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How low will the dow go?

Cigarlover

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#1
I haven't been an investor for 2 decades but things don't change that much other than government intervention. So browsing through the dow components i see some stocks right about where I would expect a dow component, in the 10-12 P/E range. Others I see way out of whack. Sometimes thats justified based on a super strong economy at the beginning of a bull run. Not now though.
So i think it's obvious the market is telling us we are going into a recession. The question will ultimately be how bad is it going to get.
So to start off with it seems like it would make sense to bring all the dow components back to a 10-12 P/E ratio and then from there try and factor in the depth of the recession. Obviously we don't know that yet but if we reprice the dow based on a 12 P/e then from there we can throw around what size haircut we want to give it overall. 10-30% seems reasonable right now.

I'm not going to go through and do all the math manually if someone already has it done. If so please post..

Off the top of my head I would say the dow at around 12 P/E would be down around 18k, give or take 100 points. Is a P/e of 12 justified in a recession or is 10 a better number? From whatever number we use for that, we can then shave 10-30% off for the recession/ bear market. 30% off of 18k gets us down to 12k and in any oversold situation we can easily got to 10k or lower. If the recession is prolonged and unemployment skyrockets.....well, the bottom is 0. LOL.

Is my thinking correct on this? Anyone have any real time data with the calculations already done?
 

Cigarlover

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#2
ok so no takers. :)..

Most know the dow is comprised of very mature companies for the most part. Their younger days of massive growth are over with and they are more conservative now with stable income and growth rates.. Normally a P/E of 10-12 is justified on these playas. This is in a healthy bull market..
Once we go into a recession it seems like earnings will be lower by whatever percent and therefor pricing must also follow suit.

I still don't have the answer but i did realize one thing.
Lets price the dow in terms of gold. currently 1529. x10 is 15,290 x12 is 18,348

I don't know what the real P/E average of all the dow comments is right now. If we take the dow closing on Fri and divide that by the price of gold the P/E would be 14.8 or just under 15.. Be interesting to know the real number. If the real number is around there then a 30% haircut is very reasonable right now and any extended recession should go down from there.

Just my opinion and random thoughts.. I have no data to back that up.. I guess I could look up the 30 components and get their individual PE's and average them out.
 

savvydon

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#3
I don't have any nuanced answer here, but my understanding is that many companies in the dow are priced for perfection. We are about to see a helluva lot less than perfection coming down the pike for an economy. The haircut could be stunning. I think your numbers are somewhere between fair and generous.
 

chieftain

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#4
It all depends on how much liquidity is left in the markets. If as I (and a couple of others on here) think may have happened, CDS triggers in the trillions would mean that the bloodletting is just beginning. However I'm yet to find any real evidence of such triggers.

It could be that they are being masked at all costs...
 

gnome

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#5
It all depends on how much liquidity is left in the markets. If as I (and a couple of others on here) think may have happened, CDS triggers in the trillions would mean that the bloodletting is just beginning. However I'm yet to find any real evidence of such triggers.

It could be that they are being masked at all costs...
Household and corporate debt are at levels similar to 2008. Someone has to be the bag holder who's gonna get stuck with all the loans.
Of course, ultimately it will be the US taxpayer.
 

Cigarlover

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#6
Household and corporate debt are at levels similar to 2008. Someone has to be the bag holder who's gonna get stuck with all the loans.
Of course, ultimately it will be the US taxpayer.
The taxpayer has nothing left to give. The the reductions in payroll tax that Trump is passing or proposing..
The fed going to step in? Already has been.. Whats left other than a jubilee?
 

gnome

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#7
Just looking at the course of the pandemic, all of Europe and the US are going into lockdown, just as China is coming out of it.
We have a lot further to fall, IMHO.

Central banks are already at low rates, already pumping QE.

US govt has been running trillion dollar deficits in a 'good' economy. What happens to the budget when revenues fall off a cliff because most of the population is hunkered down?

Airline employees furloughed. Anyone in tourism laid off. All the workers in the gig economy are belly up. Bartenders and waitresses. Independent restaurants. Retail continues it's death spiral. So even when self-quarantine is up, a large percentage of the population won't have cash to spend.

Next there will be a wave of medical bankruptcies surpassing the usual half million per year.

Great buying opportunity is coming, but it's probably another 2 months away.

Look for rallies on rate cuts around the world this week, but more bad news as the pandemic worsens globally.
 

Cigarlover

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#8
Exactly, you cant run a world consumer economy without consumers.
 

the_shootist

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#9
I've always hated the stock market as an investment. To me it's always been a highly manipulated high stakes gamble full of smoke and mirrors. I'm not the gambling type so I've pretty much stayed away for buying or investing in stocks so I'll step away from this thread and let you guys with the big brains (and balls) figure it all out!:oriental:
 

EO 11110

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#10
I haven't been an investor for 2 decades but things don't change that much other than government intervention. So browsing through the dow components i see some stocks right about where I would expect a dow component, in the 10-12 P/E range. Others I see way out of whack. Sometimes thats justified based on a super strong economy at the beginning of a bull run. Not now though.
So i think it's obvious the market is telling us we are going into a recession. The question will ultimately be how bad is it going to get.
So to start off with it seems like it would make sense to bring all the dow components back to a 10-12 P/E ratio and then from there try and factor in the depth of the recession. Obviously we don't know that yet but if we reprice the dow based on a 12 P/e then from there we can throw around what size haircut we want to give it overall. 10-30% seems reasonable right now.

I'm not going to go through and do all the math manually if someone already has it done. If so please post..

Off the top of my head I would say the dow at around 12 P/E would be down around 18k, give or take 100 points. Is a P/e of 12 justified in a recession or is 10 a better number? From whatever number we use for that, we can then shave 10-30% off for the recession/ bear market. 30% off of 18k gets us down to 12k and in any oversold situation we can easily got to 10k or lower. If the recession is prolonged and unemployment skyrockets.....well, the bottom is 0. LOL.

Is my thinking correct on this? Anyone have any real time data with the calculations already done?
my bottom is return to obama price on the sp500 -- the economy was crap - in a virtual stall after the dead cat bounce from the recession. the recovery from the recession was the weakest in US history

trump (navarro) has made a plethora of pro stock market changes since inauguration.

looking at this chart - can see where the thing was rolling over before trump came in. roughly 2300 on the sp500 is a great entry point. can only hope that we get the chance to buy obama's exit again

on a dow basis = 19,000 to 20,000 area

1584281449161.png
 
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oldgaranddad

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#11
I fully expect another free fall drop later in the month as companies create their own self feeding financial tornado when the the genius bean counters start telling the CEOs they have to lay off staff that have been sidelined by sickness or quarantine or due to the lack of business because customers are sick and quarantined and yet they still need to make their quarterly numbers.

I fully expect to see some companies to self immolate performing these near sighted tasks.

Additionally, I expect some companies to fold overnight since they were nothing but highly disguised ponzy schemes and after two or three weeks of disruption the mask comes off and everyone sees that the emperor never had any clothes on. This will make the Eron crash and burn or the mortgage debacle of 2007 look like a dry run.

Banking, other than retail banking and consumer credit cards, has all but ceased to operate at this point. Real estate and mortgage business has all but disappeared. Consumer defaults are just weeks away as many have no paychecks or figure F! it, I'm going to die or the world is going to evolve into the Walking Dead apocalypse.

Hold on, Mr. Toad's wild ride hasn't even started.
 

Uglytruth

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#12
You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before.
Rahm Emanuel

Banksters will have their hands out.
Businesses will have their hands out.
Anyone in any possible way will have their hands out.
I think there will be so much bleeding going on in every direction much will not be noticed.
 

EO 11110

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#13
I fully expect another free fall drop later in the month as companies create their own self feeding financial tornado when the the genius bean counters start telling the CEOs they have to lay off staff that have been sidelined by sickness or quarantine or due to the lack of business because customers are sick and quarantined and yet they still need to make their quarterly numbers.

I fully expect to see some companies to self immolate performing these near sighted tasks.

Additionally, I expect some companies to fold overnight since they were nothing but highly disguised ponzy schemes and after two or three weeks of disruption the mask comes off and everyone sees that the emperor never had any clothes on. This will make the Eron crash and burn or the mortgage debacle of 2007 look like a dry run.

Banking, other than retail banking and consumer credit cards, has all but ceased to operate at this point. Real estate and mortgage business has all but disappeared. Consumer defaults are just weeks away as many have no paychecks or figure F! it, I'm going to die or the world is going to evolve into the Walking Dead apocalypse.

Hold on, Mr. Toad's wild ride hasn't even started.
funny that we havent heard the dreaded CONTAGION meme from nyc banking/media vipers. not the flu kind of contagion -- the counter party risk

has it been banned?
 

EO 11110

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#14
the obama exit price was the actionable bottom for market timers and investors. safe to say i smoked the field on the call. suck it nyc 'analysts', 'technicians', and other posers

where's my trophy

:gold:
 
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