Trouble Ahead???

[Running_Man]

My anticipation is really unchanged from my analysis of September - October. At mid-October I thought the high was in at 10,119. While it was not the top in the market it really has done nothing but meander 3 months until last week. I remained convinced the state deficits and the transfer of wealth from the US government to the financial institutions of the United States cannot maintain itself. The largest states in the United States are about to sink into deflationary hell as receipts will continue to fall while their debts are far too high.

There is no money anywhere in the system of government of the United States and no great resources to obtain more other than from sources that will incur a downward spiral in the economy. The concern about inflation, which cannot gain hold despite a budget deficit for 2009 of 1.5 trillion (which when the budget was passed in 2008 was estimated to be 458 billion) is now being estimated to increase to 1.7 trillion. The fourth quarter budget deficit of 09 was the worst quarter ever and December is the worst budget deficit month of all time. Revenues have fallen for 20 straight months when compared to tax receipts for the same month in the previous year for the federal government. Economic activity is slowing, receipts are falling and the lack of money will very shortly become painfully obvious to most investors..

This belief I hold is a very dire position so I have not posted in the past few months, however with the market now having I believe begining its move towards the fundamentals and moving down, I'll am very interested in what occurs in the following 12 months. Having made 20% on my investments in 2009 the old fashioned way, I am now invested very heavily (10%) of my portfolio in long term puts, which I purchased at the start of last week.

The only solution I see myself right now and puts and T-bills and make money while prices fall. For myself I do not see this as a gloomy forecast, I see it as a forecast to purchase the financial assets I believe will perform the best in the coming year.

 

[haha]

Do I think stocks are overpriced? Yes. I thought that in July and September too. The only thing I seem to be able to do is select an appropriate allocation and stay the course.

Really, that isn't the only thing you can do. Once you have rationally determined that stocks are overpriced, to hold further, beyond your minmum allocation to equities, is speculating.

Of course your minimum and maximum equity alocations may be identical.

Ha

 

[TheSweetLife]

Well said, Running Man. I'm the crystal ball gal that thought the S&P would be at 750 by October 2009. Obviously, I was quite wrong. The unprecedented government intervention has just delayed the inevitable.

 

[brewer12345]

Snore. Shut off the "news," determine a long term asset allocation you are comfy with, and get on with life. There are a lot of rosebuds to be gathered out there.

And to add to your paranoia: it appears to me that bonds are likely a lot more overpriced than equities.

 

[Steve O]

Everything's overpriced...

There is more debt than $$$ out there...

 

[donheff]

Snore. Shut off the "news," determine a long term asset allocation you are comfy with, and get on with life. There are a lot of rosebuds to be gathered out there.

+1
My reaction to last week was to start thinking about what the market will do when Bernanke gets re-upped. I was tempted to move more into equities but then remembered what Brewer said and left things alone. I am already a little high on equities because I haven't rebalanced recently.

 

[Steve O]

Is your house worth more now than it was last year??

If you wanted to sell who would buy it

 

[brewer12345]

Is your house worth more now than it was last year??

If you wanted to sell who would buy it

Don't know and don't care. Its worth more than I paid according to a recent appraisal and I have no plans to move.

 

[Steve O]

Wallmart is laying people off... But things are getting better out there

 

[brewer12345]

Wallmart is laying people off... But things are getting better out there

I think there may be gaps in your tinfoil headgear.

 

[FUEGO]

Wallmart is laying people off... But things are getting better out there

Reading only the headlines?? They are restructuring a small line of business doing product demonstrations in Sam's Club stores. Now they will outsource this work to a firm that specializes in product demos. All laid off people will be encouraged to apply for jobs at the outsourced firm. The net effect on unemployment will be negligible. And even if all these folks were laid off and no new jobs were being created at the outsourcing firm, the number laid off represents just under 1% of Walmart's workforce. Not exactly an end-of-the-world economic indicator.

As to what I think will happen in the market and economy in the short term? No clue. Up and down most likely. 10-20 years from now? My money is on "up". Another "buying opportunity of a lifetime" would be welcomed. I'd like to see another Business Week: "The Death Of Equities" front page cover story come out soon. Hard to imagine that happening given the bumper year we had in 2009. Maybe a prolonged bear market for the next 10 years. That would be an excellent buying opportunity for those still acquiring wealth (assuming we can keep a job and get paid).

 

[Steve O]

All service jobs that don't pay anyway...

All Im saying is Id rather sit here wishing I had more invested, than be sitting here wishing I wasn't so invested

Im gonna have higher quality naps this way

 

[TromboneAl]

If we do see 666 on the S&P again will the President say "Now would be a really good time to buy stocks" on national TV like last year

 

[TromboneAl]

All Im saying is Id rather sit here wishing I had more invested, than be sitting here wishing I wasn't so invested

If it worked that way, then everyone would be in cash. My point is, that you can feel just as much regret if the market doubles and you didn't participate as when your equity investments drop.

 

[FinanceDude]

Just keep reminding yourself that a LOT of folks do EXACTLY the WRONG thing at EXACTLY the RIGHT time..........

Avoid the media, most of the so-called "gurus" couldn't call the market in the 80's, much less now..........

 

[Steve O]

Will we get the sell signal soon

He's gonna have a speech today

 

[FinanceDude]

I thought the speech was on Wednesday??

 

[haha]

My point is, that you can feel just as much regret if the market doubles and you didn't participate as when your equity investments drop.

This is perhaps true, but if so the emotion should be controlled. What counts is that your retirement isn't sunk, and usually large losses experienced are more harmful than large gains missed.

I am always puzzled that although many academic retirement gurus feel that equities are not a very good piece of a retirement strategy, most people on this board feel the opposite.

The rapid cancellation of the recent smash has emboldened people, I believe beyond that which makes sense.

Ha

 

[Steve O]

He's gonna get on TV today to talk about a "middle class task force" or something to that effect...

I got that from CNBC

Yea I know CNBC

Financial porn

Im afraid of the schemes their cooking up to spread MY wealth

 

[FUEGO]

I am always puzzled that although many academic retirement gurus feel that equities are not a very good piece of a retirement strategy, most people on this board feel the opposite.

Most of the academic gurus that I have read accept that equities are a good building block to a portfolio. But not to the exclusion of cash, fixed income investments, longevity insurance, annuities, etc.

Many of the generic retirement scenarios that the academicians study have the retiree calling it quits at 65. Some here plan on ER'ing at 40 or earlier. That equates to a doubling or tripling of the traditional retirement period.

Most of the analysis I have seen says the longer the period of retirement, the higher the equities proportion needs to be to have optimal survivability (holding portfolio size constant).

 

[Steve O]

Time in the market does NOTHING to reduce risk...

The next 20 years are not gonna be the same as the last 20 years...

 

[tmm99]

With another housing tsunami on the horizon (alt-A and option ARM), I'd say bad things are yet to come.

 

[Gotadimple]

Steve O,
It's true the next 20 years won't be the same -- any 20 year period is never the same. I like to see what Liz Ann Sonders of Schwab has to say about the economy. She provides a well balanced view of what has happened -- but she does not predict what will happen.

This January snapshot is particularly good as she talks about what has happened in the past and what elements to be watching for in this recession. She is the only economist I have found who pulls together information from various sources that makes for a fuller picture.


Market Snapshot with Liz Ann Sonders: An Early Look at 2010

-- Rita

 

[LOL!]

I use threads like this one as a great contrarian indicator. It looks like it's time to up my percentage of equities based on all the thoughts in this thread.

 

[ziggy29]

I use threads like this one as a great contrarian indicator. It looks like it's time to up my percentage of equities based on all the thoughts in this thread.

Didn't work so well in 2007, did it?