Rough close yesterday, yowza.We are scheduled to fly back to the mainland today a couple of hours after the close, unless we accidentally miss our flight.
Did you see the Greenspan interview with Maria yesterday? A panel of financial experts? I didn't know any existed.
I did not get a sense of panic being conveyed yesterday which could be taken a couple of different ways I suppose but I noticed something in the parade of what's happening now segments more so in the questions asked than the answers given.
This hearkens to something Taleb talked about; the need to explain. Sometimes the best explanation is no explanation. If this is a bear market then we can count on it doing certain things. One of which is sawtoothing down to a 30% drop (maybe a little less, maybe a little more or maybe a lot more). The reason for Tuesday's 3.4% drop might be X but it is simply one more tooth in the saw.
The best thing investors can do is wrap their arms around that this is a bear market and this is how they work.
My target for a bottom for SPX has been 1095 because that is 30% from the top and I still believe the bear will be close to normal.
Everyone knows oil, gold, currencies, mining and emerging markets have been pasted in the last couple of months. This has naturally drawn out many people that are extrapolating the trends to continue like $80 oil and $650 gold similar to the $200 oil calls back when it was in the $140s.
If you are interested in just maintaining a diversified portfolio then you don't really need to get too caught up in this sort of thing (diversified portfolio assumes no lopsided bets). Over the last few years these segments have provided an awful lot of lift without having to pick stocks (as opposed to tech where only a few names have done consistently well).
The period where these segments can do this may be over (but i don't think that will be the case, I think this is a big fast panic as the others have been). If so then there will be other parts of the market that fill this role. Yesterday healthcare, telecom, utilities and staples did relatively well.
It is much easier to try to figure whether you have enough or too much as opposed to whether you should have any.
8 comments:
I always thought the easiest job in the world is to be a financial reporter. You give an explination on why something happened (oil's up because people are worried about Iran etc.)but no one ever holds you accountable to the "why" you gave. How sweet.
Food for thought in the Times today from ex-Governor of the Bank of England, Eddie George, entitled "Things are looking up: have faith in the markets".
http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article4726824.ece?Submitted=true
Although he's not one to talk of timing the stock markets he seems to be saying most of the bad news is priced in, and he also talks some credible economics.
The gains from Fannie / Freddie nationalization were given right up.
Roger,
Following are the numbers from the S&P 500:
10/09/07 - 1565 using this as the high.
1096 = 30% correction
1174 = 25% correction
1252 = 20% correction
1234 = 21% correction currently
If this is a normal bear market and at this point i agree with you than why wouldn't it make more sense to sit on the side lines until the S&P crosses over the 200 day moving average of 1350. Wouldn't this preserve more capital tan maintaining a defensive allocation and still loose anywhere from 1 - 3% a week until this bear is through. Once you cross the 1350 mark and a bull market starts there would still be plenty of opportunity. What sense at this point does it make to ride it down another 100 - 150 points. What is the downside of earning 3% in CD's. What would be wrong to keep 60-70% inc 1-3 month cd's. Please explain the counter to this thinking.
Thanks,
BWJR
Roger, when you use the term "lopsided bets", would that be using the S+P 500 as a proxy, more is lopsided, less is not?
BWJR,
What if the bottom is today? What if the market rallies 20% in the one month you have a CD?
Just because that seems unlikely does not mean it cannot happen.
Lopsided bet= 0% of anything or going really big on anything. Financials are about 14% of SPX. The exact starting point of lopsided is subjectve but 28% would be IMO.
Roger,
What if the CD's were laddered at 1,2,3,6 months With the weighting of 10%, 10%, 40%, 40%. This gives you the defense you need and a gradual easing back in possibly with lower valuations. The one to three month time frame seems to me to be safe for CD's with what's going on in the market. Please comment. It also may expose the next sector leaders.
Thanks,
BWJR
not for me.
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