Budget crisis V. The Dow

[peternap]

nice action today, it was just crazy tho.  I saw a 72:1 down volume tick at one point.  Crazy crazy, I don't think it was ever that heated in 2008.  I exited my netflix puts with a nice return.  Might be too soon, but no one ever went broke taking a profit. 

The market structure is soo jacked here I tend to expect a rip your face off rally or an outright crash.  My bet is short term reversal with some green days tomorrow or next week; longer term, lower highs and lower lows trending down. 

I'm expecting something that resembles stabilization Tuesday or Wednesday Muldoon, maybe even a short bounce. What happens beyond that is unclear. I'm watching this very carefully because it could be much worse than I think....or just another bump.

Right now I'm tickled pink that gold is nearly $1,700.00 and oil is down.

BUT....Food costs are way up. You think there might be just a little inflation the Government bean counters are missing.
Time to take a few profits and head to the stock auction for another steer. They're going cheap right now.

[Windpower]

 dow is down 350

I just checked my 401K

they have a 30 day 'lock out' to prevent 'short term trading' (just started this policy Jan 2011) before trading within the T Rowe Price funds was almost unlimited

I was considering going into stock after this next bottom (who knows where that will be)

But I sure don't want to be locked out of going back to the 'cash' fund I am in now (it has been returning over 4% for the last 2 years with no losses)

Peter I like your idea of getting a steer or two -- I just can't do it because the pasture at the farm is not well fenced

hhhmmm maybe time to invest in some posts and fencing 

[muldoon]

I have a few thoughts on this newest direction, and I intend to put them down tonight but want to address a few comments I have seen. 

Dollar-cost averaging, boys....think long-term. 

I never try and time the market.  I max out the 401(k) regardless of the market conditions.  The only timing technique I have used is to try and add more to the IRA when the market is lower. 

Buy and hold works, except when it doesn't.  I think you need to consider secular bull and bear markets.  I believe we have been in a secular bear market since 2000 that could continue for another 10 years.

Keep this in mind - today on the S&P we traded at a the same print from 1998.  Meaning if you bought in 13 years ago, you lost money.  For a long term investor this is disaster. 

Buy and hold is a great strategy at certain times, a horrible one at others. Equities went nowhere from 1966-1982 (16 years), 1929-1950 (21 years), and 2000-? (11 years so far). It worked great from post-WWI to the 1929 crash, during the Eisenhower and Kennedy years, and during the greatest bull run of them all from the early 80s to the new millennium.

It works when it works, and if you only look at a 30 year span it looks like it always works.  It Doesn't.  The cycles involved are much larger than 30 years in span. 

I'm expecting something that resembles stabilization Tuesday or Wednesday Muldoon, maybe even a short bounce. What happens beyond that is unclear. I'm watching this very carefully because it could be much worse than I think....or just another bump.

Right now I'm tickled pink that gold is nearly $1,700.00 and oil is down.

BUT....Food costs are way up. You think there might be just a little inflation the Government bean counters are missing.
Time to take a few profits and head to the stock auction for another steer. They're going cheap right now.

We are currently trading around 1115 on the S&P.  A few days ago it was 1350.  Basically, we have lost an entire years worth of gains, pretty much back to the start of QE2 that was announced after the Jackson Hole meeting.  You are correct in mentioing that food prices are up, and gas as well.  What has happened is that "stimulous" is gone, but the unemployment, except food, except fuel.  The games Bernanke plays have left us continually in worse shape then when he started. 

[Native_NM]

So let's say I put $15k a year away for 13 years, and my balance at the end is $195,000, because the market is flat.  I'm still ahead $66k real cash in my tax bracket, and that ignores state taxes. 

[John Raabe]

Muldoon:

What does a long term, non-trader investor do in a secular bear market?

(I guess buying gold [metal or miners] in 2000 would have been a good investment at least this time.)

[Native_NM]

Muldoon:

What does a long term, non-trader investor do in a secular bear market?

(I guess buying gold [metal or miners] in 2000 would have been a good investment at least this time.)

Ask him how many "really good days"  or "really bad days" there were over any "secular period".  In other words, over any period of time, the big increases (or the decreases) were concentrated into a handful of days.  If you missed the 30 best days over the last ten years, you would be negative instead of flat.  If you magically pulled out of the market before the 30 worst days over the last ten years, and jumped back in the next day, you would be fabulously wealthy (and under SEC scrutiny).  Over the last ten years, less than 30 days account for almost the aggregate closing price today:  11.1K.  To put it another way, if you missed those days, but were in the market every other day, you would have zero. 

Secular is a fancy trading word for long-term trend...but discounts the huge impact of statistical outliers and the importance of those key data points on the trend line's overall shape.  Take every point over the past 10 years, pull out the outliers (either winners or losers) and plot the line.  Something fishy in River City?  Yep.

[Native_NM]

I'm not a stock analyst, and certainly not an expert on Wall Street matters.  I have spent a considerable portion of my career in professional and corporate accounting, including positions as CFO.   My jaded position is that the whole system is rigged; save as much as you can, minimize your tax burden as much as you can, and not worry about the rest.

Remember, wealth is not the same as cashflow, and vice-versa.  Dug here should be an inspiration to millions of Americans, as he is actually wealthier than half the population in the most affluent cities in the US.  That is a hard fact.  My wife and I are working toward zero debt (including the house).  If I can get my kids through college without any student loan debt I'll be a proud, proud man.

As an aside, I'm sure many of you saw last week that almost half the nation could not come up with $2,000 in five days.  Think about that one!

[ScottA]

The stock market is totally rigged like any self respecting casino. Get out while you can.

[Windpower]

based on the asian markets (down) I expect another big down day

futures down 100 already

sure am glad I am out of stocks

[peternap]

I'm expecting something that resembles stabilization Tuesday or Wednesday Muldoon, maybe even a short bounce. 

Yep, short bounce is here. Probably close flat or close to it.
Gold is still going up

[John Raabe]

Here is a reminder that the classical economists always understood - we are enveloped in a POLITICAL ECONOMY and two are linked at the hip. The economic adjustments we are making now are tied to the political adjustments we will, at some point, also have to make.

http://www.stratfor.com/weekly/20110808-global-economic-downturn-crisis-political-economy?utm_source=freelist-f&utm_medium=email&utm_campaign=20110809&utm_term=gweekly&utm_content=readmore&elq=761c2e5c240b4a64819f1b236ea68544

[OlJarhead]

Here is a reminder that the classical economists always understood - we are enveloped in a POLITICAL ECONOMY and two are linked at the hip. The economic adjustments we are making now are tied to the political adjustments we will, at some point, also have to make.

http://www.stratfor.com/weekly/20110808-global-economic-downturn-crisis-political-economy?utm_source=freelist-f&utm_medium=email&utm_campaign=20110809&utm_term=gweekly&utm_content=readmore&elq=761c2e5c240b4a64819f1b236ea68544

Interesting article but immediately apparent is that the author is more interested, perhaps politically, in addressing the problem from a specific point of view while possibly ignoring another.  I need to finish reading it, but from the first 1/3rd or so I'd say "yes, but where is the part about the political ideology that was bent on controlling the markets in order to allow everyone to buy a home whether they could afford it or not?  Or how about the politics behind entitlements?  Socialist programs?.

I'll keep reading but one thing I've learned is that objectivity isn't always something economists or political writers have much of.

[OlJarhead]

Here is a reminder that the classical economists always understood - we are enveloped in a POLITICAL ECONOMY and two are linked at the hip. The economic adjustments we are making now are tied to the political adjustments we will, at some point, also have to make.

http://www.stratfor.com/weekly/20110808-global-economic-downturn-crisis-political-economy?utm_source=freelist-f&utm_medium=email&utm_campaign=20110809&utm_term=gweekly&utm_content=readmore&elq=761c2e5c240b4a64819f1b236ea68544

The further I read the more I think "Clap Trap".  The author has no idea what he is talking about frankly, and is clearly an ideologue.

[h0rizon]

Buy and hold is a great strategy at certain times, a horrible one at others

Agreed but disagreed.  That depends largely on how long you buy and hold.  For some (myself included) it's 40 years.  For others, it's 40 months. More importantly, you should be questioning how much stock you are invested in compared to how long you have.  I have no problem with a 20 year lull in my 401k, with the caveat that it doesn't happen when i'm 15 years away from retiring.

As with construction, it's all about using the right tool for the right job.  Stocks are but one tool in the investment toolbox.

we are enveloped in a POLITICAL ECONOMY and two are linked at the hip.

We are enveloped in an EMOTIONAL ECONOMY more so than a political one.  Large run-ups and associated bursts/pops are fed largely by the general populous, based on their beliefs and emotions at that moment.  Take yesterday's stock crash; everyone has known for quite some time that the fundamentals of the government and economy are poor, and yet the market has been on a steady uptick.  Suddenly we are downgraded by ONE company to AA+; essentially just putting the rubber stamp on already well-known issues - and suddenly everyone pulls out of the market.  And now, the market is trending up again today. 

Any political actions are simply leveraging this fact. 

Remember, wealth is not the same as cashflow, and vice-versa

Spot-on.  If you have $0 to your name, $0 yearly expenses, food on the table every-night and a smile on your face, you are every bit as wealthy as those "1% elites".

[considerations]

I make mistakes in life, some little, some not so little....I take my lumps, look for the lessons available, and try to make use of them....se la guerre.

But I really hate it when other people's mistakes or poor choices take me down with them.  I could be really angry about what is happening in DC....but it seems so not worth it.   

[John Raabe]

Good point Considerations. A good and reasonable point.

[Native_NM]

So who jumped out of the market and missed today's rally? 

[John Raabe]

Even though there is so much dysfunction, I for one am still in the market with my old-age money betting on America (largely) long term.

The strengths are many and don't make the news or blogs as they are taken for granted and therefore invisible.

All the hissing and spitting is on the margins and can usually be ignored - in politics and business. Fear mongers are everywhere trying to get you to buy in.

[Native_NM]

Even though there is so much dysfunction, I for one am still in the market with my old-age money betting on America (largely) long term.

The strengths are many and don't make the news or blogs as they are taken for granted and therefore invisible.

All the hissing and spitting is on the margins and can usually be ignored - in politics and business. Fear mongers are everywhere trying to get you to buy in.

It works for Buffett; it can work for you. 

[OlJarhead]

So who jumped out of the market and missed today's rally? 

Looking at today it might be better to ask:  who stayed in, gloated and now is losing?

[peternap]

Going down!

[OlJarhead]

Going down!

lol

sadly I fear it's going down a lot further but I suspect it will bounce back up first, drop some more, bounce up again and so on -- I'm no market guru though, heck I'm a total dummy when it comes to the markets but I see Gold is nearly $1800 now and if the trend means anything then I suspect it will break $2k within the next 6 months and the markets?  Probably go down and up at the same time (inflation might make them look up but vs gold on the other hand (and other commodities) will probably be down).

I have no $$$ what-so-ever in the markets mind you as I pulled out my 401k and annuities when they were still worth something and I had some hair left still (didn't want to pull the rest out) and figure veggies and land are better investments for me.

Again, I'm no guru or even a market wannabee but I believe we are in the beginning stages of a 'Greatest Depression' and that entitlement spending will drive it on for longer then the last big one.

Hang on to your hats because if I'm right it's gonna suck!  But I pray I'm totally off my rocker though.

[Native_NM]

If you are in it for the long haul, you don't worry about the daily gyrations. 

[OlJarhead]

If you are in it for the long haul, you don't worry about the daily gyrations. 

Good thing I'm not in it at all...but I wonder if that's what folks thought in Argentina before theirs collapsed....though I have heard that some bought stocks when they were pennies on the dollar and a decade later became rich....

Me?  Don't have the money but I believe the writing is on the wall.

[peternap]

Actually, NM has a good plan. It will work as long as there is a viable economy and if there is not one any longer...all the cash will be worthless anyway. So he's in a win/win position as long as  he has the time.

I'm 99% out of the market, 100% out of bonds and heavily invested in Gold & Silver.
I also have several tons of lead which I still think is the best investment going for the long haul.

Everything I own is paid for and I'm kinda enjoying the show.