Nothing Fun About the Current Market Environment [View article]
Mr. Herbert - my article is hardly a rehash that one would hear by Maria B. or anything put out on CNBC. One just needs to read another's work with an open mind and understand what I am attempting to state - versus reading with your own bias dominating your thoughts that you can't comprehend the words right in front of you! The back and forth volatility (90% volume days up and down versus single directional) are indicating that a crash might happen. Who is saying that on CNBC? Yes China started to ramp up - for only the last couple of weeks. They are a communist controlled country I might add. Be careful how much faith you put on their system of government and reporting. India is looking better but I still have never witnessed a global disconnect in my 30 plus years of watching the markets. If we sneeze they at the very least will catch a cold. It wasn't long ago (2007 to be exact) pundits everywhere were extolling the virtues of the global disconnect. It didn't happen then and until I actually see it I contend that it won't happen this time either. And to your final point about 2 year TBills at 60 basis points - there you have the government doing anything and everything they can to force risk upon investors by paying them next to nothing! They have been driving rates down artificially. For your information yield is inverse to price and prices for everything (including 2 year TBills) rises when demand goes up. Investors are flocking to safety because they fear a crash is highly possible! That is what I am stating in this article. I do hedge myself by stating that market internals are improving and previous articles have discussed the importance of managing risk on positions - no matter how strong ones opinion may be on an investment. It is not inevitable that we crash as Mr. Bernanke has testified that they government is willing to do everything and anything to avert that disaster (for now). I have managed money successfully for other people through all types of environments starting before the crash of 1987. I have had a radio call in program for investors for over 8 years here in Southern California and have helped many investors and other advisors. I do believe that this is by far the most difficult market we have ever faced. I will say that the only year I lost money (which amounted to less than 10%) was in 2008 going back to 1994! Good luck on your long positions - I'm sure you were one who felt that no one could have predicted the huge drop from 2008 to early 2009. And I'm sure the 2000 - 2002 period was probably not profitable for you either. You don't seem to understand risk! Hopefully this clarifies my position.
The comments thus far are spot on! It can hardly be dismissed as possible that markets are/or can be manipulated in the short run. If this is the start of a new uptrend - the current downtrend must be reversed - that has not happened yet!
Market Outlook: Bear Case Is Running on Fumes [View article]
I have no control if the editors want to change my title which obviously happened in this case. The start of my second paragraph clearly states: "The bear case is the market is running on fumes." I then write several paragraphs supporting the bear case for the markets! With that said I am long with an eye on the exits and most likely I will short the markets if the bear starts to reveal himself - which I will obviously write about.
The bullish case as stated is the 200 day moving average has been pierced to the upside, we had three successful tests of 1040 on the S&P, and most importantly a global government coordinated effort to not let the markets crash! The last one is very powerful motivation and support - which is the primary reason to be long as I am.
I watch the markets and invest in what I see it doing. Buy and hold is not in my vocabulary. While I would love an economic recovery and a new bull market that goes up for years to come, at this stage to ignore the possibility of a decline is folly. I am a pragmatic investors, which means I have the right to change my position as conditions change.
Buzzer - You are right! There are a couple of rules that we all need to follow: Don't fight the Fed and Don't fight the tape. Someone else commented that I was waiting for the market to go down so I can participate. That's not true. While I think government intervention is bad and I further believe that if the government were to go to a hands off policy the market would go down to somewhere between 875 - 950 rather quickly, that is probably not going to happen. So should the market rally from here and cheer on government intervention - then I would go long and ride the trend for as far as that takes us. At some point I firmly believe we will have to reconcile the additional stimulus - but I will ride the next trend in whatever direction when it happens. Obviously 1132 on the S&P is resistance as is 2342 on the NASDAQ. Should those levels get broken to the upside - I will go long and use very tight stops. My soapbox speech not withstanding.
brokennail - I believe you have a misconception about what happens when we let a company fail! My wife's life insurance policy is issued by American General - a division of AIG. I never thought that policy was going to be voided and uncollectable should my have perished before the bailouts. Insurance on lives, property, and business (I am making an assumption here that is what you had) are very profitable to the insurance companies. Therefore much like what happened to Lehman Bros. or all the banks that have failed over the last couple of years or Enron to name a company from a different industry - that producing assets don't just disappear - but instead or sold by the liquidators to offset the other unprofitable business losses. AIG and many other companies got into insuring paper - such as credit default swaps as opposed to lives, property and real business - and that is where all the losses occurred! Much like many of the bank bailouts - the AIG bailout protected the stock and bond holders and the large pension fund and mutual fund investors from total loss. Had the government stepped in and said all depositors at banks as of this date (no advance notice) are 100% FDIC insured and then put those banks into receivership (exactly what the FDIC does every week as more and more smaller banks fail) - there would not have been a run on the banks as the depositors would have been insured and the stock and bondholders and investors would have taken the losses. The contra parties on these credit default swaps would have also lost their protection - but the majority of Americans and their deposits would have been protected. New entrepreneurs would have immediately stepped in to buy those profitable divisions of those banks and insurance companies and taxpayers would not be on the hook to the stock and bondholders of those institutions. Too many people think that depositors or insurance policy holders would have been left as general creditors of those institutions. Just like many former workers from Enron or Lehman never left their desks - but rather just had new business cards printed up. Or for example - most of the Washington Mutual (biggest S&L) branches are still standing with many of the same employees and customers - this whole thing could have been handled way differently. And you sir still would have had your protection. Business insurance dates back hundreds or even thousands of years as farmers grouped together to insure against crop failure. Actuaries are great at making this profitable to the insurance companies - just like having hurricane insurance in Florida or earthquake insurance in California or the new terrorist insurance. AIG and the like got too creative with derivatives and insuring paper - that didn't work so well. But instead that business still exists today and the taxpayer is on the hook for trillions! At some point I hope we can wake up and say enough!
What a Run for the Markets, But Is the Rally Over-Extended and Overbought? [View article]
Half the posts are unrelated ads - most likely for people who have run out of unemployment and are trying to be their own entrepreneur from one of those make money from home without working schemes and the others posts are all bullish so far. That is also exactly what I am talking about when I say that currently there is no fear on the part of investors.
One comment is that this is a problem only for those unemployed - Really?? The fact is that 1 in 5 mortgages are under water. That apparently doesn't concern these posters - is exactly the problem. They most likely believe that when someone declares bankruptcy that its good for everyone because resolved their debt through forgiveness of it. Debt is a concept that people are just not getting! I have news - someone (in this case taxpayers) are actually responsible for that debt and it really does have to actually be paid off one day by someone! That concept is what most don't comprehend. They believe that it will just go away - so let's keep printing money to hold everything up. They agree that not having banks mark the value of their debt to market and policies of extend and pretend are great ideas. They believe that it is ok to bailout sovereigns like Ireland, Greece, and in the future Portugal and potentially states like California - without anyone cutting their overspending. If we don't have to deal with our problems - maybe they will just go away!! Let's all close our eyes and sing Kumbaya! Great idea - NOT!!! We are just kicking the can down the road and blowing more bubbles. Bernanke is Greenspan on steroids! I am long the market now. One day though - maybe it's weeks or months - or maybe it's a year from now, we will have to deal with reality at some point and folks - it won't be pretty!! This is hardly a problem just for those unemployed.
Thursday's Sell-Off: Bad News for Bulls [View article]
Bulls and Bears do make money - only at different times. When the market is charging forward - they say it is bullish and if you are long (own) stocks you make money. When prices are being clawed lower they say that is bearish. If you are short stocks (sold a stock in anticipation of purchasing it at a lower price) you can make money then. I consider myself a dual directional advisor - meaning I should be bullish as the market advances and bearish when it's in retreat. However we seem to be in a narrow trading range between 1040 and 1125. Unless you are a large risk taker, using margin (a description which does NOT suit me), this environment is difficult to make money in. I am looking for a break either above or below those levels to put more trades on. Follow me and I will keep you posted as my thoughts progress.
The Real Price of Oil: A Closer Look at Investing in USO [View article]
Jonathan - Excellent point - however if you compare USO to USL since the crisis really began in the Middle East and North Africa - USO's performance is almost double that of USL. If we remain in a crisis mode - the what have you done for me lately trade may well be USO - which is why I picked it over USL for this article. Thanks for your commentary as you are correct for a more normal environment USL should outperform.
One of the problems here in the US versus Australia is the rate of earnings on cash investments. If David is getting 5% in Australia while he waits that's terrific! In the US the rate is less than 1% or in many cases 0%. This is especially difficult for seniors who do not want to take much (or any) risks - but are now not earning any return.
Thursday's Sell-Off: Bad News for Bulls [View article]
Explorer - If you just used the 50 day cross over or under the 200 day moving averages as a buy or sell signal - there is very little whipsaw action and has done a great job getting you in or out of the market over the last 11 years.
To Chris - With today's (6/23/11) I'll claim victory on this one (SCO) and am very happy with my long term returns. Where are your selections and articles with your suggestions. As I review most of the articles I posted on SA - they have mostly produced positive returns. When put against my small losses because I have used stops for every position for the past 21 years - my clients have done extremely well. I suppose you love the socialist policies that are at work in the markets around the world. When they unravel you will most likely be left speechless and possibly penniless as well!
The Debt Problem: Implications for the U.S. and Other Nations [View article]
Peregrinus & nmelendex both make excellent points and most likely the cuts and market reaction will be what both predict. The training wheels of the Fed are due to come off in a couple of months. It will be interesting to see who makes up for the 70% of Treasury buys that the Fed has been making since last fall. Rates may have to go up to attract buyers of our debt.
Rich - I agree with your assessment. That is why I closed with the line about the stars staying aligned. The stars don't drive markets or human behavior - nor do these historical seasonal and other cyclical anomalies drive markets. The market is currently being backed by newly created Fed dollars, the rest is coincident. In the previous paragraph I had outlined what could go wrong, so I was trying to create a feel good list as well. The best I could do was refer to Santa Claus and all.
Both of you make valid points - however Michael - if the dollar starts to rise again here in the near term and the inverse correlation remains intact - then 0% return in cash will be much more appealing than investing in asset classes that are losing value.
Nothing Fun About the Current Market Environment [View article]
Too Soon to Call End to Correction [View article]
Market Outlook: Bear Case Is Running on Fumes [View article]
The bullish case as stated is the 200 day moving average has been pierced to the upside, we had three successful tests of 1040 on the S&P, and most importantly a global government coordinated effort to not let the markets crash! The last one is very powerful motivation and support - which is the primary reason to be long as I am.
I watch the markets and invest in what I see it doing. Buy and hold is not in my vocabulary. While I would love an economic recovery and a new bull market that goes up for years to come, at this stage to ignore the possibility of a decline is folly. I am a pragmatic investors, which means I have the right to change my position as conditions change.
So call me a nervous bull!
Between a Rock and a Hard Place [View article]
Between a Rock and a Hard Place [View article]
What a Run for the Markets, But Is the Rally Over-Extended and Overbought? [View article]
One comment is that this is a problem only for those unemployed - Really?? The fact is that 1 in 5 mortgages are under water. That apparently doesn't concern these posters - is exactly the problem. They most likely believe that when someone declares bankruptcy that its good for everyone because resolved their debt through forgiveness of it. Debt is a concept that people are just not getting! I have news - someone (in this case taxpayers) are actually responsible for that debt and it really does have to actually be paid off one day by someone! That concept is what most don't comprehend. They believe that it will just go away - so let's keep printing money to hold everything up. They agree that not having banks mark the value of their debt to market and policies of extend and pretend are great ideas. They believe that it is ok to bailout sovereigns like Ireland, Greece, and in the future Portugal and potentially states like California - without anyone cutting their overspending. If we don't have to deal with our problems - maybe they will just go away!! Let's all close our eyes and sing Kumbaya! Great idea - NOT!!! We are just kicking the can down the road and blowing more bubbles. Bernanke is Greenspan on steroids! I am long the market now. One day though - maybe it's weeks or months - or maybe it's a year from now, we will have to deal with reality at some point and folks - it won't be pretty!! This is hardly a problem just for those unemployed.
Thursday's Sell-Off: Bad News for Bulls [View article]
The Real Price of Oil: A Closer Look at Investing in USO [View article]
Sleepwalking at the Stock Exchange [View article]
Too Soon to Call End to Correction [View article]
Thursday's Sell-Off: Bad News for Bulls [View article]
Reasons for Lower Oil Prices [View article]
The Debt Problem: Implications for the U.S. and Other Nations [View article]
According to Plan? [View article]
Nothing to Cheer About [View article]