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These days, everybody seems to be in the mood to spout off his or her opinions on the direction of the stock market and economy. This noise should be taken with a grain of salt. Even the Oracle of Omaha, Warren Buffett, falls into this class, as he is simply overrated. At the rate of decline his holdings are experiencing, he could quickly turn from Billionaire status to Millionaire status. His take on the economy sounded more like a stab in the dark than from an accomplished Wall Street veteran. His latest analysis could be construed as “incoherent and random” rather than a reasonable assessment of the future. It teetered on almost mea culpa, proportions.
Don’t get me wrong, I still have tremendous respect for the man, as he has more knowledge in his little finger than I do in my entire body, but nobody is perfect. The number one stock guru of all time is simply getting on in age, and his mind obviously isn’t as sharp as it once was (it happens to all of us). His statement, “the economy will be in shambles throughout this year and way beyond" is contradictory to his assessment that he does not have any idea which way stocks are headed. If he follows his own logic, he must deduce stocks will move lower if he anticipates a poor economy over the next 24 months, as the stock market typically looks 6-12 months ahead.
Clowns out in full force: Henry Blodget has gone from one extreme to another. This former Goldman Sachs analyst, who had a reputation as a ultra bull (pumping Yahoo (YHOO) at $300 per share in 2000) has gone full circle to the bear camp, along with his “partner in crime,” Aaron Task. The term “devastation” seems to be their favorite word these days and they appear to think we are in for another 30% haircut, because that’s what the charts say.
Their favorite guest commentator, Nouriel Roubini, looks to fan the flames of fear, as he attempts to capitalize on this current fame as one of the pundits that accurately called the meltdown, but his prominence will soon fade as his dire forecasts have already reached lunacy levels. Headlines such as “Even Dr. Doom is Scared” are proving the media’s thirst for sensationalism is reaching extremes, as they promote their current agenda of severe bearishness. This extreme pessimism permeating from all directions, leads me to believe a bottom is near. Although I recognize the Blodget/Task team members as extremely talented journalists, their crystal ball antics are no better than anyone else’s. What does it all mean? It means these guys have no clue which way the market is headed. None of us do. The stock market is not that tidy and simple and usually does the exact opposite of what the masses are anticipating.
What to do:
- Cash is king - keep your powder dry, you will soon need it to load up on some of the best bargains of the century.
- Utilize about 30% of your cash now to begin gradually accumulating low PE stocks, carrying minimal debt and high cash. Try and prospect for stocks that pay a nice dividend yield and are defensive in nature (such as food and drug) while exhibiting high relative strength (easier said than done).
- Short high PE stocks as a hedge against your long positions
- Buy oil and gold stocks
- If the Dow falls to 5000, up your allocation from 30% stocks to 70% stocks and cover your shorts as the market will be set for a huge rally.
The market will fluctuate, and obviously yesterday is history and tomorrow is a mystery. Don’t listen to the noise of the pundits, rely on your own instincts and logic to take you to the promised land. The point is, history tends to repeat itself and those investors brave enough to go against the crowd will ultimately end up being the big winners. The worm will turn!
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On Mar 04 06:44 AM J. D. Swampfox wrote:
> So we are at 6700-ish. The writer says, "This extreme pessimism permeating
> from all directions, leads me to believe a bottom is near." But then
> he goes on to say, "If the Dow falls to 5000, up your allocation
> from 30% stocks to 70% stocks and cover your shorts as the market
> will be set for a huge rally." Hmmm, talk about fat bottoms...
My pension was linked to the S&P 500. At the time it was linked the S&P 500 was around 330 if I recall correctly. I pulled it all out when the index hit 1000 over loud angry objections of the pension manager. My pension is more than twice what it would have been had I listened to him.
Grandpa taught me "Pigs get fat. Hogs get slaughtered." Thanks Grandpa.
* We're in a period of high volatility
* There could be a market rally in march, april
* It will be difficult just not to lose cash
I'd basically say a "d" started around the 1st of the year and we're seeing the liquification of a lot of bad debt. The fed is also printing gobs of money and we have a stimulus package coming through in the later half of the year. I was originally thinking a low of DOW 6500 but I think I'm going to revise that downward.
The US can not pay for everything it has legislated, orchestrated and guaranteed.
Long term, what do you think that spells for the future of the economy?
You don't have to be a perma-bear to recognize the dangerous path we are on. While there are still plenty of opportunities to make money in this market, the health of the economy is a foregone conclusion. Watch the next "axe to fall"- unfunded pension obligations.
To the author's suggestions on how to survive I would add - turn off the TV and read solid financial reporting like the Financial Times or the Economist or Bloomberg and get away from the popular media. You will be much saner and invest far better without your thinking being distorted by the hype.
On Mar 04 09:01 AM optionsgirl wrote:
> The Keynesian economic theory preferred by Obama et al is doomed
> for failure--it never worked in the past.
>
> The US can not pay for everything it has legislated, orchestrated
> and guaranteed.
>
> Long term, what do you think that spells for the future of the economy?
>
>
> You don't have to be a perma-bear to recognize the dangerous path
> we are on. While there are still plenty of opportunities to make
> money in this market, the health of the economy is a foregone conclusion.
> Watch the next "axe to fall"- unfunded pension obligations.
Washington, DC (AP)
President Barack Obama and the democrat controlled Congress are considering sweeping legislation that will provide new benefits for many Americans: The Americans With No Abilities Act. AWNAA is being hailed as a major legislative goal by advocates of the millions of Americans who lack any real skills or ambition.
"Roughly 50 percent of Americans do not possess the competence and drive necessary to carve out a meaningful role for themselves in society," said California Senator Barbara Boxer. "We can no longer stand by and allow People of Inability to be ridiculed and passed over. With this legislation, employers will no longer be able to grant special favors to a small group of workers, simply because they have some idea of what they are doing."
In a Capitol Hill press conference, House Majority Leader Nancy Pelosi and Senate Majority Leader Harry Reid pointed to the success of the U.S. Postal Service, which has a long-standing policy of providing opportunity without regard to performance. Approximately 74 percent of postal employees lack any job skills, making this agency the single largest U.S. employer of Persons of Inability.
Private-sector industries with good records of non-discrimination against the Inept include retail sales (72%), the airline industry (68%), and home improvement 'warehouse' stores (65%). At the state government level, the Department of Motor Vehicles also has an excellent record of hiring Persons of Inability (63%).
Under The Americans With No Abilities Act, more than 25 million "middleman" positions will be created, with important-sounding titles but little real responsibility, thus providing an illusory sense of purpose and performance.
Mandatory non-performance-based raises and promotions will be given so as to guarantee upward mobility for even the most unremarkable employees.
The legislation provides substantial tax breaks to corporations that promote a significant number of Persons of Inability into middle-management positions, and gives a tax credit to small and medium-sized businesses that agree to hire one clueless worker for every two talented hires.
Finally, the AWNAA contains tough new measures to make it more difficult to discriminate against the non-abled, banning, for example, discriminatory interview questions such as, 'Do you have any skills or experience that relate to this job?'
"As a Non-abled person, I can't be expected to keep up with people who have something going for them," said Mary Lou Gertz, who lost her position as a lug-nut twister at the GM plant in Flint, Michigan, due to her inability to remember "rightey tightey ,lefty loosey".
"This new law should be real good for people like me," Gertz added. With the passage of this bill, Gertz and millions of other untalented citizens will finally see a light at the end of the tunnel.
Said Senator Dick Durbin (D-IL): "As a Senator with no abilities, I believe the same privileges that elected officials enjoy ought to be extended to every American with no abilities. It is our duty as lawmakers to provide each and every American citizen, regardless of his or her inadequacy, with some sort of space to take up in this great nation and a good salary for doing so."
Warren Buffett and Charlie Munger have had a hell of a run but both are now in their eighties. Maybe it's time for them to retire. They could sure afford to.
On Mar 04 11:24 AM henarl wrote:
> Your article was right on until you got to the "what to do" section
> and then you became just another "expert".
> Warren Buffett and Charlie Munger have had a hell of a run but both
> are now in their eighties. Maybe it's time for them to retire.
> They could sure afford to.
Buffett's book value went down less than 10% last year, based on general stock market malaise and derivative mark to market accounting rules. While the S & P 500 went down triple that. How did you do? Soon to be a millionaire poke at Buffett is laughable. I'm sure you will join the company of Buffett critics who were totally wrong in short order. That's my prediction!
On Mar 04 01:04 PM Dave Shafer wrote:
> I'm certainly not a bear at this point, but your derision of Buffett
> is way off base. And if you read the full letter in context you
> know he is a raging bull long term and heavily invested now. So
> you are deriding him and not fully invested? Apparently you agree
> with him short term at least that "the markets will be in shambles
> this year" as you think the Dow is going down to 5000. At that time
> you argue to go in to 70%.
>
> Buffett's book value went down less than 10% last year, based on
> general stock market malaise and derivative mark to market accounting
> rules. While the S & P 500 went down triple that. How did you
> do? Soon to be a millionaire poke at Buffett is laughable. I'm sure
> you will join the company of Buffett critics who were totally wrong
> in short order. That's my prediction!
Good for you! There are many folks out there that went short at the right time and made magnificient gains. I guess the majority of them were just plain lucky, while a minority had a plan in advance and exercised it to perfection! But Buffett has a plan too and it doesn't call to go short. Its worked out pretty good for him for 44 years. I'm betting [literally] on his plan and nothing I see points to him not being able to continue to pull it off! Best of luck.
On Mar 04 01:32 PM Dave Shafer wrote:
> Plum....
>
> Good for you! There are many folks out there that went short at
> the right time and made magnificient gains. I guess the majority
> of them were just plain lucky, while a minority had a plan in advance
> and exercised it to perfection! But Buffett has a plan too and it
> doesn't call to go short. Its worked out pretty good for him for
> 44 years. I'm betting [literally] on his plan and nothing I see
> points to him not being able to continue to pull it off! Best of
> luck.
They've learned that their instincts are right more time than not, but never bet the farm because they know sometimes they're wrong.
And those folks will do OK in any market.
On Mar 04 01:32 PM Dave Shafer wrote:
> There are many folks out there that went short at
> the right time and made magnificient gains. I guess the majority
> of them were just plain lucky, while a minority had a plan in advance
> and exercised it to perfection!