Liquidations Redemptions

[Horsefish]

By now you have all heard the speculation about mutual funds and hedge funds being forced to sell stocks in order to give their customers money back as those customers exit the market. This could go on from now thru the end of the year.
We saw this before after the dot com bust in 2000. The really bad thing about it is that those people who are exiting the market because "all they ever do is lose money when they invest" will not return to investing for a long time. They will stay with CDs and such. This is what depressed the market so long from 2000 to 2003. That would seem to cause a pretty flat market (no buyers) in 2009 and well into 2010.
Thoughts?

[BuyOnDips]

Don't underestimate the power of greed. Panic and fear rule the markets now, but greed will come back and the markets will rise again. Right now I think it's a day trader's market. You're seeing 1 to 3 dollar daily swings on $10 stocks. You're seeing 5 to 7 dollar daily swings on $30 stocks. That's some volatility. And it is scary. But, IMO, you're also seeing incredible bargains on many stocks right now. There are some ridiculous low valuations on many stocks that are great companies. If you have cash that you don't need for 3 years, I'd start taking small positions in lots of stocks over the next 6 months. I believe it's a strong buyer's market. Warren is buying now too.

http://www.nytimes.com/2008/10/17/opinion/17buffett.html?_r=1&ref=opinion&oref=slogin

[BuyOnDips]

I just wanted to add that your analysis is probably right. I don't expect 2009 to be a good year at all. I'll probably stay mostly in cash, only making trades when I see highly favorable opportunities. Right now I'm searching for high quality stocks that are getting dumped by hedge funds. It's the good companies that have large % down days with unusually high volumes on no bad news. I'm buying the dips, hoping for bounces and taking profits quickly. I'd stick to companies with lots of cash, that are growing, that have ridiculously low evaluations(like P/Es below 7) and large stock repurchase programs in place.

IMO, housing prices have to hit bottom before the overall market comes back. That could take years. :(

[cramerica1972]

housing prices are grossly overinflated.

[dmmull]

I think considering that the interest rates on CD's is so low and may go lower people will have to get back in the market.

[madcowdisease]

I can't find the article but it was in the Wall Street Journal a couple weeks ago and stated that based on market psychology and the fact the perception and attitude of the populace may have changed from positive to negative with regard to the stock market we could see an extended bear market for the next eight years before we turn the corner essentially trading flat until 2016 or loner.