Stockmarket, how far could it drop, and is it a good time to buy shares.

In message , ceres writes

Do you think that we have seen an end to all the financial problems?

It seems to me that many are acting as if it is all over and there is no need to worry. Whilst worrying of its self does no good how wrong can they be?

Banks are not lending money, they have all had substantial cash injections but despite encouragement are still not lending. They will need to repay the money they have had and rather than take a risk are clawing back money as soon as there is any sign of a problem. Many small businesses are finding that as soon as they have problems and need money the Bank does the opposite and withdraws the credit lines. If that continues you will see them reducing staff and possibly going under.

House repossessions are up and trade is down, markets are driven by sentiment but they don't always get it right so don't be fooled just because there has been a recovery. There is a feel good factor, people are relieved that it isn't going to be as bad as other predicted but I would suggest that they are living in false hope at this stage. I didn't go so far as M. Holmes as I was just looking for 3200 next and I still think we shall see it. That will probably not be the bottom. If you are looking long term you could drip feed but personally I would still hold off investing for now.

Timing is the hard part. The bust left to itself would run through in 4 or 5 years. With government continually bailing out the folks we need to go bust though, it could take a lot longer. Just look at Japan in their

Can't help. I'm sorry. I blame Brown.

FoFP

The banks are going to be like this for at least a couple of years and the authorities know this. The banks will recapitalise through huge spreads between loan rates and base rates and the government will help by dropping rates. The banks get a nod to do this while the government admonishes them in public to lend more. That's purely staged for the public.

Businesses are slow to learn the lesson that being in debt during a debt-deflation is potentially fatal. The businesses in too much debt will go to the wall and their resources and personnel will be freed up for the more prepared businesses to grow with once this is through. It helps clear the decks of excess debt and is thus part of the cure.

Yep. When the last optimist is on the ledge in despair that things will ever get better, that's the bottom. It's the flipside of markets topping when the last bear joins the bubble.

FoFP

OK. Thanks for that.

But without a proper forecast of the time scale, saying that the index will 'bottom' at a certain figure, is as meaningless as predicting that Portsmouth will win the Premier league. We need to know by when, otherwise, for as long as it doesn't, you can always say you know that but it will, and that doesn't count as much of a prediction in my book.

In the meantime, it seems all you're saying is that you see the index falling to 1500 or so sometime in the next 20 years.

I'll leave others to decide whether they think that's useful. In the meantime, before I die waiting, I'm off to put my money in some other long-term investment.

Sorry. It's all I've got. If you think there's a way to predict timing, taking into account what at least two governments will do to interfere, then I'd be most interested to hear of it.

If you just mean you can't make money on a prediction without timing, I know. I'd be posting from my yacht if it were otherwise.

FoFP

I knew that house prices were going to crash for quite a while before they did. I didn't know when they were going to crash, or exactly when and where they would peak.

Was that useful information? I think it was, because you could have done what I did, and am still doing, which is to rent until the crash does happen, and buy the place cheaply.