Why This Is No Time for Buy and Hold 49 comments
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Dear Fellow Investor,
At the risk of being labeled a perpetual pessimist, or a disciple of Dr. Doom (Nouriel Roubini), let me offer a few words of caution.
Do not allow yourself to get swept up in the euphoria that comes with those 3-digit upward bounces of the Dow we have seen lately. Recognize them for what they are. Some, the naturals, are the result of normal market restructuring - the ebb and flow of demand and supply. But these do not come frequently.
Others, especially those that begin in that last hour prior to market close, could be attributed at least in part to manipulation. You can read more about it here, here, and here.
For those of you with a deeper sense of foreboding and perhaps a case of “administration mistrust”, we suggest you familiarize yourself with the “Cloward-Piven Strategy” if you do not already know of it. I am quite certain Rahm Emanuel does.
At the moment the market appears healthy, the Dow resting significantly above the 8,000 level where the PWG/PPT seems wont to keep it. And there are other positives in the air: the Administration is promising goodies by the basketful, all to be paid for with future savings. Government economists are telling us it has been a “V” shaped recession, and that we are on the road to recovery, “even though employment may continue to lag”.
Against these rays of sunshine, it does appear some clouds are forming. And if enough of them align themselves, we could be in for a “perfect storm”.
In reply to the government spokespeople, other economists, pessimistic and otherwise, liken this recession to a deep “U”, or to a “W”, or an “L”, or even an “X”, from which there will be no immediate release.
The current Administration in DC is pumping out dollars as fast as they can be printed. The word “trillion” has little meaning for most of us, but not for the foreign governments that hold our bonds. The BRIC countries, along with OPEC, are quietly preparing a currency alternative to the US dollar. They cannot shoot themselves in the foot by acting too swiftly, lest the US reserves they hold drop precipitously. But a replacement for the US dollar is in the making, and when it arrives, or more likely in anticipation of it, our interest rates will have to rise.
This will stall any recovery that may be in progress.
Another impediment to any recovery, speedy or otherwise, is the uncertainty surrounding the Fed’s ability to stabilize the dollar. Those trillions being pumped out will eventually have to be mopped up, but by whom and with what? Thus, the market sees inflation ahead while the country still struggles with its recession, an early symptom of stagflation. This fear will continue to haunt the market until Mr. Bernanke clearly explains his strategy for turning off the money spigot and mopping up the excess.
We see the market bouncing around its present level with increasing volatility, and expect that any piece of sudden bad news could take it right back down to the 6,500 level, despite the helping hand of the U.S. Treasury team. Thus, we suggest that preservation of existing capital be your primary goal. Take profits when and where you can. Use these 3-digit leaps to increase your cash.
Convert portfolio holdings that have pierced or surpassed their Exit Zone.
There will be plenty of occasions to re-invest it, restoring your portfolio holdings at lower prices, i.e., when they are in or below their Entry zone. Do not fall prey to “buy and hold” - it is not a strategy. Use the E-Zone System for your strategy.
Best regards.
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This article has 49 comments:
Well, diogeron, you might consider this, then, if you don't think this administration is out to destroy wealth in the United States:
"The way to crush the bourgeois (the capitalists--those who make money) is to grind them between the millstones of taxes and inflation"--Vladmir Lenin.
If you don't believe that the present policy of the Obama administration and the Democrat-controlled congress isn't leading us into boundlessly high taxes and unavoidably outrageous wealth-destroying inflation, then just who is it that "belongs in Disneyland?"
If this is truly the case then that in itself is enough to disallow trust in the markets. Even if this is meant in the well being of America, the fact that it exists is profound. In the markets someone must win and someone must lose, if the game is rigged the right people are not winning, and it is a criminal activity.
I find this appalling no matter what the intentions are. And leaves the Obama administration open for all kinds of conspiracy theories and innuendos of their real intentions.
The fact that they are playing into the hands of the FED and the Financials always has disturbed me to the point of disbelief.
Anyway, trust and transparency is what we elected, I have seen no such beast. Therefore I dont trust.
We have a hard time believing.individuals are evil until they come out and prove it to us. Which is why it is so easy to jump on the hatred bandwagon against individual politicians or celebrities that violate our personal moral code.
Right now, many refuse to believe that Obama (or Pelosi, or Reid, or Rahm, or Geithner, or Bernake) are doing anything wrong and evil.
Until they prove it, we continue to hope for the best in people.
The oddity is when the individuals DO prove it, yet we continue to ignore facts because we don't want to believe the worst.
By the time we all believe, I fear it will be too little, too late.
If this is relevant at all to the discussion, I guess I would say that it shows even Cloward and Piven don't believe in the C&P Strategy anymore. I seriously doubt Obama has given it any thought. I'm with ConceptWizard... There is manipulation going on, but it is not to bring down the system -- at least not intentionally, and CERTAINLY not to benefit the poor.
The most reliable data point to me was GE's sales dropping 17% or so. That is reality and the rest (in large) is noise and manipulation. Especialy bank earnings.
I also know that as soon as I cover my short positions the decline will begin, so I am hanging on to them.
This whole article is just an overblown advertisement for some half assed BS trading system. Hell, check the links below his picture on the article, the asshat can't even spell his own website description right. singals?
Credibility = gone for you.
If you had $50 billion and a clever trading platform, wouldn't you try to manipulate the markets to benefit yourself to the maximum possible degree?
I completely agree with TheFounder that we should be looking at bellweathers like GE as a quarterly gauge of where we're at economically as a nation.
Diversification
Dollar cost averaging
Position sizing
Leverage
Basic Fundamental Analysis
These are the keys to massive wealth that let you sleep peacefully at night. None of these has anything to do with taking the market pulse every 5 seconds.
As for gov't oversight - bring it on baby; A lack of transperancy was the cause of this whole mess and the fed is only trying to ensure that the same thing doesn't happen immediately following a recovery.
How does one find out what happened to the retail investor, what % stayed invested, % got out, % got back in and to what degree and in what? Plenty of talk about light volume since March but light based on what, yesterdays normal is not todays so these comparisons are of little value? It seems this kind of information would be helpful and help one determine how to proceed going forward.
The problem we had was that nobody wanted to rain on the markets parade, so the agencies and politicians who could have sounded the alarm bells didnt, the agencies in charge of oversight closed there eyes, politicians just denied denied denied so going forward these same idiot agencies and politicians are the ones we look for fairness, openness and transparency, this will never happen unless there are political reasons for it and that will just make matters worse. " If you always do what you've always done you will always get what you have always gotten"
On Jul 21 06:55 AM rick12345 wrote:
> In my opinion the market is range-bound between 10000 and 14000 for
> the next couple of years. The real problem will be for pension funds,
> as baby boomers, who have already postponed their retirements, begin
> to collect on their nest-egg.
> As for gov't oversight - bring it on baby; A lack of transperancy
> was the cause of this whole mess and the fed is only trying to ensure
> that the same thing doesn't happen immediately following a recovery.
How did everyone else miss this?
On Jul 20 04:17 PM speeddaimon wrote:
> Bah,
>
> This whole article is just an overblown advertisement for some half
> assed BS trading system. Hell, check the links below his picture
> on the article, the asshat can't even spell his own website description
> right. singals?
>
> Credibility = gone for you.
should have saved yourself all that verbage before you made it to the point of your article.
You have been added to the list of noise makers.
China will eventually have to stop buying Treasurys when their stimulus bubble breaks and millions are unemployed and their own housing bubble explodes. The world is in a contraction and the bottom has not yet occurred. The global GDP has been carried by China. The American consumer will continue to contract their spending. The DOW will drop below 8000, and likely below 7000. There are no binders to hold the recipe together. It is an illusion.
Nuff said.
There can be no true wealth without an INCREASE in jobs that people actually want.
As usual, the banks will find the loopholes and the people will suffer because they don't understand how the banks operate.
If you seriously think that banks can make profits when all it's depositors are losing money...well, it can't last forever!
End result will be that the depositors will run out of money and the banks will be forced to "restructure" debt to make it look like income.
Like I said in a few other posts, "Just watch the banks for investment ideas."
If the dollar's headed down.
Is what do you do with the cash?
Hold cash for any length of time and you lose.
Did anyone notice the news that this year will be a new record deficit, of just a hair under 4 trillion dollars? How long can that kind of spending be sustained?
Regardless of what you think of the authors strategy, I think this one thing holds true - "any piece of sudden bad news could take it right back down to the 6,500 level..."
It's definitely non-partisan to see and be concerned by the market manipulation going on. This administration (like any other) is not going to stop the big players from pushing the market up (against fundamentals) since it increases general sentiment. This of course also happened during the Bush admin (and probably every other). Maybe it's worse right now with volume so light, because it leaves markets in a position to be easily pushed around. Sooner or later fundamentals come in to play because they have to in the greater scheme. But in the short run, the manipulators (the big time tradin desks) can profit handsomely.
An investment strategy should take into account of the market environment. Stubborn buy-and-hold investors are definitely sweating it out right now.
Which asset class is safe at this juncture? I love hard assets and commodities, but they are either difficult to invest in due to contango traps or due to collapse in a stock market collapse. So I have a physical metals "disaster insurance" hedge but would recommend no more than 10-20%. I hate FRNs, but it seems the wisest of all options right now. It's like taking a guaranteed -5% YOY return versus what could be a lot worse anywhere else. TIPS are interesting, but only marginally better than cash right now, and have a risk of loss in a collapse as well.
I'll jump back in on commodity producers (FCX, STO, AUY, SLW) after they take their requisite hammering. I'd prefer not to give back my gains.
On Jul 21 10:47 AM sbfeibish wrote:
> The problem I have with raising cash.
> If the dollar's headed down.
> Is what do you do with the cash?
> Hold cash for any length of time and you lose.
On Jul 20 01:18 PM TeresaE wrote:
> Until they prove it, we continue to hope for the best in people.
>
> The oddity is when the individuals DO prove it, yet we continue to
> ignore facts because we don't want to believe the worst.
>
> By the time we all believe, I fear it will be too little, too late.
Are you sugesting that cash (US Dollar) is the ultimate safe-haven where you are sure to "preserve existing capital"? I sleep better at night knowing my money is companies such as Vale do Rio Doce and Petrobras, wich own real assets such as huge oil reserves wich will be valuable for decades to come, no matter what happens (a war, terrorist attack or natural disaster blackswan-like event may even help oil companies!)
Keep things in perspective!
Dear God, people, can't you see and admit when a strategy/rationale is just plain WRONG?! The proof is in the returns.
Not just wrong: doubly so. This author has been seeking beta with a vengeance lol
On Jul 20 08:48 AM Perry B wrote:
> god article
On Jul 20 12:53 PM conceptwizard wrote:
> I think it is pretty common knowledge at this point that there are
> forces at work here in the markets that are not normal.
On Jul 21 02:25 PM Albert Ling wrote:
> "we suggest that preservation of existing capital be your primary
> goal. Take profits when and where you can. Use these 3-digit leaps
> to increase your cash."
>
> Are you sugesting that cash (US Dollar) is the ultimate safe-haven
> where you are sure to "preserve existing capital"? I sleep better
> at night knowing my money is companies such as Vale do Rio Doce and
> Petrobras, wich own real assets such as huge oil reserves wich will
> be valuable for decades to come, no matter what happens (a war, terrorist
> attack or natural disaster blackswan-like event may even help oil
> companies!)
>
> Keep things in perspective!
My take on this economy is a W shaped recovery due to low trading volume and immense cash on the sidelines.
Capitalism has been destroyed by the politicians. I'm being nice here and attributing "good intentions", but they are as flawed and deadly as ever. However; one cannot deny that capitalism does not serve the business of government well enough. Capitalism, in all its freedom, moves the State toward irrelevent. The State loves Socialism much better along the road to serfdom as it makes them more powerful, more important, and provides much more rewarding careers (some Socialist leaders even bag super model girlfriends!). So of course those self-serving clowns in DC are trying to destroy capitalism...some of them might even know it!
Mickey Mouse nods knowingly. He is, afterall, a very successful capitalist.