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Old 08-23-2010, 06:53 PM   #21
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If the Bush tax cuts are not extended, don't the CG tax increase and individual tax rates go up next year?
Not if I never pay them. Who knows- it may be best to take gains this year, but it would be a bitter pill to swallow voluntarily.

Ha
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Old 08-23-2010, 06:55 PM   #22
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Why are there no questions on why people are staying in the market? What do the people staying in the market see that those getting out do not?
I can't speak for others who are staying in the market, but I don't see anything clearly enough to make any moves at all at the moment. But then I've never been able to see the future of the market and stopped trying to time it a couple of decades ago.
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Old 08-23-2010, 06:55 PM   #23
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Maybe Dex is right. Can the upside potential of increased corporate earnings (the only positive news) be greater than the downside risk of rampant unemployment, dismal real estate market, huge government debt, probable tax increases, and the uncertain outcomes of the new government programs?
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Old 08-23-2010, 06:57 PM   #24
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Not if I never pay them. Who knows- it may be best to take gains this year, but it would be a bitter pill to swallow voluntarily.

Ha
FYI to others - I deleted my post that haha quoted - I didn't research the tax cuts before I wrote it and I got too lazy to look it up.
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Old 08-23-2010, 06:57 PM   #25
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What am I risking if I am wrong - the opportunity cost if the market goes up?
Heck, if you're right not only do you have a lot of dry powder, but you can start a newsletter.
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Old 08-23-2010, 07:02 PM   #26
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We have been switching mainly to fixed income investments for the last two years. My goal is to save enough to just be able to live off interest from things like TIPS and maybe CD ladders.

I realized the other day that part of the reason we hear so much about stocks as a good investments is because middle men make money from them so they get advertised more than investments like TIPS. It is kind of like prescription drugs where we see TV and magazine ads for prescription high blood pressure medication, but none for fruits and vegetables rich in potassium, even though the fruits and vegetables are cheaper and might work better for some people. It is just that the profit margins on bananas don't justify a lot of advertising.
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Old 08-23-2010, 07:02 PM   #27
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Frankly I am a lot more dubious about the bond market these days than anything else. Tight spreads and low govt rates are not recipes for good returns in all but a few environments.
Now I can't imagine why you would say this other than maybe Norfolk Southern, a triple B credit, sold $250 million of 100 year bonds at a yield of 5.95% today!!!!

My stance is highly liquid currently as I see little upside in stocks and while I think there is money still to be made in 30 year tsys I'm concerned about the timing of everyone heading for the exit at the same time.

YMMV of course...

EDIT: Re: stock market I think the upside at this point is 500 points and the downside could be easily 2,500.
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Old 08-23-2010, 07:10 PM   #28
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"The time to buy is when there's blood in the streets."
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Old 08-23-2010, 07:19 PM   #29
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I'm sitting tight as I have no idea what is going to happen. I tried before to guess what will happen and I've never been right so I'll just sit and what happens happens...
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Old 08-23-2010, 07:48 PM   #30
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People question why get out of the market. My guess is they want to know what that person sees that they may not.

Why are there no questions on why people are staying in the market? What do the people staying in the market see that those getting out do not?
There are no questions because there are lots of studies about market timing and how well it works, so people tend to avoid it. Instead, they pick an asset allocation that they can live with through thick and thin and one that allows them to rebalance without emotions.
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Old 08-23-2010, 07:49 PM   #31
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What am I risking if I am wrong - the opportunity cost if the market goes up?
Unless you expect deflation, parking your money in the bank is a strategy designed to produce a (hopefully) small annual decline in the real value of your investments as inflation does its thing. In effect you are accepting that decline in real value in exchange for removing both the possibility of a greater loss and the possibility of achieving a return which is better than cash in the bank.

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Why are there no questions on why people are staying in the market? What do the people staying in the market see that those getting out do not?
I stay in the market for a number of reasons, not least my inability to see beyond (i) earnings yields on equities are higher than for cash or bonds and have the potential to grow over the longer term which leads me to expect higher returns over the longer term and (ii) as long as central banks continue to expand the money supply, I expect that there will be inflation over the longer term.

I fully acknowledge and expect there to be fluctuations along the way and I do play around the margins of market timing with parts of my portfolio but I have no wish to hold a lot of cash for anything other than relatively short periods of time.
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Old 08-23-2010, 07:50 PM   #32
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Why are there no questions on why people are staying in the market? What do the people staying in the market see that those getting out do not?
Ah, well there, I can help you. I generally do not buy funds, preferring individual equities. I typically research each of my holdings and extensively model what they can generate in the way of cash flows and earnings. As such, I know my companies pretty well, but must confess ignorance to a greater or lesser degree on investor sentiment and macro conditions, although I generaly do have a view on the latter. So for the stuff I own, business is generally decent if not outright good. Valuations are extremely low on an asset value and earnings multiple basis, and balance sheets are stable to quite strong. Most companies I own have adapted to the current economic conditions and keep a very lean cost structure. So they are able to sustain themselves in current conditions to a downside scenario and would be printing money in the event that the economy starts to recover. So looking at the micro fundamentals, I find little to be worried about.

I think the biggest risk is investor sentiment. We are in relatively thinly traded markets and bonds are a lot more popluar than equities. So a change in sentiment could bop equity prices in the short term.

Dex, what do you see that is sounding alarm bells? The last few years have induced some humility in me so I am keen to hear it.
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Old 08-23-2010, 07:52 PM   #33
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Might be time to buy a little VXX if your in the negative camp. I did earlier in the year and made a quick 40% profit. But instead of dumping all your stocks, this is one way to hedge your bets. I don't own it now.
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Old 08-23-2010, 07:52 PM   #34
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... they pick an asset allocation that they [think they] can live with through thick and thin and one that allows them to rebalance [theoretically] without emotions.
[Edited to enhance reality].
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Old 08-23-2010, 08:07 PM   #35
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In clicking about, I find a lot of noise being made about the "Hindenburg Omen". Well beyond my understanding or care. Google it or look on Wikipedia.
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Old 08-23-2010, 08:15 PM   #36
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I think the biggest risk is investor sentiment. We are in relatively thinly traded markets and bonds are a lot more popluar than equities. So a change in sentiment could bop equity prices in the short term.
According to this article the bond market is being driven in part by the "boomer factor".

Bonds aren't the new tech bubble Nick Godt's Market Medics - MarketWatch
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Old 08-23-2010, 08:28 PM   #37
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Dex, what do you see that is sounding alarm bells? The last few years have induced some humility in me so I am keen to hear it.
There are a few things you could look at - most of which are in the area of Technical Analysis. I'm going to be a bit lazy with some of my answers since I'm repeating myself - if you see LU = Look up for accuracy.

1. The general overview or macro - we are in a Secular bear market that started in 2000. The trend is down - don't fight the trend - Secular bear markets last from 13-18 years (LU). We have not seen the bottom yet. When we read as we did in the early 80s that the stock market is dead, it might be the bottom.

2. In early July the 50 day moving average crossed below the 200 ma for the S&P - a precursor of a large decline. (LU)

3. Find on the site below his 80 and 40 year stock market cycle theory. You don't have to buy into everything. The general concepts are good.

T Theory? Foundation: T Theory? Daily Updates, Forecasts, Charts and Data
Terry Laundry's T Theory? Observations: Terry Laundry's Weekly T Theory? Observations for August 22 2010

Listen to the audio that goes along with this.
http://ttheory.typepad.com/files/env...0100820pdf.pdf

4. We are entering the 4th qtr - volatile

5. Stock market volume has been very lite - small things can move the market.

6. What good news is out there that will move the market up?

7. Just for the hell of it.

http://www.decisionpoint.com/ChartSp...0227_lows.html

MAIL
Hi Carl,
I really enjoy your service and have for about nine years. Thank you for all your hard work and dedication. I was wondering if you could tell me the potential technical "bottom" numbers for the Dow, S&P 500, and Nasdaq?
Thank you very much.

ANSWER: I don't follow the Nasdaq. I have rough targets of Dow 3000 and SPX 300 around late-2010. I wouldn't exactly call these "technical" targets -- I am guestimating a total decline of about 80%, using the 1929-1932 bear market 90% decline as a guide. The timing is based on the estimate for the next 4-Year Cycle low, which is due mid-to-late 2010.
While I can't swear by these estimates, I don't think I'm sticking my neck out too far.
Carl



This might be an up week.

I think I will sleep very well once I'm in cash.
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Old 08-23-2010, 08:31 PM   #38
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I think I will sleep very well once I'm in cash.
Hard to argue with the sleep factor.
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Old 08-23-2010, 09:32 PM   #39
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Equity-linked index annuity, just saying. Let the flames begin!
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Old 08-23-2010, 10:03 PM   #40
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Equity-linked index annuity, just saying. Let the flames begin!
I'll get the popcorn.
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