Silicon Investor - Where Do You Think The DOW Is Going?

[EL KABONG!!!] In the short term, I think the market goes down. Whether you're a professional t...

EL KABONG!!! — 9/22/2011 6:23:12 AM

In the short term, I think the market goes down. Whether you're a professional trader or a Joe Six-pack player, markets are ruled by two emotions, greed and fear. Of the two, fear is (in my opinion) the stronger emotion, though many market "gurus" will choose the other side of that "trade". Anyway, given all of the short term global geopolitical concerns, the budgetary constraints in the (notably) USA and (very notably) Europe, the situation in the war-torn Middle East, and Asian unrest, the markets are primed for a significant downturn as nearly everyone concerned has one hand on the SELL button even while actively trading with the other hand.

For the longer term (say at a minimum, 5 to 10 years out), the markets rise considerably, if for no other reason than to keep pace with monetary expansion in nearly every country with a fiat currency. Look for inflationary trends in nearly every commodity, as well as inflation in the costs of manufacturing goods and providing consumer services. Given that nearly all of the countries in the West have massive debt and budget deficits, the only (and I do mean only) way out of that morass is to inflate away the debt and future deficits.

Since you're only 22, your best option for a bright future lies with using time as your ally and investing prudently in the stock markets for the longer term. Avoid or minimize your exposure to bonds and bond funds, particularly municipal bonds. While interest rates may (or may not) rise to keep pace with inflation, surely every government entity will be entertaining thoughts of restricting just how high interest rates can be allowed to rise before some sort of cap is encountered. Also, default used to be a bad word in bond investing, whether muni bonds or corporate bonds, Now some "genius" has renamed "default" to "strategic default" and all of a sudden corporations and local governments no longer fear welching on their debts and obligations. (Too bad for the widows and orphans funds, eh?)

EK!!!

[deeno] Here you go have fun Subject 58033

deeno — 9/16/2011 12:00:22 PM

[SI Dave] Many people (myself included) believe we will see a sizeable spike in inflation ...

SI Dave — 9/16/2011 11:10:52 AM

Many people (myself included) believe we will see a sizeable spike in inflation in the next 5-10 years..

Agreed. I don't know how else we can extricate ourselves from under this mountain of debt except to inflate our way out of it.

[SI Brad] What a great subject for your first day on SI! Are you looking for short-term ...

SI Brad — 9/16/2011 12:10:01 AM

What a great subject for your first day on SI! Are you looking for short-term predictions or long-term ones? I will venture to guess that tomorrow (Friday) will be an UP day for the market, and Monday will be down.

Why? Options expiration...stock options expire tomorrow (the third Friday of every month) and the prior day's movement is a often a precursor to the expiration day. When you have a strong 2-3 day move associated with this "witching day", the trend tends to reverse the following Monday.

Long-term prediction? The Dow will be higher 30 years from now, at least in nominal terms. If you are investing for the long-term, it's a much better bet than buying a government bond paying only 3% interest.

Many people (myself included) believe we will see a sizeable spike in inflation in the next 5-10 years...if that's the case, putting your money in precious metals, energy, and commodities is the way to go.