Matt Blackman

Five Challenges Ahead as the Corporate Soup Lines Grow

Daniel;
I wish you luck because history is not on your side. I have done some fairly extensive research on the election cycle and the two years after a US election are hard on all markets and stocks pretty much world wide. The ratio for the Dow/SPX since 1902 works out to 93% of the gains occurred in the 26 months leading up to each election versus just 7% in the 22 months after. As well with the exception of the relatively short-lived Oct 1987 meltdown, every single major bear market and recession since WWII has occurred in the 2 years after a US election. The ratio of the Toronto TSX for the 2 years pre-election versus post-election since 1950 is 97:3 or 32:1. Not a very attractive probability (see tradesystemguru.com/co... )

Five Challenges Ahead as the Corporate Soup Lines Grow

Daniel K. just reading your website and compared to you I'm downright giddy! ;-O worldworststockpicker..../

Good job though and an interesting analysis! So are you giving away Cramer's book for giggles and laughs?

Five Challenges Ahead as the Corporate Soup Lines Grow

Daniel K. I am a trader, not an investor. My research tells me that fundamentals, while useful in a longer-term trend to confirm the move (i.e. if fundamentals are supportive of the move its a good thing), do a lousy job of getting you out in time especially at turning points. Right now the fundamentals longer-term like real earnings, election cycle, increasing debt and increasing reliance on foreign buyers of debt look bearish. We are now in the process of breaking the largest number and size of asset bubbles in history which I have seen coming since 2005.... (My first published article on the US housing bubble was in the Oct 2004 issue of SFO...) In my opinion, buy and hold investors are taking a tremendous risk by staying in long-term stock positions.... as I think I said in my Two-Ton Wall Street Conflict of Interest article seekingalpha.com/artic...

However, my primary approach to markets is technical: I watch the charts, take a quick look at the fundamentals to see if they support the trade and make my buying and selling decisions accordingly...

But you bring up an interesting point. Larry Williams once said in a seminar that he is pessimistic every time he enters a trade, and he expects to lose. That way he won't overstay his welcome and ignore his stop loss. In other words, if his trade hits his stop, he quickly exits and doesn't ignore the signal because that is what he is expecting..... Its counter-intuitive when you think about it. Traders by nature are generally optimistic. But that can keep you in a trade longer than you should be and bankrupt you.

Nukldrager - Good point. I need to check the latest BIS (Bank of International Settlements) derivatives data. The problem is that is lags by about 6 months. But from the data I have been seeing, the size of the derivatives market began shrinking in late 2007.... Will take a look at it an do an article update when I have the info....

Cheers,
Matt