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Going GlobalIn this ever changing economy we need to look to new markets and not let ourselves get entrenched in the old ways of thinking. It is time to break free of speculative buying in terms of our personal feelings and what others think and start buying and purchasing on sound financial principles coupled with a high degree of risk. When I say risk, I mean new markets, new ideas and under valued... more |
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I liquidated most of my porfolio yesterday (My real portfolio). My losses had been in-line with Dow losses. When the Dow loses 500 I lose 500. I lost $150 today on an almost 700pt drop. So I did something right. Now I am strongly considering reducing most of my remaining stocks to MMA to wait an collect interest on cash. Listening to CNBC, in the past 2 weeks, I have heard alot of guests stating they have gone to cash. I thought I could recover, but I didn't heed the warning and in the past 5 days I lost 25% of my portfolio, half of it was margin. I caught a small bounce yesterday, and sold at levels pretty much calculated the night before to gaurantee liquidation. This is just my reaction to this situation.
As for my topic. What is happening here? Is this a bottom? First I should discredit myself, I am a noob, this is my third year investing, and I have lost alot of money. Mostly because I haven't learned how to quit while ahead. If your still with me, I am getting to my point.
"Pure Panik", "Indiscriminate selling", "Capitulation?" I don't know what capitulation is really. Here is what I gathered... oil prices were the straw that broke the camels back, i.e subprime. This caused banks to fail, then brokerages found themselves suddenly overleveraged when their underlying assets losty value. 2002 some legislation allowed brokerages to leverage upto 40:1 (please correct me if I've misunderstood something) That money never really exsisted then right? So I ask what part of this unrealistic growth since 02 do you think might have been bought with essentially monopoly money? With this observation I look at the low in 2002 (7700+/-) and then I figured some of this growth must be real so I said to myself 8500 sounds good. That was a few weeks ago (take my word) and now here we are. Now I am hearing some estimates putting the bottom at 7500pts.
So are we gonna see a retracement? I gotta ask, does the money even exsist now to retrace much? The 40:1 leveraging in done. Do global economic conditions support an influx of investment? Also are hedgefunds,investors, etc, done deleveraging? ( I know I am) I really think once the financial market finds a bottom, it doesn't recover much. We are definately in a recession. http://www.econlib.org/library/Enc1/Recessions.html, recessions last from 6-43 months according to this link. What kind of a recession are we in? I don't see retracement, I think this recession should be moderate in length, 18 months maybe due to the severity of the situation.
I think there is more to come, the U.S pres. election results may reestablish some stability, but speculatively, there is an arguement against the effectiveness of both candidates economically. Some analysts feel we are bottoming here. I'd feel better @7500 to buy however, and even then cautiously. The monopoly money is gone, hedgefunds and brokerages are crippled, so are investors. The deleveraging has sucked alot of investors dry.
Just some of my thoughts, I was hoping to inspire some debate and discussion.
Thanks.
Having owned 4-5 homes in my lifetime, I knew a boom in mortgages was dangerous because of the inherent ability to work fraud into every aspect of the process, but then having Wall St. leverage the mortgages 30 to 40 times in paper that no one seems to really understand anyway seems like just a meltdown waiting to happen and with Bush and Friends running the government no one checked on any one and if they did, they were pulled off by Bush appointees. Some of this has been going on since Reagan's time in office until there was little or no regulation. And McCain promises the same--he would put your Social Security in the market, he would tax your health insurance and give you a meaningless $5K tax deduction, and give tax breaks for rich people and oil companies. The US Dollar is falling in value as I write this against even the Indian Rupree! So much of the worthless American legal tender is now in the marketplace that it may become of less worth than the paper it is printed on. Remember Germany after World War II--Bush and Friends and McCain and Friends have brought us to this party. Is tomorrow going to be a Black Friday?
Foreign market Down sharply overnight, and US Fut are suggesting another big selloff today. In order to be a Black Friday it would have to drop big. Over 700 big. If the world mkt is any forecast 7-10% drop today is likely. So in that case, yes Black Friday is very likely, imo.
So McCain wants to deploy archaic (and counter productive) Reaganistic 1980s policy. Is that what your saying? I was a baby then, and I have never educated myself about Reagan. If I am understanding you right, McCain is trying to relive his 'glory days' in US politics. That's McCain, that guy is such a dork. He is stuck in the past, and wants to bring this thing full circle by ignorantly redeploying stone age government. 'God' help us if middle america, aka the red states, win this election. If he gets in it'll send the economy back into the 70s. Damn, I didn't realize he was bringing reagan back from the dead. His old hero, right? Now I REALLY like Obama.
just for the record, I like Reagan, and maybe he was the guy we needed in 1980s during the cold war. I jus feel strongly that we don't need that now. Especially since there was a bankng crisis in the 80s.
Reagan was a jerk as Governor of California, but you know he was not as bad as I thought he would be as President. I think it was because he held the nutcases in the Republican Party at bay and made a personal friendship with Tip O'Neal, the Democratic Speaker of the House. McCain is simply way out of his depth and has no idea how to wield the Powers of the Presidentcy or even what those powers are, which is just a damn shame! The people of Arizona should vote him out as Senator in the next election he runs in as Senator from their state.
I did a little research and I found this article wrote in 2005 http://bigpicture.typepad.com/comments/2005/12/100_year_bull_b.html. It was about a pattern of bear and bull periods lasting between 8 and 21 years. There are a couple of ironic statements one of which would indicate that this could be a bottom.
The first statement states that a 2 1/2 year bull run from 2002 to 2005 when the article was written would be unprecedented. This bull run refered to ended in October of 07 making it about five years long.
The second statement refers to the great depression and tech bubble. It suggests that these "moonshots" were followed by 80% drops. Even the 87 crash has a similar statistic if you look at the increase of 1700pt run from 84 to 87 followed by a 1400pt retreat. There was an approximate 4100pt run from 98 to 2000 on the Dow followed by a 3500pt retreat by 03. From 03 to 07 there was a 6000pt run followed by a currently 5500pt retreat. I am sure there are more examples.
I am not saying it means anything, just thought it was interesting. Here 's other interesting links:
http://www.frbsf.org/education/activities/drecon/answerxml.cfm?selectedurl=/2001/0102.html This is another analysis of bull/bear mkts broken down by year, and other interesting graphs.
http://en.wikipedia.org/wiki/Refractory_period We are entering a "refractory period" heres how it occurs in physics.
Here is another analysis of bull/ bear periods outlining Commodity ranges:
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