Over the last couple of weeks, a number of people have asked me if it's time to buy in to the market

[xthread]

They've clearly been asking 'has the stock market stopped falling.' The answer is pretty clearly that 'no, it hasn't.' A lot of the fact that the US economy is having a very bad time now, and is going to keep having a very bad time for a while, has already been taken into account ("priced in") by the stock market, but we keep seeing individual firms having a worse time of it than we'd hoped, and in general there's just a whole lot of bad news out there that hasn't become public yet. The problem the current market has is not about 'confidence' or 'sentiment' - the problem is that every player in the economy owes a lot more money than is good for them, and need to repay a bunch of that debt before they'll be able to deal gracefully with the normal ups and downs of life and business.

The best article I've seen all month on this is here. I recommend you read it if you're trying to understand what's going on in the US and world economy.

Comments

[tronpublic.livejournal.com]

So, if it's clearly not the time to get in to the market, does that mean that it's clearly time to move 401K stuff to money market? Most of the stuff that I've read says "no, it's impossible to predict the bottom".

[xthread.livejournal.com]

That depends on what you're doing in your 401k.
We're not going to know we've found the bottom until we're climbing off of it.
Broad indexes are going to keep going down, but if you don't need the money soon, it's a question of transaction costs and how steeply things climb. I haven't been moving my own money into cash, I've been using it to make bets on the market continuing to fall that will leave me owning equities I expect to survive and want to own after things start to recover, and let me pick up a little income one way or another along the way. And the really long term money is going into indexes, and I wince a smidge because I know that those will go down before they come back up.

[strspn.livejournal.com]

Are you kidding? We just elected a Democrat? What could possibly go wrong?

[xthread.livejournal.com]

It's true. We never elect a Democrat unless things have gone horribly, horribly sideways...