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Being Street Smart

Sy Harding

TOO MUCH BULLISH SENTIMENT? August 14, 2009.

By far the majority with skin in the game of investing have little or no interest in the details of how their money is treated when left on its own.

I speak with people all the time who make remarks like, “I threw my 401K statements in a drawer unopened for almost a year. I couldn’t stand the losses. But with all the talk of the stock market being up 50% I figured I’m good again, and opened the last one. I’m still down 30%. Thirty percent of my savings are still gone. The market’s up 50% and I’m still down 30%. I don’t get it.”

Well yeah. The stock market has had its biggest and fastest rally since the 1930’s off its March low, with the S&P 500 up 52% in just 5 months. But the problem is that in the bear market it lost 57% of its value. If you start out with $100,000 and lose 57% of it you have $43,000 left. You’d have to more than double it, in fact make a 132% gain, to get back to $100,000. So the S&P 500 is still down 35% from its level at the top of the bull market in 2007. (It would need to gain another 54% from here to be back to its 2007 top). And in fact, in spite of its 52% rally off the March low it is only up 12% for the year so far, the 25% plunge in January and February was so severe.

So I ask them why they didn’t do something to stem the losses instead of ignoring them, and they say they aren’t knowledgeable enough to know what to do, don’t have time to learn, and their advisor or their employer or their friends told them to just stay the course, the market always comes back.

Continue reading ‘TOO MUCH BULLISH SENTIMENT? August 14, 2009’ »

1. Well here something else to chew on:

The S&P 500 P/E Ratio has more than DOUBLED from the end of 2008, which at 60.7 was a historic figure at the time!

Why is this happening and what’s the outlook going forward?

The current P/E Ratio for the S&P 500 Index is at a whopping 143.95, per their website. That’s more than 3 times its historical average!!! Is no one shocked by this figure???

To put this figure in perspective, the S&P 500 P/E ratio throughout and after the Internet Bubble of the late 1990s/early 2000 was in the high 20s and low 30s. And we all know how that turned out!

Continue reading ‘Equity Markets are a Farce!’ »

Keeping financial fitness is an art that many have not learnt. Having healthy finance means that you are living your life to the maximum with the amount of money that you earn, you are not short of finances at any given time and yet are able to save for the rainy day!

Continue reading ‘How To Recession Proof Your Finances’ »

Personal bankruptcy is one of the methods to get out of your debts once and for all. The entire outstanding is eliminated with this method and you are not required to pay a single dime to the creditors. This happiness however is lost when the credit score goes down to zero and the report of bankruptcy filing shows up on the credit history for a period of 7 years to 10 years. Thus, for nearly a decade you are not eligible for getting fresh loans from any creditor!

It is because of this reason that the consumers are actually advised not to go for bankruptcy filing. Even the creditors are asked to go for settlement deals with the consumers instead of pushing them for full repayment because there are chances that the consumers might file for bankruptcy. This is advised because of the fact that bankruptcy has a very deep relationship with recession. Continue reading ‘Personal Bankruptcy – Relation Between Bankruptcy And Recession’ »

At least closer in terms of proximity. A recent survey from the Pew Research Center shows that because of difficulties with their personal finances, many young adults are being forced to move back in with their parents. Of parents polled by Pew, 13 percent said that one of their adult children has had to start living with them again due to economic stress.

“Social scientists call them ‘boomerangers’ – young adults who move in with parents after living away from home,” a report from Pew stated. “This recession has produced a bumper crop.”

Overall, 4 percent of respondents who are older than 18 said they have had to move back in with their parents because of the recession. That number spikes for those who are between 18 and 34 years old, with 10 percent of respondents saying they’ve had to return home because of personal finance difficulties associated with the economic downturn. Continue reading ‘Recession Forcing Many to Move Back With Parents’ »

A recession is widely defined as a decline of the economy; particularly in the Gross Domestic Product (GDP), employment and trade. In order to be classified as a true recession, the decline must last for at least six to twelve months. Some economists argue that we are already in a national, (if not quickly approaching a global) recession. The actual term is an economic term, but the effects are felt by everyone. If you yourself have not begun to feel the effects of the current downturn, you surely know someone who has.

The best way to prepare for a recession and the effects it can have on your situation, is to take a multi-pronged approach. Realize that you could take hits from this economy in different areas of your life. Take stock of each area and determine the likelihood that the recession could cause trouble there, then prepare yourself accordingly. Below are some tips. Continue reading ‘The Best Way to Be Prepared For a Recession’ »