Wednesday, October 08, 2008

Suze Orman predicts a Dow bottom of 8000, so investors should believe it!

Okay, Suze Orman predicts a DOW bottom of 8000 (on Anderson Cooper's 360 on CNN). Jim Cramer has been saying pretty much the same thing. I guess that if “God” says it, then it’s true. If Suze says it and Oprah picks the president (Obama) and Suze is on her show, I guess it’s true. You read this on the Internet.

The patient, Suze told Anderson Cooper tonight, is in intensive care, after a kind of fiscal coronary bypass surgery (heart-lung machine included). There’s still some surgical bleeding to stop. That’s six months, then six months in a hospital, then six months in a skilled nursing facility for rebab, and then home. The economy is going to be sick for several years (it, like David Letterman, already joined the zipper club), not just for a few weeks. That’s what psychiatrists told me to expect when I started “treatment” after my freshman college expulsion (for admitting homosexuality) in 1961. Nothing to be ashamed of, they say.

Anderson teased Suze as to whether there would be bread lines. Well, Suze said, she gets calls from people living in cars.

Seriously, retired people feel pressure to sell all stocks right now, to preserve cash. So do the unemployed at middle age. All of this is bound to put more pressure on selling, and create a vicious deflationary cycle. Pure demographics will force the major indices down more, perhaps another 10%. Younger people who remain employed should keep buying stocks in their 401K's to take advantage of dollar-cost averaging. Bear markets are great for young people with good jobs.

Seriously, I think cautious investors could start getting back in at about 8000-8500. For stocks in basic necessities with good PE ratios, maybe at 9000. Food companies, utilities, oil, etc. may be relatively stable. It might be time to start buying them soon. High tech companies seem to have much higher PE’s and may have paradigm problems, and unstable business models. We’ve seen the ISP business get healthier since the 2001 shakeout by consolidation into fewer companies, but still with decent competition. What I fear is that the next shakeout will corrode that service for consumers and free-entry speakers.

Remember, the Nasdaq tech bubble popped in 2001 and we got over that, but the Nasdaq never got back to where it was. The PE’s just never made sense.

You read this advice on the Internet, so you can believe it.

Anderson Cooper is starting a series “Culprits of the Crisis” and said he will “name names.” That phrase comes from Randy Shilts.

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