Financial topics

[The Grey Badger]

Is anybody still taking the stock market seriously? Their pants have been on fire for years, now.

[Higgenbotham]

Well, I am still short and have now lost 13% of my money.

And just when you give up is probably when the market will resume its decline. That's not just amusing it's probably true.

The key here is not to get too wedded to your beliefs. Yes, bad things are coming but history shows us that the stock market can remain irrational longer than most of us can remain solvent. One thing I know is that the market will offer tremendous value for a period of time prior to the start of the next great bull market, assuming there is one. I also know that our government must once again allow failure in order for our economy to succeed. Given these two basic principles I suggest that you conserve what you have and be very, very patient.

Actually I have been doing pretty well shorting spikes-up over the past few months but always seem to get back to even as the market goes a little higher than expected or, more likely, I get impatient. I am taking this unique opportunity to teach myself greater patience as I really think that is the single biggest weakness of most investors, including myself.

--Fred
http://www.acclaiminvesting.com

I wouldn't be posting specific information about my losses except for one thing. There is a lot of BS being posted on the Internet by people who are claiming to be making money in the markets. Usually they have some newsletter or gimmick to sell. It's not that easy to make money in the markets. I would guess definitely fewer than 3% of all investors make money over a lifetime and it is probably less than 1%. Further, even those who do make money in the long run take substantial hits in the process. A good example was Warren Buffett's op ed in the New York Times in October where he said he was buying stocks with his personal money. I checked the price of the S&P 500 the morning he made that call. From that time to the March low, the S&P fell 30% from where he bought. It is now up 20% from where he bought. If Buffett with his billions, his vast experience and his connections can't time the market without taking a hit that size, then nobody can. Unless they're lucky. If anyone wants to fool with this market, it's going to be painful. I was short at the 2007 top. It was painful then and it's painful now. Nothing has changed and it never will. And, as you said, I may not catch the top this time. I almost gave up in 2007.

Nobody can even be sure that stocks will eventually become great values as they have in the past. It would depend on whether any infrastructure remains to support business when the Fourth Turning is complete. If all out nuclear or biological warfare ensues, then I seriously doubt there will. It'll be building again from scratch.

PS This probably has less to do with patience and more to do with being wedded to beliefs; in other words, being wrong back in July and August about whether the Fed and Treasury could create the conditions for another bubble and whether the public would embrace the bubble again (or sit back and let the banks speculate with their money), then being wrong a second time by underestimating how big this bubble could get. There were people on this thread who thought that a bubble could develop but we didn't believe it could. Therefore I became and remain,

Wrong Way Higgy

[The Grey Badger]

I'm not even bothering my head with the stock market any more. As John has pointed out, their numbers are pure Bulshytt, quite as much as their public pronouncements. "Figures don't lie, but liars can figure."

[gerald]

deflation coming?

The Fed's own Monetary Multiplier crashed to an all-time low of 0.809 in mid-December. Commercial paper has shrunk by $280bn ($175bn) in since October. Bank credit has been racing down a hair-raising black run since June. It has dropped from $10.844 trillion to $9.013 trillion since November 25. The MZM money supply is contracting at a 3pc annual rate. Broad M3 money is contracting at over 5pc.

Professor Tim Congdon from International Monetary Research said the Fed is baking deflation into the pie later this year, and perhaps a double-dip recession. Europe is even worse.

from

http://www.telegraph.co.uk/finance/comm ... evels.html

[Higgenbotham]

I'm not even bothering my head with the stock market any more. As John has pointed out, their numbers are pure Bulshytt, quite as much as their public pronouncements. "Figures don't lie, but liars can figure."

Pat, You might like this one. Stiglitz says Wall Street is hyping up the economy so they can dump stock off on the public. There's a short 1.5 minute video here where he's interviewed on Bloomberg. Very funny.

http://crooksandliars.com/susie-madrak/ ... ng-emperor

Wrong Way Higgy

[abs]

Which currencies, governments and sovereign bonds are the safest at this point? Bill Gross recently commented saying that he thought Germany would be more stable than the US since their debts are low and, presumably, fear of a repeat of the hyperinflation of the Weimar Republic still lay in the minds of government officials. Apparently there are laws in Germany (and the EU) controlling the rate at which money printing and debt monetization can occur. The US and Britain are said to be taking a much more aggressive tact toward money printing. Many of the analysts I follow are talking about the recession worsening and, after some time, severe inflation and perhaps hyperinflation. How many of us have faith that Bernanke will "know" when to stop printing? I suspect that he will keep on going until we have extreme inflation which will further decimate households and cause a permanent drop in standards of living.

Thoughts?

Andrew

[gerald]

Which currencies, governments and sovereign bonds are the safest at this point? Bill Gross recently commented saying that he thought Germany would be more stable than the US since their debts are low and, presumably, fear of a repeat of the hyperinflation of the Weimar Republic still lay in the minds of government officials. Apparently there are laws in Germany (and the EU) controlling the rate at which money printing and debt monetization can occur. The US and Britain are said to be taking a much more aggressive tact toward money printing. Many of the analysts I follow are talking about the recession worsening and, after some time, severe inflation and perhaps hyperinflation. How many of us have faith that Bernanke will "know" when to stop printing? I suspect that he will keep on going until we have extreme inflation which will further decimate households and cause a permanent drop in standards of living.

Thoughts?

Andrew

Yes, most people in the US will see a permanent drop in their standard of living. This is due partially to the labor arbitrage that exists between the US and other countries of the world.
Our labor cost are too high due to taxes, regulations, and benefits. These costs can be reduced by reducing these, as well as dollar devaluation and automation. However if greater automation is implemented what do you do with the people? As for investing in foreign countries what do you do if the countries institute repatriation controls or confiscate investments of foreigners? Countries will do unthinkable things if their backs are to the wall.

[abs]

Which currencies, governments and sovereign bonds are the safest at this point? Bill Gross recently commented saying that he thought Germany would be more stable than the US since their debts are low and, presumably, fear of a repeat of the hyperinflation of the Weimar Republic still lay in the minds of government officials. Apparently there are laws in Germany (and the EU) controlling the rate at which money printing and debt monetization can occur. The US and Britain are said to be taking a much more aggressive tact toward money printing. Many of the analysts I follow are talking about the recession worsening and, after some time, severe inflation and perhaps hyperinflation. How many of us have faith that Bernanke will "know" when to stop printing? I suspect that he will keep on going until we have extreme inflation which will further decimate households and cause a permanent drop in standards of living.

Thoughts?

Andrew

Yes, most people in the US will see a permanent drop in their standard of living. This is due partially to the labor arbitrage that exists between the US and other countries of the world.
Our labor cost are too high due to taxes, regulations, and benefits. These costs can be reduced by reducing these, as well as dollar devaluation and automation. However if greater automation is implemented what do you do with the people? As for investing in foreign countries what do you do if the countries institute repatriation controls or confiscate investments of foreigners? Countries will do unthinkable things if their backs are to the wall.

That's exactly what I'm trying to solve. I don't like China since I think it's in a major bubble, John has pointed out that the Euro has major issues, we all know how bad things already are and are likely to get in the US, so what does that leave us with? Canada? Brazil? It would be nice to shift the dialog a little bit to not just focus on the looming challenges and risks but also to identify some mitigation strategies. Certainly, moving to cash, shorting the US market and so forth "may" help. On the other hand, if we can identify currencies that are likely to be stable (or to appreciate) in countries with low debt loads or who are outright creditor nations, then those may be the best currencies to hold. Everything has risk including moving out of the US dollar, but in a global crisis like the one we're currently in, intelligent diversification may be a best bet. Thoughts?

Andrew

[freddyv]

...many of these bankers will be going to jail, just as bankers went to jail in the 1930s when they did similar things.

I am a great believer in Generational Dynamics as I have seen it play out over the course of my life and now, as we wade deep into the crisis era, I see it become more obvious and ominous.

I quoted the above sentence because I think this is the key to knowing that we are not yet at the depths of the "depression". While we have seen the initial shock to the system and progress has been made among the people, our noble leaders have yet to gain a clue about what is going on and where we are headed. Of course most of them will not ever have a clue and that is why many will have to be dragged off to jail before I will believe that we have turned the corner and healing can begin.

While many who share my beliefs that we have yet to see the worst seem disheartened by the recent runup in stock prices I see it as a necessity of the need to destroy wealth. As many come to believe the worst is past they will once again take risk, believing that the upward trends of previous decades will resume, and once they are convinced that happy days are here again the markets will teach them lesson after lesson. Only when Jim Cramer is finally off the air and Hank Paulson and Timothy Geithner are in jail will I believe that we have truly learned our lesson as a society.

But that's just my opinion.

Fred
http://www.acclaiminvesting.com

[abs]

In today's Elliot Wave Theorist, Robert Prechter is calling for an extremely likely top in the US equities market by the end of this week. He called both the massive leg down starting at the end of '08 as well as the turn in March with uncanny accuracy. He's been expecting a turn down for some time and may have starting calling for it a little early a couple of months back, but I think he may really be right this time.

Andrew