Yet once again, the market is through another critical level. The market fell below the lower band I have been watching. Next support level is 7,552. If the market breaks that level with conviction on a closing basis (7.450?), the next stop is much much lower.
IBM reported good earnings, the futures for Wednesday are pointed up by a small amount. If a rally can be started, this should be a rocket shot once it gains steam. GDX has held up great through all this. Gold has risen. Oil crushed, DXO modestly taking hits. The US Dollar is rising against many currencies. The British pound is getting destroyed as Britain is starting to understand its hurting way worse than the USA. USD to British pound was almost 2 to 1 last year, now 1.4 to 1. We may see parity in the next year, which is hard to comprehend with how bad the US is also.
If the market breaks below DOW 7552 with conviction, next support level is back to 1992-1993 levels, about DOW 3000-4000 range.
What else is there to say? The market is on the ropes, beaten and bruised and setup to hit the mat hard with the ref counting. I still , although losing hope rapidly, think the market has to gain SOME optimism with Obama now in office. I would expect Obama to make some announcements that could move the markets.
The odd thing to me is, the "right" thing for Obama to do is to stop preventing banks from failing, and let the weak fall and the strong take over. Of course, the market would plunge immediately if this intention was announced. But the recovery would be much quicker. I'm still on the side the politicians will pull more tricks out of the hat to try to prevent further financial destruction in the near term.
Also on a Positive? Note about 50% of all stock market losses in the last month came from financial stocks. Positive? Well, I guess the rest of the market is not that bad off in comparison. Click for source.
During the 40-minute speech, Bush also promised to bring an end to the severe war drought that plagued the nation under Clinton, assuring citizens that the U.S. will engage in at least one Gulf War-level armed conflict in the next four years.
"Under Bush, we can all look forward to military aggression, deregulation of dangerous, greedy industries, and the defunding of vital domestic social-service programs upon which millions depend. Mercifully, we can now say goodbye to the awful nightmare that was Clinton's America."
"Much work lies ahead of us: The gap between the rich and the poor may be wide, be there's much more widening left to do. We must squander our nation's hard-won budget surplus on tax breaks for the wealthiest 15 percent. And, on the foreign front, we must find an enemy and defeat it."
On the economic side, Bush vowed to bring back economic stagnation by implementing substantial tax cuts, which would lead to a recession, which would necessitate a tax hike, which would lead to a drop in consumer spending, which would lead to layoffs, which would deepen the recession even further.
The onion got the last one wrong, not a recession, but a depression. And Obama will be hard pressed to not increase taxes as this nation faces spending over 2 trillion of debt in 2009 alone. The US total outstanding debt from the start of the nation to 2000 was 5.5 trillion. That's a striking change.
I hope the Onion publishes a spoof article on Obama, so we can gain some insight of what we all face in 2009.
Unfortunately, I do not believe in Obama's massive debt plans. But to his credit, after 8 years of corruption and fraud, he is going to try to soften the blow of the worst economic depression this nation and the world will since WWII.
I can't see how reality of math can be avoided, and Obama will take the hit for what Americans willfully decided twice create this situation. I for one will continue to prepare for what looks like the inevitable bankruptcy of the US government and world banks.
Mish was on FIRE this past week. His blogging is always top-notch, but he really went to town this past week. All of his posting are well worth the read, I tried to cut out the lesser posts.
The Smart Money Tracker Possible 1-2-3 reversal Basically echo's Mish's and some other bloggers on how we are set up for a rally. Glad I got out of those longs Thursday........ The most important chart Gary's view is of a very strong dollar for months if not year to come. If this is correct, resources will get even cheaper, as the dollar becomes worth more. Hence why I am recommending slowly over the year, move into resources when cheaper, no need to jump in. What Gary is NOT considering is a possible (though not highly probable) crisis event to cliff dive the dollar down. Gold Gary's thoughts on Gold, which, I lend high credance to. Where I differ is the fear of gold miners collapsing. So far, they have been extremely strong since DOW 7.552.
The Market Ticker Hey CONgress wake up! Another classic "on the money" rant by Karl, this time, on congress waking up to the fact that hiding Trillion + dollar in taxpayer money being "spent" in secrecy is not proper nor legal. On Hyperinflation Yet another rant by Karl on why inflation is impossible, and why gold is a bad investment. No arguement here. And your Excuse is? Long, repeating rant by Karl on why everyone must be active in contacting their congress to regain sanity and fiscal responsibility. What Karl fails to realize is its human nature to wait until all other options are tried before the correct one is, since the correct one is always the harder path in the near term. I do fax my congress periodically, and I encourage everyone to do so too, its the least you can do.
Robert Reich's Blog One thing I can say for Mr. Reich, he can't seem to make a title shorter than 15 words! How the Ensure that an Aggregator (or Bad) Bank Isn't Another Taxpayer-Financed Boondoggle for the Banks That Got Us Into This Mess Yet another commentary on how the government "should" handle creating "bad bank". Frankly, there is no good way without setting up the taxpayer to eat the costs, while the companies that created the situation keep the past bonuses/profits from bad behavior. What Should Be Done With The Next $350 Billion of Taxpayer Bailout Money: Criteria for TARP II Great comments on how to use TARP II, now lets hope he has some influence with democrats... I very much like this statement, but it shows Mr. Reich opinions are not based on a likely reality... Require that any bank getting TARP II funds be reimbursed by its executives, traders, and directors 50 percent of whatever amounts they were compensated in 2005, 2006, 2007, and 2008. This compensation was, after all, based on false premises and fraudulent assertions, and on balance sheets that hid the true extent of these banks' risks and liabilities.
My long term "safe play" for preserving wealth (months-years) by placing money into assets such as "cheap resources", "cheap land", or "cheap food" and diversify away from bonds this year is a correct long term play. Time will tell in the months and years to follow. There may be investments that do better, however, I am trying to blog the "safe" play that has greatest potential to weather the financial storm the world is facing.
In the recent past, I blogged about DOW 10,000 as a target. This is still to me a high possibility in the next few months, but in the recent past weeks, the market plummeted off of an upper boundary down to lower boundary I have been watching. (see graph on right) My long term belief is the DOW will break below 6,000, and I truly believe this is a bankable event. This isn't based upon a religious conviction, but over significant issues the world faces, and is not being addressed. Please refer back to my previous posts for rants. :)
From 2006 to October 2008, I "shorted" the market, bet the market was going down. During that time, I had the mass media, friends and family state I'm pretty much off my rocker. My trading account at its worst lost 50% of its value in less than 10 trading hours, mainly due to what I believe was corrupt actions by the government. In any event, during all of these events I had an easier time trading vs the last two weeks.
Why? Because I KNOW the global economy and stock markets cannot overcome 8 years of fiscal fraud in a matter of months. The market must play out, the economy must work through its issues, and this will take time. Over that time, the market will not enter a long term bull mode, but will continue to move up and down, but make no mistake in a long term trend down.
So when I was "wrong" on timing trades, I had the faith that if I could make it past the hump being faced, the market would come back in my direction. Sure, during 2006-2008, there where plenty of times I was REALLY right, but I covered some of my shorts out of fear from the red numbers across my entire screen, only to see the market reverse downward sometimes within hours. But over-all, I did good. As a matter of fact, EVERY trade I made from 2006 to 2008 shorting should NOT have been covered. All shorts where right.
In the recent trend trading, I reversed my thesis, that the market would rally, and it did from 7.552 up to 9034 in a matter of 5 weeks, a 20% rise. Quite a force! But I got greedy, and fixated on DOW 10K. Hindsight being 20/20, I should have lightened up after such a great run. So this past week, I got "shaken out" of some of my long positions. Why? Because my main trades that hurt me was betting that the market will rally, a direct violation of my long term thesis. Therefore such bets are high risk, since at any moment, the long term trend could become an instant reality, and therefore I could not have faith to keep the trades on the table. I would not be surprised that this week sees a great rally, one that I will profit from, but not nearly enough as I would have if I didn't get shaken out.
So why am I writing this? Because it was my cone to Jesus moment. I realized that I cannot and should not try to hit a home run in trading. I need to preserve my own wealth, and follow my own general theme. And I will try hard in 2009 to stick to the basics and that is:
1) Buy "cheap" resource stocks, be it Oil, Gold Miners, Food Companies, Silver Miners, and other cheap depression resistant trades. Do NOT chase resource valuations up, wait for them to fall hard. As an example, I will not buy gold at 850 an ounce, it is historically high. 2) Do not trade more than 50% of my cash position into these plays, and "add" to them when moments like this past Thursday happen. 3) When I feel like king of the world, as I did two weeks ago, lighten up more. Take the cash when you have it. 4) Listen to bloggers such as Gary of Smart Money and Mish with respect. I don't have to go 100% in their direction, but their blogging of "Trend change" needs some respect, in short-term observations.
In 2006-2008, I did items 1-3 the entire time, however at the "bottoms" (market rallies since I was shorting) Item 2 I went over 100% of my entire savings short. It paid off, but past results don't indicate future return. :)
As a "bonus", if at any time, the world economy does flirt with disaster, I'll be positioned well to ensure my family's financial security. As another bonus, this follows closer to my own advice for those who don't trade frequently, aligning with my own long term advice.
As for how badly I was hurt, basically all of my gains from 7552 to 9035 was wiped out, but not a nickel lower than my net worth at DOW 7552, so really I can't complain on keeping 2 years of gains during a market collapse.
Back to my regularly scheduled blog postings. I have a lot to say, and I better get cracking at laying out the facts, as I see it, and hope that I help everyone out there with a better fiscal security. As always before trading on any bloggers dribble, consider this disclaimer.
I do take solace that my trades far exceeded Barron's advice, enjoy the video below.
Thursday's market plummeted about 200 points, rebounded positive +12 points. So what prevented the market from falling? possibly 6+ days in a row down, the market needed a breather.
I need to blog where I went wrong, and my new direction for the future trading. For 2006-2008, my trading wasn't perfect, but it was easier to some extent than this past week. The major problem with the last 8 days is I was "betting" a higher market, but I didn't have conviction over the long haul, as my 2009 predictions show. I will return back to my basics, and that is trade in the direction of the longer term conviction, but trade in/out of stocks depending on the extreme levels.
I am of the opinion some of the news today may in fact stemmed the decline to turn into a rally. Its good to see that the Obama administration is following the Bush administration by coordinating announcements to benefit wall-street market makers by turning the market a day before options expiration. For once, this benefited my account, although 2 hours earlier would have made a huge difference. If the market rockets higher Friday, I'll miss somewhat out, I panicked out somewhat at the bottom Thursday.
Bizarre News Indiana State Legislature proposed currency for state "backed" by gold <--- Absolutely bizzarre, and I thought illegal. I am pessimistic of US dollar long term, and for a state to propose backing by gold is unreal Video to congress about how spending 1.2 Trillion dollars of Taxpayer money to support wall street in secrecy is not appropriate. This is $4,000 for every man, woman, and child in the USA. I wonder, if Clinton has spent 1.2 Trillion "in secret" to lend money to various companies his administration saw fit, if it would have been tolerated.
The market collapse has been brutal and with force. The graph I keep bringing up shows that when the blue trend line was broken, it was really time to get out. And now, we are on another historic support level, and the after hour news has been horrible. Oil & GDX hasn't been hit that bad, but many other stocks where destroyed. Gary of Smart Money Tracker was right...again.
Earnings reports where bad, and to throw fuel on the fire, some other news. I'm running for the hills, hit out of some positions today, probably hit out of more Thursday. If we close below DOW 8,100 tomorrow, look out, we could collapse.
The market is basically flat for Tuesday, there is a strong case for the market to collapse or rally in the next 3 days. Leading up to options expiration, (Saturday) the games being played is very different. To really make the games interesting, JPMorgan moved their earnings report to Thursday.
The long haul, no matter what doesn't change, read my 2009 view.
Ben Bernanke of the US Federal Treasury gave a speech today, which I recommend watching. The speech was much longer than the video below, but the one thing Mr. Bernanke stressed, is that it's CRITICAL for the US to stabilize the banking system. I am impressed that Mr. Bernanke mentioned companies "too big the fail" makes an unlevel playing field for companies, and it needs to be addressed. Blogger Mish provides a dissection of the speech.
Alcoa reported, their report wasn't great, but could have been worse. Looking for a turn around Tuesday. This weekend is options expiration, expect high volatility into Monday. If Tuesday ends lower, I will be dumping some of my loser positions by 25% of size. As I go to bed, futures are looking higher, by nominal amounts. Assuming the market turns up through Thursday, will lighten up into option expiration.
The Market Ticker Obama's Prescription: FAIL Karl's rants are entertaining and usually spot on "in the spirit" of reality. Obama's promises can't live up to the reality. The Price of Capitalism Karl explains why mathematically market crashes and resets MUST occur in capitalism.
The Slope of Hope Those who can't trade advise Tim Knight took the time to report on Barron's Roundtable results for 2008, since Barron's didn't want to go back and review the results, since the "upper crust" of wall street advisers did so badly.
And the winner of the week is: Mish's entry on Larry Flynt Seeks Porn Industry Bailout I still contend that Bennigans should become a bank and seek a bailout!
Unfortunately the market has decisively broke down on Friday. Looking at the chart to the right the market clearly has broken down outside of the trend I was watching. Most of my market plays are in resources, which is affected, but not as much as other sectors. I still have hope for a rally, but it better come by Tuesday or I need to wise up and take my losses & get out of my losing positions.
The big news this week will be corporate earnings. At the close today Alcoa (AA) reports. In my twitter I announced I put some option bets that AA runs higher. On Monday, if the options rally, I'll sell 1/2 to cover my expenses and let the rest ride. If AA options fall, at close Monday I may add to my bet.
The "Market Ticker Guy" Karl has a pay video service that I watch. I do recommend paying for Karl's video service. In his service he calls for ending the optimism if the S&P falls below 870. In addition to The Smart Money Tracker, also has a pay service that I recommend, he has warned for weeks that the market rally will not occur, and will trade down or "sideways" for a while. This week we'll know if Gary is right (again).
So Monday and Tuesday will be interesting for me, and I suspect I'll have to make some decisions on Tuesday. In any event for long term investing, slowly buying in the next 6 months basic resources when "cheap" such as oil, and if gold gets cheap, hasn't changed, and will not change even if the market collapses.
The big news on Friday will be the government's job report at 8:30 am. The spin from what I read is basically reaction of this news compared to the ADP report. The trend lines I have been posting are at a critical juncture. Can the trend hold?
As you can see on the picture, we are trading in a triangle range, pictured in light blue. If the market breaks above the upper line, much more likely we are in for a good rally.
A major break below the lower light blue line indicates I'm flat out wrong and tighter stops need to be put into place to prevent losses.
Even if the market breaks down a little more on Friday, I will hold out hope that next week will start really bringing in the news for Obama as president, and help the market situation.
I had a discussion today with a friend (well, maybe he doesn't consider me a friend, but an entertaining crackpot) about cash, resources, stocks, bonds, real estate and other investment vehicles.
I have been repeating a theme in person, and now I'll repeat it to you. :)
I view now there is no such thing as absolute "wealth". Most people look at cash as "absolute" wealth, others defer to gold as a definition. So what is the creation/storage of "wealth"? In simple terms in every day life:
We work and receive X pay for our efforts. At the end of the day the costs to "live" costs Y, the net left over (or borrowed if negative) is Z. X-Y=Z Z can then be stored in cash, or some other asset. An asset could be a baseball card (assuming it appreciates or maintains value), gold, stock, or cash. When needed we exchange some of Z to answer a need (such as buy a house).
The problem is, most people DO NOT look at cash as a "risky play" like the other assets. People look at stock as "risky" now that it fell substantially. Why do I say cash (could) be a risky play? Well, what is CASH?
CASH is NOT backed by gold, a common misconception. During the the Great Depression almost all currencies left the Gold standard. "Tricky Dick" Nixon finished off any remaining ties in the USA currencies tied to gold. What backs CASH? Well nothing. Its basically in essence the "stock" of the USA. As an example, the Peso vs Cash vs Zimbabwe dollars trade among each other. Kinda like gold, silver, copper trade at different values "per ounce" for each other, or for dollars.
So what makes the USD more or less valuable than others? There are whole books written to explain it. But at it's heart is the faith by people that it is a safe storage for value.
As an example, do you believe GOLD is safe? Gold went from 1,000 an ounce down to about 750 in 2 months in 2008, now back up to 825 range. OIL? OIL went from about $140 a barrel down to $36 in a few months. Same for food, real estate, bonds, etc.
Which brings me back to the point of the USD as a play, like any other play. When you keep your life savings in "cash", you are making a play that the value of the USD will remain about the same or rise. In Zimbabwe, the moment you are paid, people run out and buy 100% of their cash for goods. Why? Because the inflation is high and faith in the Zimbabwe currency is low.
Now, I am NOT suggesting the USD will ever be like the Zimbabwe currency. But it paints a stark picture that maybe, just maybe, in the next 1 month to 3 years the US Dollar may not be as "valuable" as it is now. And that the US Bond rates will not remain at sub 2%. That at some point, as the US Government prints trillions of debt, our creditors will say enough.
The video below, while a bit out there as a media source, does quote some disdain for the US dollar as the default currency for the world. I have blogged (or was it emailed) before how the US Dollar was the only currency to buy oil since WWII, but a year or so ago Euro's and other currencies are now trading.
The question you have to ask yourself is, assuming Obama debt spends over 1 Trillion per year, and the US government spends 1 trillion per year covering the losses of financial companies each year for the next two years, do you believe the USD will be worth more, less, or the same as it does today? The answer isn't simple, since it has to be asked as compared to WHAT? Other currencies have issues worse than the USD, some a little better. But at the end of the day, some things transcend currency valuations and are more absolute (but all are still RELATIVE, there is no absolute wealth). Buying cheap Real Estate (like an acre for $5K) , Gold (if cheaper), or Oil in 5 years in my opinion can't be worth significantly less than today, and maybe even more in USD.
And this is the point, what is the SAFEST play to store wealth for the next 5 years? Stock market? Click for my 2009 view. Real estate? Click for my 2009-2011 view. Cash? You now have an exhaustive explanation of my view.
CHEAP Oil as an investment has the added advantage of it is always needed (although demand level changes) and if there is world instability, it will spike up, not down. As always GDX is still my favorite long term play. UPDATE 2/9 - Read USO vs USLCheck out USO , possibly GDX (click) , food EFT (RJA) or a broad resource fund and consult your financial adviser. Never put all your eggs in one basket, including cash/bonds.
It is possible that Wednesday marked the end of the market rally, and its time to dive to much lower levels. But I don't believe it is time yet. To the right is an updated version of the graph I drew the other day. Basically if the market moves "below" the light blue line, I'll start getting concerned, and may lighten (but not close) my long positions. If the DOW moves below 8,175, I'll admit I'm wrong, close all long positions, and go mega short.
If you read my "twitter" messages (click to see) I lightened up on my index longs. I *should* have bought them at EOD Wednesday back. However I'd rather get even a cheaper price. I will put bids in for a few things.
OIL took a massive hit. In Hindsight, my twitter post that I was considering selling some DXO would have been the smart play Tuesday. For now, I am holding. If it cracks below 2.35, I may dump out. Otherwise around 2.50, I may buy quite a bit more.
Someone was buying to keep the DOW from being 600 down. And my bet is, its the smart money.
I'll post another news round up either Thursday or on the weekend, quite a bit of other news out. But none of it matters. The market is deaf and dumb, and knows one thing, up. But NOTHING goes in a straight line. We needed this to continue the advance.
If the market ends down on Thursday, EOD I'll load up a bit more.
If you think I go off the deep end sometimes (like my war on blue collar America post), check this video out, from European news station. Funny thing is, at principle (NOT the fatwa part) I agree with this guy. I just wonder if I sound like this to people around me. ;)
Some of my readers may be confused on what I'm looking to invest in Q1 of 2009..
Gold miners (not gold) as a play, but a careful. When GDX was at 17 it was a no-brain-er, at 32, it may pullback before moving higher. Notice that GDX would not move below 28.50 in the last downswing. If it breaks this number, I'd be concerned of a free fall. If it finds the bottom at 29-30, I'll buy some and put a stop-loss at 28. I'll take 1 - 2 buck risk for a potential 5-10 dollar gain. As previously posted, I moved out of GDX in force back on the 17th.
Gold itself I will not purchase until it approaches 600 an ounce. I will not chase gold at these levels.
Oil was extremely cheap last two weeks in December, with DXO hitting 1.75 range. Oil since then has recovered somewhat. I'm holding onto my positions but not adding to them. I'm split between USO, UCO, and DXO. I started looking and buying oil around 12/19/08.
I do not like oil companies, as a short or long term investment. The new administration may not be friendly to oil. Therefore I do not want to hold oil companies since an Obama announcement may tank the oil stocks. If you want to go long oil companies, the ETF named OIH is one of the better ones.
I found a two week old video (slightly late) on analysis on gold vs oil. Its pretty interesting. I recommend you watch it to show the valuation of gold vs oil, and why oil may raise (50-60 a barrel) and gold come down, to bring the two commodities more inline with each other.
Oil futures are already close to 50 (about 48). I may start to lighten some of my positions as it crosses the 50 mark.
The US Stock market has been trading in a range for quite a while, with the exception of a few weeks where the market plummeted 600 points lower, shown in green on the graph. I am not a chart professional, but it does seem like the DOW is trading in a wedge type range marked in light blue. If this is correct (which I am not a pro at this) the market could make a pullback do 8,700 range before moving higher and breaking the upper trend line with force. In any event, if the DOW trades over 100 points higher than where it stands today, I would expect the market to continue to break higher.
I'll remain a bull unless the market moves below DOW 8,500, then I'll get cautious. Below DOW 8,175 and I'll reverse my up trend thesis. With the majority of my investments in OIL related ETF's, the market could collapse and oil continue to rise. Still maintaining USO, UCO, and DXO.
I posted some pontifications on outlook for 2009. But it is important to look beyond 2009, to have a plan on how to maneuver in a changing environment.
Buy broad basket of stocks now I have read where people are trying to buy now with "prices are good. Wrong. Prices are still too high for stocks. In good times, the analysts state look at the earnings multiplier. In bad times they state prices are cheap. You can't have it both ways, either a stock is good to buy because the earnings multiplier is strong and rising OR a stock is cheap because.....well...it isn't worth more.
So ask yourself this, do you believe the market downturn has ended, and now we are setup for another 5 year run? If the answer is no, then investing in a broad basked of stocks for the long term is just wrong right now, and your money should be invested elsewhere.
If the answer is yes, my question is why? The US after artificially inflating housing (through cheap interest and easy credit) to drive the economy since 9/11, that all the debt (bad or good) since then has now been overcome in less than 6 months?
If history is something to use as a guide, a banking collapse such as the US (and the world) is experiencing will take years to unfold before hitting a solid bottom. There are several decent articles you can read on the topic. Harvard paper, Japan's own issues resulting in 20 year recession, Causes of last American Great Depression. There is NO historical basis to assume the market and the economy will U turn in the near future.
Obviously with a new US administration, new steps will be taken, which could completely change the time line I post below. The efforts to "increase debt spending" to stimulate the US will make the predictions below more accurate, not less. If the US accounting irregularities are fixed (eliminate level 3 debt class) and proper valuation for debt is realized, the US should plunge much harder into a recession/depression, but spring back relatively quickly (year or two, rather than decade)
2009 As previously started, 2009 will be a down year on the stock market as the deflation whirlwind continues to crush the weak. This downturn could be much shorter IF the bad debt in the system is exposed and cleansed. However, the politicians are likely to NOT do this (until it must), and therefore by hiding the bad debt, will extend the downturn. DOW 6,000 is my target.
2010 2010 may see the final (3rd big wave) down of the market decline, with some headroom for a 20% further downturn into 2011. By this time, everyone will be dismayed by the market and finally start giving up, and selling their assets at a huge loss. Housing may actually start being sold by banks for actual market value, rather than held by banks to avoid losses. DOW 3,000 is my target.
2011 As previously posted, the adjustable mortgage resets will be reaching their peak by 2011, allowing the final bloodshed to be exhausted. The housing may continue to fail, but the avalanche will be ending. 2011 will mark the bottoming and most likely hopelessness of everyone. Basic items such as food, energy, housing costs will be primary focus of many people. Pop around DOW 3,000, make a all time low, trade in a range. Making money in the market (short or long) becomes difficult. The trading party is over.
2012 This will be a telling year, can the US come out of the funk, or will it end up like Japan, into it's 3rd year of a 10+ year recession. This is too far to see.
Summary OK, so what the heck is my point? The point is do NOT get caught holding stocks for the next 10 years waiting to regain your losses. Assuming the DOW hits 10K this quarter, get the heck out of dodge. Remember how bad you felt looking at your life savings when DOW was at 7,550? Take that fear and put it to good use. GET OUT of the market and put your money in US Federal bonds, consider buying OIL fund USO (assuming oil is below 50 a barrel), GDX gold miners (if still cheap, 35 or under), and attempt to store your wealth in "real" terms, rather than paper terms. (Click here for indicator when to invest in stocks)
And that is the key point, in the next few years (as it was 6 months ago) the name of the game is keeping the wealth you have built up. And investing in the stock market broadly is a high risk play for the next few years.
If the US actually achieves hyper-inflation, as it is trying to do, then resources are even a better play to preserve wealth.
Extreme preparedness Finally, consider buying physical gold, I am trying to wait for gold to fall to 600 an ounce myself. Please remember, the US government in the last great depression entered the banks across the country and TOOK everyone's gold. Therefore I would recommend storing gold outside the US (and some inside) as well as holding 20K of it physically. GoldMoney.com has some very compelling ways of holding gold to store wealth if in the event the US dollar starts to collapse. I am not in extreme mode, but if Gold gets cheap enough, I can't see the harm in "storing" some money at GoldMoney.
Final Thoughts Between now and 2011 there will be quite a bit of money to be made. Trading is about being on the "right" side of a trade, and "Taking" profits, rolling into the next trade. Once the market hits bottom and flatlines, trading will yield nominal profit (if any). World players can change the pace and depth of the timeline I laid out. But one thing they cannot do, is wish away this issue.
It must be addressed, either up front, or at the bottom, the companies must realize their losses and move on. Nothing short of that will fix the problem. Additional debt is not the answer.
This entry isn't a prediction you should trade on. But it is my and "Happy John's" view of the world. Happy John is a friend of mine who is a professional trader. Many of my ideas are his recycled. I do read, form my own opinions, and contribute to his thoughts, but he is the brains driving my direction. :)
Oil will go up on Q1 of 2009. Oil as it is priced right now is a great buy for people wanting to buy & hold for 10 years. It may be a buy of a lifetime. Thats not to say before 2009 is out that oil can't hit lower than current.
Oil for shorter term traders, on the pop up in Q1, will sell significantly out of this trade. Oil went straight down from 140 to 36, it needs a counter rally.
Gold valuation is unknown for Q1/2/3. Long term Gold is a great buy here again, and will be higher in the next 2 years. GDX is is currently at 33, and will hit over 55 in next Q1/Q2, target is close to 100 in 2009. This will be due to golds high price, but low energy costs and cheap labor (other miners such as copper laying off in droves).
If gold collapses, will recover by Q4.
The market will have a rally over Obama and his policies to save the world as the new savior. The rally (or trade sideways, lack of collapse) will last into Q2
In Q2, the market will pull back, sucking the bears in for the short of a lifetime. They will be disappointed as the market rallies back in Q2/Q3 and hurts the bears.
After the rally of Q2/Q3, the market will finally collapse to new lows in Q3/Q4.
Update: Happy John agreed with this entry, and I had to correct his mistake in his comment. ;)
2008 has been brought to a close, and I would like to start an annual tradition of making annual predictions.
My original prediction that I made to a friend in December 2006 was market crash in 2007.....I was a tad bit early, crashed in 2008. Since my "awakening" in August 2006, I read and learned from every turn of world events unfolding. Each event has taught me more about human nature, politics, and finance. Some of the missed opportunities where unimaginably huge. Such lessons get your attention, and make you a better person to learn from it.
I'm hoping I am becoming more accurate in my time line, and the person I am now would not have predicted complete collapse in 2007. I have learned the world moves slowly, but when the panic hits the heart of people, it moves quicker than anyone can imagine. In large numbers, fear is more powerful than greed.
2009
Obama cannot save the USA and the world in 2009.
DOW will hit below 6,000 (I'll take ANY bet on this one). And it wouldn't surprise me to hit DOW 4,000. (over 50% drop from current position)
Unemployment will hit 8% in 2009 in official figures, unofficial (REAL) numbers easily top 12%
The housing collapse is 50% there, as per my previous entry. The NorthEast will see acceleration as the financial market layoffs take effect in the region.
All countries will continue to race to devalue their currencies. The race to devalue will help ensure the US Dollar doesn't collapse as compared to it's peers.
Gold, Oil, and resource plays are NOT guaranteed safe heavens, but over all investments, it will fair pretty well compared to the alternatives. See previous bullet as to why. GDX will hit 55 a share in 2009, wouldn't surprise me if this occurs in Q1.
Deflation will "win" in wages, stocks, and real estate. Inflation in Gold, Oil, or Food, will occur in 2009.
The ETF SRS will hit over $200 a share in 2009, currently at $53. May hit $25 before $200. Over $500 a share would shock me.
More insurance companies will have severe financial issues.
Stock DECK (at 80 now) will trade at below 25 a share by Jan 2010 (may need extra month for earnings report)
Oil will hit 50 bucks a barrel in Q1 2009. Oil will hit over 60 a barrel before EOY 2009.
With all this doom and gloom, predict the market WILL RALLY, sometime in Q1/Q2, and fool people into thinking the market has recovered before failing again. From 2009 market top to bottom will exceed 50%. (hence why I am long currently resource stocks/oil)
The above I truly believe will come true, below I have less faith in, but still think are reasonable.
China will NOT save the economy of the world, but will continue to slowly open their financial markets in preparation to offer world investment in a future attempt to ursurp the US as world leader.
Gold will make a new high 2009, but may also hit 600. I would be surprised if gold hit over 2,200 an ounce. (triggered by world panic or countries resorting to buying gold to build faith in their financial systems) GDX would surprise me if it hits over 100 a share.
Oil could hit 100 a barrel in 2009 due to political events, but I would be surprised if over 125.
Another country will fail, like Iceland did, in 2009. Not in the same exact manner, but will collapse. Over 4 countries would surprise me.
Trade barriers start to erect, causing shortages and some pricing issues with specific resources.
I take NO PLEASURE in this doom and gloom view. If you know me in real life, you know I am an optimist (thanks happy john). But I am brutally logical, and the facts presented to me lead me to the predictions above.
I encourage people to use the Comment section to make their own predictions.
Yet once again, the market is through another critical level. The market fell below the lower band I have been watching. Next support level is 7,552. If the market breaks that level with conviction on a closing basis (7.450?), the next stop is much much lower.
