Investors pulled a record $72 billion out of stock and bond mutual funds in September, the research firm TrimTabs said yesterday, and in the past week alone took out $52 billion.
By Nancy Trejos
Washington Post Staff Writer
Sunday, October 12, 2008; Page F01
It has become a familiar refrain among financial advisers and investment strategists: The stock market may go down, but it always recovers over time.
If history has proved anything, it's that sometimes, it takes a really long time.
Take the bear market of 1967. That dragged on for 15 years. The Great Depression was called great for a reason: It took 30 years for the market to bounce back. Look at Japan, and you'll find that the Nikkei stock market index has yet to recoup its losses from its crash of 1990.
It's no wonder that investors now are fearing a prolonged and painful rut. Already, the Dow Jones industrial average is down more than 36 percent for the year.
"You could be in it for a long time, five or 10 years, before the Dow starts to rally," said Doug Roberts, founder and chief investment strategist of Channel Capital Research Institute in Shrewsbury
Well, it looks like the rats deserted the sinking ship. The market took a dump that was much worse than anything that I have seen in my lifetime.
Then again, there are a lot of good companies around, whose stocks are priced at bargain prices. Which ones of us are tough enough to put more money in a sinking market? Who thinks that there will be a depression?
I have a theory. If there is a depression, or even a severe recession, there are some things that people will need, no matter how frugal they are. Take toilet paper. I don't think that anyone will be using Sears catalogs to wipe their butts.
I maintain that the stocks in toilet paper companies will go through the roof.
What do YOU think? Are you courageous enough to step into the market now? What stock (or sectors) do you think will raise up out of this morass? Have we hit bottom yet?
Phoenix, You're spot on! Consumer goods producers like Johnson & Johnson, Proctor and Gamble, Costco brands of household goods, foods and staples like Campbell Soup (even McDonalds), are all good investments in good time or bad.
Earlier in the day (no telling what happened at the end) beer and tobacco shares were up.
Things are a bit trickier for GM. The company has tapped most of its credit lines. Its international operations were generating cash, but overseas economies are slipping now, too, says Oline. That means the company will almost certainly have to find a way to raise more money. GM had $21 billion in cash at the end of June. The company has a further $5 billion in available credit and cash and plans to save $10 billion from cost cuts. Assuming GM can also tap $5 billion to $7 billion in federal loans that the federal government has approved, GM has up to $21 billion in excess liquidity on top of the $14 billion it needs to run the company, says Gimme Credit analyst Shelly Lombard.
Given GM's cash-burn rate of more than $3 billion a quarter, the company has five to seven quarters before it gets down below the bare minimum it needs to buy parts and keep factories humming, Lombard says. GM's best bet is to tap the government's loan program and hope the market turns up.