria, las perdidas pueden ser muchisimo mayores, una cifra, yo apostaria por 1.000 o 2.000 billones , en terminilogia USA 1 trillon o 2 de dolares, quiza parezca exagerado, pero lo realmente exagerado es la burbuja financiera mundial en dolares que existe.

Nota; Supongo que el autor del articulo ha usado la terminologia americana al mencionar perdidas de 1 billon de dolares, si utiliza la terminologia europea entonces coincide conmigo ya que 1 trillon americano equivale a un billon europeo.

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Buttonwood
The big bear
History has to be rewritten after the market’s recent falls



Oct 16th 2008

Illustration by S. Kambayashi

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From The Economist print edition





At the end of 1964 the Dow Jones Industrial Average traded at 874.1. Seventeen years later, despite rapid inflation, the average had inched forward only to 875. It was the kind of grinding bear market that drove investors to despair. Near its end, Business Week famously proclaimed “The Death of Equities”.

It is beginning to look as if we are in the middle of another of those great phases, what commentators call a secular, as opposed to a cyclical, bear market. Broadly speaking, the 20th century can be divided into six phases; bear markets from 1901-21, 1929-49 and 1965-82 and bull runs from 1921-29, 1949-65 and 1982-2000.



Those unlucky enough to live through the bear markets saw their savings turn to dust. Equities were shunned in favour of alternatives such as government bonds (in the first half of the century) and property and commodities (in the inflationary second half). In the bull markets, investors made their fortunes, generally driving shares up to excessive valuations.


When the dotcom bubble burst in 2000, share valuations were at ridiculously high levels. In his book, “Irrational Exuberance”, Robert Shiller calculated the cyclically adjusted price/earnings ratio over history. This measure, which takes an average of profits over the previous ten years and adjusts for inflation, is superior to the traditional p/e ratio because profits are highly volatile. In January 2000 the cyclically adjusted p/e on the S&P 500 was 44.3; the previous peak, just before the crash of 1929, was 32.6.


That suggested markets had a long way to fall. And share prices did indeed suffer a long period of decline. In Britain, for example, the FTSE 100 index more than halved between December 1999 and March 2003. At that point, however, the effect of lower interest rates, booming corporate profits and more attractive valuations kicked in. Equities began a four-year bull run that saw the MSCI world index more than double between March 2003 and June of last year.


During that time, it would have seemed ridiculous to ask whether investors were in the middle of a long bear market. But with global equities falling by 41% this year (including the spectacular gyrations of this week), the question is now much more pertinent. The Dow was trading below 9,000 on October 15th, a level it first passed in 1997. In other words, investors who bought stocks more than a decade ago have no capital gains to show for it, only dividends (and yields have been low throughout)
.

Why does this matter? The existence of a bear market does not preclude the possibility of fantastic returns over shorter periods. Indeed, one striking point about the Dow’s 936-point gain on October 13th was that it climbed more in that one day than it did in the first 85 years of its existence (it was founded in 1896). Two of the very best years in American stockmarket history were 1933 and 1935, right in the middle of the Depression.


But bear markets behave rather like Lucy in the Peanuts cartoon strip. Just when Charlie Brown is persuaded to attempt to kick the football, she snatches it away. Just when investors are persuaded the bottom of a bear market has been reached, share prices slump once more. The Dow closed above 1,000 in 1972, only to fall to 616 by the end of 1974. A rally in 1975 took the average to 852, but it then gained only a net 23 points over the next six years.

Equity markets have again reached a stage where valuations look attractive in historic terms. In America, continental Europe and Britain the dividend yield is higher than short-term interest rates, a rare occurrence in the past half-century. A net 43% of fund managers interviewed by Merrill Lynch for a survey published on October 15th thought that equities were undervalued. That was the highest level in a decade.

However, those managers were not snapping up bargains. A net 49% of them had a higher-than-normal weighting in cash, a record figure. That kind of paralysis is typical of a prolonged bear market.

Even if managers feel that a complete economic catastrophe has been avoided by the bank bail-outs, they are worried about the prospects for recession, and the potential effect on company profits. (Pepsi, a core consumer-goods group, gave a disappointing outlook on October 14th.) They might be proved right in five years’ time by buying now, but they antiestéticar being proved wrong (and losing their jobs) before Christmas.



Snapping investors out of their bear-market mentality takes a lot of work. The shortest of the 20th-century phases was 17 years. With luck, time will move faster in the 21st century.

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Analysis: Bear market's worst may be over

12:00 AM CDT on Friday, October 17, 2008

By WILL DEENER / Special Contributor to The Dallas Morning News






Stock investors have stared into the teeth of this bear market and cowered like mice.

Though the Dow Jones index rose 400 points Thursday, the stock market has taken a beating the past few weeks as most everyone, from hedge fund managers to hedge-trimmers, dumped stocks.

And mutual fund companies this year will likely see the most net redemptions ever. By the end of the third quarter, $77 billion had been withdrawn – including $25 billion in September alone, according to the Leuthold Group, a Minneapolis money-management firm.



Houston, we have a problem, and it is this:


"The buying and selling behaviors of the public are notoriously wrong at key turning points in the market like this," said Andrew Engel, portfolio manager at the Leuthold Group. "Investors need to know that when you get this much antiestéticar and people are just throwing in the towel, then historically, that is when the market stops moving down."

Most financial planners and money managers are trying to make that argument to their clients so they will stop liquidating stocks. But many people just aren't buying it.

The attitude of investor Gwen Foster Downum, 46, of Sealy, Texas, who has seen about one-third of her life savings evaporate, is typical of many. She's concerned, angry, confused, and almost ready to put about half of her portfolio back into the safety of cash.

"I would say the chances are about 100 percent that I will sell some stock and mutual funds by Election Day," said Ms. Downum, an insurance agent. "I just don't think we have seen the bottom yet. I am a realist."

That's the attitude that continues to drive the market down. But market experts and financial planners basically cite three reasons this may be wrong.

First, the losses incurred so far in this bear market – 42 percent – are more than the historical average. Second, the average bear market since 1950 has lasted 13 months, while the current bear is already 12 months old. And third, stock market valuation is modest, meaning many stocks are "cheap."

That grand old warhorse, the Dow Jones industrial average, may look like a broken-down nag at the moment, but scoff not. It will come back, said Alan Skrainka, chief market strategist at Edward Jones.

"Even quality stocks and bonds are priced for disaster, for the end of capitalism," he said. "But we have experienced crises before and each time we eventually recover."

The Dow and the broader Standard & Poor's 500 index are both down some 40 percent from their highs of last October. But consider this: In the past 80 years, the median bear market decline is 32 percent, meaning half the bear markets fall below this and half above.

"What this means is that historical standards suggest that most of the bear damage has already been done," Mr. Engel said. "This bear has been among the worst in history. To me, that is enough. We have gone too far to the downside."

The second factor suggesting we are nearing the bottom of this bear is that it is already a year old, which is slightly below the average. In fact, five of the last nine bear markets lasted only eight months. That doesn't miccionan that this bear market will fall within the historical average; in fact, two of the worst bear markets – 1973 and 2000 – lasted 20 months.


But those are rare.


"Unless we are facing a truly disastrous scenario for the economy, that history would suggest the current bear market could be close to running its course," Mr. Skrainka said.

Third, stocks are on sale. The most common measure of stock valuation is the price-earnings ratio (P/E). If a stock is priced at $40 a share and has earnings of $2 a share, the P/E is 20. The P/E is like a "thermometer of investor enthusiasm," Mr. Skrainka said.

When the P/E is high as it was during the late 1990s – in the 30s – investors should worry, because eventually valuations will return to the norm, meaning prices will drop. Currently, the P/E of the Standard & Poor's 500 is a very modest 13.

"We haven't seen these kinds of low valuations since 1984," Mr. Engel said. "There are great bargains out there and hopefully people aren't going to look back and say they missed it."

In fact, the Leuthold Group has examined other periods when the market P/E was at this level and discovered that investors buying at this level can expect annual returns of 14.2 percent over the next 10 years.

"Now is the time to at least begin rebuilding equity exposure," he said.

The bottom line is that investors have gotten outrageous in their pessimism. Investing in stocks and bonds when so many are selling can be a lonely pursuit, Mr. Skrainka said.

"But optimism is the foundation of courage," he said. "For those who have courage and the money to invest, we think the weeks and months ahead will be a great time to put that money to work."

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Fray Guillermo dijo:

Nouriel Roubini: Lo peor está claramente por delante
Nouriel Roubini afirma que después del rescate del Bear Sterns se instauró una especie de autoengaño, de que "lo peor ha pasado", de que "la recesión será corta y que incluso evitaremos la recesión". Pero este autoengaño está desapareciendo rápidamente mientras los mercados financieros vuelven a entrar en pánico.
La razones que da el premio nobel....

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