We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
That's the evaporation of wealth in the US in 2008 - not including 2009. Some of that was mine - enough to make a difference in my plans and in my comfort level. No, I do not expect markets to only go up, nor do I ever expect to sell our house (which still has a significant mortgage) - but this was a tornado. A fluke.
Being no longer a young fellow, I must admit that it causes me some anxiety. We don't have pensions (who does these days, except government employees?). We have 401-Ks. I have no problem with working forever, but I did want some choice about it. I like choices.
Tigerhawk explains why Lefties should be pleased about wealth destruction. More equality, etc. Tigerhawk can be a bit flip about it, though, because he is a young guy, full of beans and ideas, and clever enough to outsmart Obama's Socialist plans for us.
There is a lot of people in the same boat, Barrister. In the case of my retired parents, I tried to get my dad to cash out at 12000 but he obstinately refused as he didn't want to be taxes on the gains. Now he doesn't have to worry so much about that. He stubbornly says he is in stocks for 'the long haul'. But at age 81, I don't think there is much 'long' left in his haul. They will still get by, but SS is now needed. Before it was just icing on the cake.
However, I am concerned that the current consensus forecast by analysts of earnings for the S&P 500 of around $65 is overly optimistic. This consensus is from mid-February and was revised lower by 2.2% from the prior week.
We had a horrid drop in GDP in the fourth quarter of 2008 and I believe that the first quarter numbers will not cause to many warm fuzzy feelings. Credit continues to contract and there has never been a macro-economic expansion when credit contracts. I expect downgrades in corporate credit ratings which will hurt the bond market, which is a flickering light of hope at the moment but subject to extinction. Banks may decide to cut credit card and home equity lines as unemployment rises and the need to reduce balance sheets continues in an effort to meet capital adequacy requirements. I could go on, but you get the point.
If S&P earnings come in at $50 to $55 and you assign a 10 multiple you get 500 to 500 on the S&P 500 index. A 15 multiple, which is relatively rich in a bear market gets you to 750 to 825. We closed at 750 today. I have learned from experience that a "cheap" stock can always get cheaper.
There are a number of risks to the global and domestic economy that could negatively impact earnings.
In short, I am being cautious because I see the downside risks as being significantly greater than the upside potential.
As always, caveat emptor. I wish you good luck in your trading and investing pursuits.