So much I want to talk about....this was going to be a very long post but I figure it's best I just get down to what's important. Obviously, the big news over the weekend was the S&P US debt downgrade. I said it before, these rating agencies are a joke. Remember, these are the same geniuses who slapped AAA ratings on MBSs and had investment grade ratings on all the financials that went under in 2008 and didn't downgrade them until after they were already crushed and bankrupted. The same thing happened with Enron and Worldcom...these clowns had their heads up their asses keeping investment grade ratings right up untill they filled for Ch. 11.
So, after being badly embarrassed in 2008 for failing to see the collapse, it seems to me that S&P is tying to make up for it by being a tough guy with this US downgrade. The US treasury pointed out that S&P made a $2 trillion mistake in their deficit projections, which is pretty large, and yet these jokers still stuck with their downgrade citing "political factors" as the main motivator. lol! Who are you clowns fooling? You just got embarrassed yet again! My grandmother can do a better job rating bonds then these agencies.
Clowns or not, this news will simply add fuel to the sharp loss of confidence and panic that's taking place in the market. Buying during panics, even during bear markets is usually a money maker so long as you are a strong holder able to take the pain until the rebound occurs. If you bought during the fall of 2008 or the flash crash you ended up doing quite well so long as you held strong because it took months for it to pay off and there were lower lows in the interim...in 2008 the lower lows were quite significant. That is where I see market right now. We are in the range where any buys here will likely pay off sometime down the road, but in the interim, you have to be prepared to grind it out and perhaps be early. If you use tight stops and look at the market every hour, every day, odds are high you'll end up making an emotional decision. You have to be a strong holder. If you can't be then it's best to wait for the dust to settle and buy when the bulls have regained control.
Let's consider the bear case for a moment. The broken clock bears are really pounding the table now with a recession call. Now, just because they were wrong as could be for the past 2.5 years about the market doesn't mean you should automatically dismiss them. Hussman had a lengthy commentary this weekend and is flat out calling for a recession based upon his composite of indicators. He pretty much called for one last summer too along with other bears. Oh, but this time it's gonna happen - so the bears say. Well we'll just see now won't we?
Here's the deal. If the bears are right and this slide is the first leg of a new bear market because of a forthcoming, recession you're going to be sorry if you aggressively bought the dip (and didn't flip quickly on strength) because the market drops 40% on average during recessions. If it turns out that no recession is in the cards and this is just a correction, then odds are the market will do some base building for several weeks or even months before taking off again. Therefore, either way, the best move here is to do nothing if you're mostly in cash like me. Some selective buying on weakness is warranted but you need to respect market action if you're bottom picking....the wind is no longer at your back so don't be a hero.
The bottom line is that it's best to remain mostly in cash and wait patiently for the dust to settle for the next several weeks and maybe months to get a better idea as to where this market is headed longer term. Waiting and doing nothing will cause you to miss out on all the ST bounces and declines that will occur during what will likely be a volatile period. Fuggetabout it. Don't get sucked into the sports gambling aspect of this game.
I want to say more but I've had a long day and I'm going to bed now....maybe I'll post again tomorrow. Hope everyone is holding up ok.
At the end of the day, the question I think we have to ask is - Is the bull market that started in March of 2009 over?
ReplyDeleteI am just going to manage risk from this point because I am down on my positions. I will only add if I see the market stabilize and recover. I have gotten my hands chopped off too many times in 08 thinking stocks were too "cheap" then later get carried out in a stretcher for been greedy.
it's a fair question to ask which is why it's best to simply wait and see how this plays out. It could take many weeks/months for the dust to settle and for that question to be answered. I don't think the bull is over, but I'm respectful of the market telling me that I could very well be wrong about that.
ReplyDeleteMonday closed at the LOD which unfortunately suggests this crash not over yet. But we are now just about as oversold as we were in early October 08 and so some sort of bottom ST or IT should be immanent. I didn't pull the trigger on Friday because that reversal seemed a little suspect....I was somewhat lucky to be right I guess.
Sorry to hear about your recent loses but it seems to me that you are in good shape overall and did well over the past couple of years. You'll be fine....just keep your emotions in check and stay disciplined and patient. Wait until the market changes it's character again
before making any big moves. Until then cherry pick a little or simply sit tight in cash for as long as it takes until you see an edge.
One of the funny thing I should have taken notice earlier about the market's weakness is that many times when I sell a particular stock that I own during the day it usually marks some kind of bottom for that day. Yes I am that bad. That's why I don't even try to day trade. But in the past few weeks, every time when I make a sell, the stocks actually fell even further.
ReplyDeleteI am not gonna lie I have taken my share of hits since we made that Osama Bin Laden top in early May. Only recently, I have been doing okay because I avoided this latest crash by going cash.