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Frank W

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#1

Are we fucked?

07-21-2002, 06:01 PM

Here's a little analysis that seemed like it might be worth sharing...
The aggregate P/E for the S&P 500 is now at 34.1

P/E for the S&P bottomed out at 5.6 after the crash of 1929. This was an 83% drop from the P/E peak of 32.6

P/E for the S&P bottomed out at 8.3 after the crash of 1973. This was a 56% drop from the P/E peak of 18.7

The average P/E for the S&P for the 50 year period from 1950 through 1999 was 17.0.

Modeling the three scenarios - a 1929-magnitude market drop, a 1973-magnitude market drop, and reversion to the historical average P/E - projects the S&P falling to 492, 215, or 440 respectively.

So... best case is that the S&P heads down another 44% from where it is today before hitting bottom at 492. And it wouldn't be historically surprising to see it head down as far as 215.

Oh, and one more thing. The market took seven and a half years to return to its high after the crash in 1973, and TWENTY FIVE years to recover after the peak of 1929.

This is what you call a BEAR market. No...not the gay hairy man niche. The fucked up stagflation kind of bear.

Last edited by Frank W; 07-21-2002, 06:02 PM.

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#2

07-21-2002, 06:02 PM
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#3

07-21-2002, 06:55 PM

What the fuck does P/E and S&P stand for?

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#4

07-21-2002, 06:59 PM

Are you some kinda geek. Why does a crash in 1973 affect adult webmasters.
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Frank W

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#5

07-21-2002, 07:02 PM

Originally posted by .:Frog:.
What the fuck does P/E and S&P stand for?

P/E = Price Earnings ratio for stocks

S&P = Standard and Poor 500 list of top US companies. The S&P 500 is a broad measure of the economy.

"If you hate a person, you hate something in him that is part of yourself. What isn't part of ourselves doesn't disturb us." -- Herman Hesse
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Frank W

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#6

07-21-2002, 07:07 PM

Originally posted by JimmyReject
Are you some kinda geek. Why does a crash in 1973 affect adult webmasters.

Jimmy, the post is about the US economy. Bottomline, based on historical performance, economic indicators like stock P/E [see definition above] point to the economy going to the shitter. If we use past performance, stocks are way overvalued and the US economy may be in the shit can for a while.

How does this impact you? well the general economy and discretionary spending MAY impact people's willingness or ability to buy porn.

Then again, some people may argue that since porn is a form of escape, it may be spared by a general economic meltdown like the movies were during the Depression. My take is that given that there is so much free porn, there will be less people paying and more freeloading.

"If you hate a person, you hate something in him that is part of yourself. What isn't part of ourselves doesn't disturb us." -- Herman Hesse
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#7

07-21-2002, 07:09 PM

in other words were fucked.
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Just the Village Idiot

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#8

07-21-2002, 07:25 PM

This temporary bottom will make the rich richer -- those with the liquidity to buy in this market will make a killing.

This is a TEMPORARY setback.

The only people that could possibly be hurt buy this downturn are people about to retire that had (1) bad financial planners, (2) were caught in the greed bug that the late 90's created, or (3) chickenshits who pull their money out of the market now due to fear.

Institutional investors are having a field day watching Joe average pull his money out of the market and picking up stock in companies with solid fundamentals that are now undervalued because 'Joe' is scared.

Pick any 10-15 year period where money was put in at the beginning and was worth less at the end (including the Great Depression and factoring in inflation) -- go ahead... I'm waiting!

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Mr.Fiction

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#9

07-21-2002, 07:35 PM

Don't believe the hype. This shit is bad and it's going to get worse.

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Frank W

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#10

07-21-2002, 07:37 PM

I guess, you're saying that the people with liquidity who bought in right after the 1929 crash got richer? Sure, if you bailed out right after the spike since the market kept tanking until well into the 30's.

As for your challenge of finding a prolonged 15 year decline, you know the answer to this, there isn't one. But this really puts focus on your definition of "temporary" -- while the 8 year decline between 73 and 81 maybe "temporary" it sure felt "permanent " to the poor folks who lost their jobs and investment.

The point of the post is the impact market stagnation/decline will have on the general economy and our bottomline--people's willingness, if not ability, to pay for porn.

Sure, as an investment mechanism there are probably some choice spikes you can ride to make a quick profit. But better exit quickly cuz the ride is pointing downwards.

Some people will always make money on the market--e.g. short selling. For the broader market, however, it is historically way overvalued and I wouldn't be surprised if the Dow hits 5000 within 3-5 years to coincide with a real estate bubble crash

"If you hate a person, you hate something in him that is part of yourself. What isn't part of ourselves doesn't disturb us." -- Herman Hesse
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Just the Village Idiot

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#11

07-21-2002, 07:38 PM

Originally posted by Mr.Fiction
Don't believe the hype. This shit is bad and it's going to get worse.

Ahhhh -- another opinion without any statistical or analytical analysis...

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#12

07-21-2002, 07:42 PM

porn is a recession proof industry. Similar to Alcohol, hard drugs, and prostitution, porn is a vice. No matter how bad shit gets, people ALWAYS spend their money on a vice. That is one of the main reasons that I got into porn.

This shit with the stock market doesn't scare me at all. I'll still be making money in porn. Plus, now is the time to buy in and snatch those good companies that are at low prices. Such as Johnson & Johnson. And Proctor & Gamble. And if you are practicing a regular routine of buying, no matter whether the market is high or low, you'll come out living well. Just practice dollar cost averaging.

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Mr.Fiction

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#13

07-21-2002, 07:48 PM

Originally posted by Just the Village Idiot

Ahhhh -- another opinion without any statistical or analytical analysis...

Do you have money in stocks right now? Most people with money still in are trying to find a reason to believe that things aren't so bad and it's going to go right back up. I don't blame you for wanting it to come right back, but I think you're going to be disappointed.

Hopefully I'm wrong.

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Frank W

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#14

07-21-2002, 07:52 PM

Good points BVF. Unfortunately, the facts don't support your conclusion.

1) Unlike alcohol, hard drugs, and prostitution -- porn is readily available FREE [TGPs, free FTPs via IRC, IRC fileswap bots, Newsgroups, email distrib lists, email attachments, Kazaa, etc]
Where can you get free alcohol that won't kill you? Drugs? Unless you live in Jamaica, mon, forget it. As for prostitution--it ceases to stop being prostitution once she gives it up for free.

2) A lot of people would make an analogy to the Great Depression. The economy tanked, people hit the theatres--giving rise to the idea that entertainment is recession proof. Notice that they did not have the ability to do mass file swaps back then. They had a need to escape and due to technological limitations they were forced to use paid means to satisfy that need.

Compare that to the 21st century where there are TONS of non-paid means to satisfy one's "need" to escape [see the list above re free porn]

My guess is that the porn biz is not going to die. It will just get 100 times more competitive since there's less paying people to go around and there will be a big "flight to quality"--ie., better content, exclusives, etc etc.

If the economy continues to tank, the porn industry will still be around, don't get me wrong, but it may look way different from what it looks like now.

As for dollar cost averaging.... my bet is that investing your cash in HEDGE funds will probably yield a higher rate over a 3-5 year range.

"If you hate a person, you hate something in him that is part of yourself. What isn't part of ourselves doesn't disturb us." -- Herman Hesse
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Just the Village Idiot

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#15

07-21-2002, 07:53 PM

Originally posted by Frank W
I guess, you're saying that the people with liquidity who bought in right after the 1929 crash got richer? Sure, if you bailed out right after the spike since the market kept tanking until well into the 30's.

As for your challenge of finding a prolonged 15 year decline, you know the answer to this, there isn't one. But this really puts focus on your definition of "temporary" -- while the 8 year decline between 73 and 81 maybe "temporary" it sure felt "permanent " to the poor folks who lost their jobs and investment.

The point of the post is the impact market stagnation/decline will have on the general economy and our bottomline--people's willingness, if not ability, to pay for porn.

Sure, as an investment mechanism there are probably some choice spikes you can ride to make a quick profit. But better exit quickly cuz the ride is pointing downwards.

Some people will always make money on the market--e.g. short selling. For the broader market, however, it is historically way overvalued and I wouldn't be surprised if the Dow hits 5000 within 3-5 years to coincide with a real estate bubble crash

The only way anyone lost money between 73 and 81 is to take their money out of the market and put it under their mattresses... if they would have left it until 2000 what would they have had???

Jobs are different -- I'll give you that.

I was sure that the point of this post was in regard to peoples willingness (not so sure about ability) to pay for porn, but that wasn't clear in the first post.

The first post seemed to talk about the market and where it is going -- porn isn't always talked about here...

My point is that the long term ride (20-30+) never points downward... you know and I know that's true.

The only people that should be heavily invested in stocks are those in their 20's, 30's, and MAYBE early 40's and unfortunately most in that group are holdovers from the 20%-30% annual returns from the 90's and now that they are not getting them and actually are losing a bit they are yanking funds.

My point is that is a mistake -- but I guess only time will tell.

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Just the Village Idiot

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#16

07-21-2002, 07:56 PM

Originally posted by Mr.Fiction

Do you have money in stocks right now? Most people with money still in are trying to find a reason to believe that things aren't so bad and it's going to go right back up. I don't blame you for wanting it to come right back, but I think you're going to be disappointed.

Hopefully I'm wrong.

Do I have money in stocks right now??? Yes I have alot of money in stocks.

Guess what I haven't lost too much value because I invested and continue to invest in companies with rock solid fundamentals.

I am also 25 -- so I am looking at the long term -- not 3, 5, or 7 years...

In 30 years -- I will have alot more money than I do now and a ton more than if I pulled out not and bought back in better times. That's why I continue to buy.

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#17

07-21-2002, 07:56 PM

The average P/E is still a bit high, we will likely see dow7500, maybe even 7000, but that's about it.

There's a number of factors besides P/E that account for the market's grow or decline. Interest and Inflation being just two of them which both are well in check. In fact, those two factors are more important in today's non-gold standard economy than any other time in history.

We will be launching a full on attack on Iraq fairly soon and a good foriegn war always helps boosts a economy.

And hopefully, alot of these idiodic "75k a year mutual fund managing morons" will go back to doing the books for their local Burgerking, instead of making really bad choices with billions of dollars. And Intitutional Investing will return to the boring stable force it was until about 5 years ago, when any moron with a BS could become a fund manager!

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Frank W

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#18

07-21-2002, 08:00 PM

Good points JVI.

I agree with you--on the LONG TERM [ie, 15-30 years] nothing can beat equities.

In the SHORT TERM, I'd look into hedge funds.

As for the porn market, my bet is on a smaller "paying pool" of users who will demand more quality/interactivity for their money.
Maybe consolidations? Maybe a fundamental shift from the CC rebill business model?

Originally posted by Just the Village Idiot

The only way anyone lost money between 73 and 81 is to take their money out of the market and put it under their mattresses... if they would have left it until 2000 what would they have had???

Jobs are different -- I'll give you that.

I was sure that the point of this post was in regard to peoples willingness (not so sure about ability) to pay for porn, but that wasn't clear in the first post.

The first post seemed to talk about the market and where it is going -- porn isn't always talked about here...

My point is that the long term ride (20-30+) never points downward... you know and I know that's true.

The only people that should be heavily invested in stocks are those in their 20's, 30's, and MAYBE early 40's and unfortunately most in that group are holdovers from the 20%-30% annual returns from the 90's and now that they are not getting them and actually are losing a bit they are yanking funds.

My point is that is a mistake -- but I guess only time will tell.

"If you hate a person, you hate something in him that is part of yourself. What isn't part of ourselves doesn't disturb us." -- Herman Hesse
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#19

07-21-2002, 08:01 PM

(3) chickenshits who pull their money out of the market now due to fear.
/quote

Tell that to the investors of Enron, and WorldCom.

While I know it's not their fault, and they aren't directly responsible for it. I am going to love the hit the Republicans get out of this, in November.

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Frank W

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#20

07-21-2002, 08:06 PM

Good point re Interest rate, Wizzo.

We are in a very new stage of our economic development--low GDP growth with low inflation. Typical economic downturns couple low GDP growth/contraction with high inflation. Also, there is currently a real estate bubble and this is functioning as a brake against a quick exodus of capital from the stock market. My question is, after all these "special circumstances" play themselves out, will we following traditional economic patterns [1929 and 1973--see the PE and S&P levels above] or will there be a "soft landing" to DOW 7000?

I'm putting my bet on hedge funds and gold at least for 3 years.

Originally posted by Wizzo
The average P/E is still a bit high, we will likely see dow7500, maybe even 7000, but that's about it.

There's a number of factors besides P/E that account for the market's grow or decline. Interest and Inflation being just two of them which both are well in check. In fact, those two factors are more important in today's non-gold standard economy than any other time in history.

We will be launching a full on attack on Iraq fairly soon and a good foriegn war always helps boosts a economy.

And hopefully, alot of these idiodic "75k a year mutual fund managing morons" will go back to doing the books for their local Burgerking, instead of making really bad choices with billions of dollars. And Intitutional Investing will return to the boring stable force it was until about 5 years ago, when any moron with a BS could become a fund manager!

"If you hate a person, you hate something in him that is part of yourself. What isn't part of ourselves doesn't disturb us." -- Herman Hesse
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Just the Village Idiot

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#21

07-21-2002, 08:08 PM

Originally posted by ChrisH
(3) chickenshits who pull their money out of the market now due to fear.
/quote

Tell that to the investors of Enron, and WorldCom.

While I know it's not their fault, and they aren't directly responsible for it. I am going to love the hit the Republicans get out of this, in November.

They didn't pull their money out -- they invested it poorly (at least at the end) and lost it.

The people I feel sorry for are the employees who bought into the fantasy management sold them.

Take a page from Warren Buffet -- never invest in a company when you can't understand their financials... he lost money in neither.

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#22

07-21-2002, 08:38 PM

I remember back in the net boom days I was saying this is excatly the same as 1920's market with telecomunications, companies just being made on paper with no earnings no assets etc...
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ChrisH

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#23

07-21-2002, 08:43 PM

Originally posted by Just the Village Idiot

They didn't pull their money out -- they invested it poorly (at least at the end) and lost it.

The people I feel sorry for are the employees who bought into the fantasy management sold them.

Take a page from Warren Buffet -- never invest in a company when you can't understand their financials... he lost money in neither.

As far as the investors that were too stupid to know what they were even investing in.... I agree, that's on them. However, they were lied to in the quarterly statements.

But you're right about the employees that got screwed over and couldn't sell while it was falling like a brick.

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#24

07-21-2002, 08:47 PM

Originally posted by foe
I remember back in the net boom days I was saying this is excatly the same as 1920's market with telecomunications, companies just being made on paper with no earnings no assets etc...

I didn't think Pets.com was worth $65. at IPO either. Then it soared to $125. I think the investors liked the "Sock Puppet Ads", I liked them too LOL..

Last I saw it was 7 cents a share!!!

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#25

07-21-2002, 08:48 PM

You are absolutely right!
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Frank W

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#26

07-21-2002, 08:53 PM

Originally posted by ChrisH

I didn't think Pets.com was worth $65. at IPO either. Then it soared to $125. I think the investors liked the "Sock Puppet Ads", I liked them too LOL..

Last I saw it was 7 cents a share!!!

The Super Bowl ad was over the top.

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#27

07-21-2002, 08:56 PM

Originally posted by Frank W

The Super Bowl ad was over the top.

LMAO....

The ad was very funny. Even funnier thinking that that was your market, and you spent 3/4 of a million dollars on a 30 second spot.

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Frank W

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#28

07-22-2002, 07:46 AM

btw, Dow is down another 200 pts as of 8:50 AM PST today.

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#29

07-22-2002, 08:09 AM

I don't think the only problem is the market. We will recover from that given a little time. The danger is that the economy is vulnerable to further attacks. Imagine what would happen with another terrorist attack, while stocks are plunging...

Don't forget the real estate market, for the past couple of years banks have been giving 0% down loans. This means that there's a lot more people out there living in homes beyond their means. People are getting loans they can barely afford to pay off. IF something happens to cause mass layoffs, then we'd end up in a true shit hole.

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#30

07-22-2002, 08:16 AM

Originally posted by SunTzu
I don't think the only problem is the market. We will recover from that given a little time. The danger is that the economy is vulnerable to further attacks. Imagine what would happen with another terrorist attack, while stocks are plunging...

Don't forget the real estate market, for the past couple of years banks have been giving 0% down loans. This means that there's a lot more people out there living in homes beyond their means. People are getting loans they can barely afford to pay off. IF something happens to cause mass layoffs, then we'd end up in a true shit hole.

I agree that another attack on the scale of the 9/11 would cause serious problems, but I have serious doubts that this will happen, though I suspect there will be attacks on a lesser scale.
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