Warning: New Lows Ahead

Let me say upfront I'm long UYG, and I'm getting my financial 'head' handed to me. The game plan for me has been trying to catch this proverbial 'bloody knife', but there needs to be a transfusion fast. When Capt. Paulson of the U.S.S. Financial Disaster recanted in the name of changing facts, Mr. Market was NOT amused by the sudden discovery of new information.

Its obvious fundamentals are atrocious: ABX new lows, housing crumbling, Big '3' begging for a bailout, and retailers looking more like museums than bastions of prosperity. So why would I be long UYG? Because I 'thought' I saw a bottom. Well, if you haven't noticed, the new lows, created since the October 10th lows in the Dow, are noteworthy. These companies are lower now then on October 10th: GE, Bank of America (BAC), Citigroup (C), Research in Motion (RIMM), Microsoft (MSFT), Intel (INTC), Google (GOOG). It seems to me the DOW and S&P 500 could see 6,000 and 600, respectively. The financials since October 10th have been horrible. And if the financials don't catch fire in a hurry, I quote GW, " This sucker is about to go down."

I'll admit I've been buying the hyperinflation gig, but the market is selling deflation. And my personal solvency is relying on the fed doing what the fed does best: Print money! I'm watching GLD, and I'm really hoping we don't see a breakdown, but the gold bugs may be overestimating the fear trade for hyperinflation. It's apparent that some powerful forces are selling this market despite all the 'medicinal methods' applied by Ben and Hank. If the financials don't ignite soon, may I suggest placing your 'financial' head between your knees.

Disclosure: Long UYG and Money Market Funds, No positions: GE, RIMM, MSFT, INTC, GOOG, GLD

Comments

[investor88:]

Agree likely to see new lows ahead maybe Dow 6k. The way the market behaves and the lousy economic backdrop would suggest Dow 6k is a real possibility and then that might not be the ultimate bottom.

2008 Nov 17 08:06 AM

[Kingsley An...:]

Sadly, I am starting to agree you investor88. I wonder about this "retest" as it seemed to come only a month after the last drop. I would have liked to see a little more sideways action before we retested. Even if we don't go down right now, the 50 day moving average is making its way down to the current levels, so if we don't go down, we will see if that can be breached, and if we can't there is going to be a lot of pain.

2008 Nov 17 08:41 AM

[Robert O. P...:]

can't speak to GLD, but I think more safety in a strong mix of Oils and Utilities; at least both inflation and disinflation will not effect the dividend flow as much.

2008 Nov 17 09:50 AM

[ebworthen:]

Agreed.

S & P of triple 777's like the slot machine or lower.

When people realize the machine keeps taking their money, they'll leave the casino. Many have been staying and playing and losing. The whales get bailed out with money from hiked prices at the buffet and bar, but the regular folk just pay and lose.

Time to go home and make some mac & cheese and pay down debt.

2008 Nov 17 10:26 AM

[Jason Rines...:]

Remember gentlmen, there is no effective government policy other then unlce hank propping up a few friends between now and January 20th. Even then, I will wait until the end of Q1 to see what Washington policy will look like to plunk money down. That was my advice as posts here for the entire last quarter. I suppose I will write an article for SA about this. In the interim, building the tech toolset for the political landscape so 100,000+ individuals and groups can educate America and root out bad leadership in business and government. My only bitch is the innovators are often smaller business guys that must help solve this problem and thus far have gotten zero help for the investment community or government. Such is the way of human nature and cycles I suppose.

2008 Nov 17 11:45 AM

[peterthepai...:]

...prices of houses...while they continue to fall...watchout...

rising unemployment is bad for house prices...

the workin stiffs are skint...the housing atm is closed...

debt is a bitch...innit!

2008 Nov 17 12:56 PM

[Still Renting:]

As I watch this unfold, I am reminded of what one analyst said a few months ago about the penulum swinging high and it is now coming back:

Pendulums don't stop at equilibrium.

2008 Nov 17 04:44 PM

[Did U Think...:]

Prechter is the only one who has accurately called this deflationary crash, even if he thought it was going to happen as a result of dot bomb. He didn't count on Greenspan letting loose every credit stop imaginable in order to ruin the US and world economies as a means of opening the door to a world monetary system and ultimately world government.

But there is now no greater bubble possible and Dow 8k is still above the lows of dot bomb which, again, was not the real low because of Greenspan's intervention.

This mania chart is going to unwind fully and you are looking at Dow 4k best case, probably less. Either that or when 1 oz of gold buys the Dow then I will believe a bottom is in. One of these things will happen over the next 18 months. This is going to be very similar to the crash of 1929-33. In some ways it will be worse because we were not so badly in debt back then and because the dollar was save-able simply by stealing everyone's gold. That's not going to work this time. Nobody is keeping gold in safe deposit boxes anymore, having learned from last time. In fact, smart people are storing their gold offshore at places like the Perth mint, etc.

The whole thing is a pyramid scheme in collapse which would make Charles Ponzi proud.

2008 Nov 17 05:18 PM

[2houndz:]

Since we are making predictions - Dow 6300 the week after Thanksgiving.

2008 Nov 17 10:42 PM