Took a long break over the holidays and came to the conclusion that we are entering a bear market. I'm a more active investor in bear markets and have been rather passive in the bull market for the last few years. As Donald Trump says, this where the money is made. When everyone is running for the door, moving their cash out of stocks, that's when you go in a buy at bargain prices. Of course I wouldn't touch the financials, there is still more big write-offs out there and with the insurers failing, that has a deep ripple effect. So I've been studying the yield curve, LIBOR spreads, swap rates, the bottoming out dollar and of course this is an election year. So let's get the recession over with, why not? Many people will still get tempted to go in too early and start buying tech thinking this is a dead cat bounce. When you try to pick a bottom, especially in financials, you are trying to catch falling knives, don't do it. Book value means nothing when they are writing down their assets. Citigroup lost $10 billion in the last quarter and wrote down $16B in bad loans! My predictions here is the S&P will find its way down to 1000 or 1100 (where I recommend start buying). The NASDAQ still has another 15% to go. Ken Fisher says there is a 1/3 - 2/3 rule. Bulls die with a wimper, not in one big bang. They fall 1/3 in 2/3 the time and the remaining 2/3 in 1/3 the time. That's TGH (The Great Humiliator) drawing you in to buy that Intel when it hits 16 or Starbucks when it hits 15. So for the time being, I'm going to be mixing in some market insights as we go along here. Go find some ETF that short the market to park your money.
Federal Reserve Chairman Ben Bernanke is not going to be the next Eli Manning coming down the stretch. In a surprise move the Fed cut rates this morning before the opening. The only cheering today was the NY Giants ringing the opening bell. The Dow and S&P are down over 15% from their highs. Other markets like the small caps are well in to 20% territory. Sorry, it's not enough yet. We've got another 15% to go. The S&P was at 1274 at its lowest level. In another post, I'll explain why I don't like the DOW as an indicator (it has to do with the way its structured). Everyone was selling on the rallies and raising cash. Apple got clobbered after the close, it dropped down in the low 130's. Apple is a consumer luxury, like Starbucks or Nordstrom. People are going to do without. We need a nice, steep yield curve so banks will loan business customers money. That will help techs and other B2B companies. The VIX finally creeped over 30, we bears love that because that means fear is running rampant and we smell blood in the streets. Keep your gunpowder dry, they'll be some good deals to pick up.
Took a long break over the holidays and came to the conclusion that we are entering a bear market. I'm a more active investor in bear markets and have been rather passive in the bull market for the last few years. As Donald Trump says, this where the money is made. When everyone is running for the door, moving their cash out of stocks, that's when you go in a buy at bargain prices. Of course I wouldn't touch the financials, there is still more big write-offs out there and with the insurers failing, that has a deep ripple effect. So I've been studying the yield curve, LIBOR spreads, swap rates, the bottoming out dollar and of course this is an election year. So let's get the recession over with, why not? Many people will still get tempted to go in too early and start buying tech thinking this is a dead cat bounce. When you try to pick a bottom, especially in financials, you are trying to catch falling knives, don't do it. Book value means nothing when they are writing down their assets. Citigroup lost $10 billion in the last quarter and wrote down $16B in bad loans! My predictions here is the S&P will find its way down to 1000 or 1100 (where I recommend start buying). The NASDAQ still has another 15% to go. Ken Fisher says there is a 1/3 - 2/3 rule. Bulls die with a wimper, not in one big bang. They fall 1/3 in 2/3 the time and the remaining 2/3 in 1/3 the time. That's TGH (The Great Humiliator) drawing you in to buy that Intel when it hits 16 or Starbucks when it hits 15. So for the time being, I'm going to be mixing in some market insights as we go along here. Go find some ETF that short the market to park your money.
