As random, ahem, as my reference to the Brady Bunch might seem so too are the movements in the market as the bear market condition continues to process through to its conclusion.After the rally on Monday I commented on the lack of health belied by such a huge move up. It seems that moves of greater than 5%, regardless of direction, are going to be a normal thing as we work to the next bull market.
A huge focus in my writing and more importantly in my practice has been to brace for something bad and at the same time keep a sense of reason.
On yesterday's post a comment came in that said "screw iceland, my retirement portfolio is shrinking fast." Maybe that is a joke and I was too dense to pick up on that but if not then that is a deplorable attitude. There may be issues in Iceland (still trying to resolve conflicting accounts) with importing food, that's access to food. Bear markets to equities come along every few years, trouble accessing food does not so get a grip and while your at it, a clue.
One notion that has been moving around is that many hedge funds have gone to cash. I have no idea if that is true or not but it seems odd to me. Delever, sure, sell out I don't get. Barry was on PowerLunch trying mightily to make the point that down 40% is the time to think about getting back in and for anyone aggressive to consider leverage, he disclosed using a double long ETF to do so.
Buying a lot of stock is reasonably a difficult proposition for many people but this idea makes the point of how much of a mistake selling out would be
I disclosed recently selling the last of my double short with the same general idea of getting a tad longer; a comment I've made a few times which is that the risk of a big drop is less after a big drop. That is an important consideration for you psyche as well as for any tactical considerations.
Down forty whatever percent is a lot. Fear is sky high as is volatility, people don't know what to do and are getting worked up enough to leave comments like the one I ragged on up above.
It is ok to not know what comes next, not know where the bottom is and to be worried. No one ever did financial damage to themselves by being unsure and worried. People have damaged themselves financially by acting on their being unsure and worried.
One bit of clarity. I said I sold the double short ETF to get a little longer but on Monday I sold a stock (not part of a hedge strategy) at the end of the day. That may seem contradictory but 10% up in a day seemed like a good time to take something off.
11 comments:
Roger, these are extremely difficult times to generalize about, and I think you're doing a pretty fine job with what is "all over the map".
But please include the following data point(s) in the info you're trying to synthesize:
http://quantifiableedges.blogspot.com/2008/10/scary-pictures.html
I would LOVE to believe that there will be one final good shakeout, a retest of our low and then we can slowly grind our way back to something like historical valuations.
The link suggests that there may be great danger for those who (like me) are increasingly doubting that it can go much lower.
Removing your double shorts may be the right move in the near term, but the underlying fundamentals are still quite stressed and it is hard (impossible?) to say what "normal" is, what probabilities favor, and what the "right" course of action may be right now.
Fear of the unknown is not completely irrational. Particularly if you're talking about your children's education/future and your own retirement.
Keep it up and don't put away the "warning, Will Robinson" signs just yet...
R in NY
R in NY,
i "second" roger's idea that we don't know where or when a bottom will occur. with that in mind, i postulate that we already have one very significant difference in place between 1929 and 2008: the folks in charge in the government (and overseas as well) acted to attempt to stem the crisis. we will need some time to see if the actions lead to any tangible results and if the international cooperation persists, so the stock market may well follow the same pattern. nevertheless, i would look at the charts as a warning of what could happen if governments become complacent or contentious (with each other). imho, a second notable difference offers a more frightening scenario (but i have no charts to offer for this): during the depression, both Pres Hoover and Pres FDR tried to maintain a balanced budget--this obviously remains ridiculously out of reach. the truly scary scenarios derive from the potential for US budget deficits to spiral wildly out of control relative to GDP--probably not quite as bad as iceland, but we don't want to even think about where this could go. roger is absolutely right: while our markets offer us challenges, our anxiety stems from worrying about feeding ourselves in five, ten, or maybe fifty, years. the economic conditions in iceland may cause real severe deprivation right now. we need to keep some sanity and perspective (btw r in ny, i don't mean to imply that your post lacked either--just wanted to reinforce that for everyone--we probably all need to heed the advice of the bank of jamaica--or wherever).
--gjg49
Roger,
I watched Fast Money and they all agreed that the best investors are down 30% or more this year. I would think you are also down 30% to 40% like everyone else. I'm down almost 40% - invest in 5 Star Mutual Funds. Would you suggest since I don't need the $'s for a few years at least to just let it ride or take some BIG losses and get some cash.
ultimately the bottom process will including scaring people. maybe that is happening now? don't know.
gjg49 is correct about the diff response by the G. it should mean a different more benign set of consequences, i hope i hope i hope.
anon, cannot give what could be construed as specific advice.
five star means very little to me. if a fund's mandate is to be fully invested, many have that mandate, then it will be down 40%.
i have said repeatedly i would not know what to say to someone who took no defense before the crash.
you need to decide what you think the final result of this is. bear market or the end of the US financial system.
Aren't there really two shoes dropping - the credit crisis is the first, while the second - the economic downturn - is not far behind, and is somewhat independent of the first.
If the Government needs all its money keeping banks etc. solvent, the bottoming could go on a lot longer than usual.
OG
The Fed is running out of bullets.
http://tinyurl.com/3oh6q9
Think the market is depressing? If you are a baby boomer, watch this
http://www.msnbc.msn.com/id/21134540/vp/27178233#27178233
wrong link. Watch this as per roger's post
http://www.msnbc.msn.com/id/27167488/
Very interesting post over at the MarketBeat blog on which countries may be in line to suffer the same fate as Iceland. WSJ.com
Hey Roger. From the TV announcers saying the Red Sox need one run to keep their no shut out playoff streak intact from about 1918. To many of the Red Sox fans leaving in the 5th & 6th trailing 7 to zip. To the first run back in the 7th and then there were four in the 7th. To three more in the 8th to tie the game up. To the sweet clincher in the 9th.
Hey Roger, I know you were watching it all and believing.
Here's to you Rog. Enjoy!
Prescott Joe
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