The case for a quick recovery

[Architect]

I don't believe in blindly following any strategy: I'll step out of the way of a freight train I see coming. So I use firecalc/asset allocation maybe 80% of the time, and otherwise do my best to avoid the potholes. Worked well so far.

I got the idea from a friend who is a close friend of William Bernstein.

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Originally Posted by Gearhead Jim Not to sound flippant, but to me a good investment plan isn't based on experts' predictions. Use firecalc, and LBYM so you can adjust if things turn out to be worse than history.

[ziggy29]

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Originally Posted by Bestwifeever Perhaps W2R could start a thread about cautious pessimism--that's the ticket!

Yes, yes -- definitely. We're waiting. Not sure how many times the 7800-8000 Dow level can hold...

[Hobo]

So many people are saying, "this is uncharted territory - unlike past recessions, unlike past depressions". So many unknowns - how can anyone really know what will happen in 6 months? They can't.

Until I see the horns of the bull, I will never try to guess when this bear market (or sideways market). Find the safest harbor you can possibly imagine. Plenty of money to be made when the Dow finally breaks 10,000 again. Why put your money at risk now?

[ziggy29]

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Originally Posted by Hobo Find the safest harbor you can possibly imagine.

Many people think that's Treasuries.

But if they buy into Treasuries and that "safety bubble" pops, how much have they really protected themselves, and how safe was it?

The closest thing to "safe" is very short term T-bills earning something like 0.00000000000003243%.

[RonBoyd]

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[NW-Bound]

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Originally Posted by ziggy29 I guess what we need here is a good gardening/farming analogy for the ground hoarding all the fertilizer that's being spread around and not using it to grow the seeds lie within it...

Metaphorically speaking, even with loads of fertilizer, we still need some rain. Politicians are playing rain doctors now.

When the rain comes, an optimist as I am, I hope that the seeds that germinate will not be of the crab grass, or the dandelion. Will the rain doctors be willing to work as gardeners, stooping down to the back breaking labor of pulling those nasty weeds? Or will we stand back and admire the deceptive lush green that our collective efforts brings, like the dotcoms and housing bubbles of the past?

[Gardnr]

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Originally Posted by Hobo Plenty of money to be made when the Dow finally breaks 10,000 again. Why put your money at risk now?

But how will you know that it's above 10K "for good"? If you wait 'til you think it's "safe" again you're setting yourself up for buying after a 25% advance, only to see another down draft, and miss out on the dividends in the mean time. What would you do then? Get out 'till it's "safe" again?

Are you a chart reader/tech analysis type? Or will you just go with your gut?

It's tough to pull off market timing. Good luck with that!

[samclem]

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Originally Posted by Gardnr But how will you know that it's above 10K "for good"?

He already told us--he'll know it when he sees the "horns of the bull." It's like groundhog day-if you see the horns of the bull you'll have six more weeks of the bull market. Or, maybe I've got it wrong and it's an astrological reference: When Saturn enters the house of Taurus and sees the horns of the bull, the market will have changed course. Or it's time to buy Saturn (GM) stock. Or a Dodge Aries. This technical analysis is confusing.

Market timing is easy. In retrospect.

[RonBoyd]

Quote:

Originally Posted by samclem market timing is easy.

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[TromboneAl]

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how can anyone really know what will happen in 6 months? They can't. Until I see the horns of the bull...Plenty of money to be made when the Dow finally breaks 10,000 again.

To paraphrase: "No one can know what's going to happen. When the Dow hits 10,000, we will know what's going to happen."

[Gardnr]

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Originally Posted by samclem He already told us--he'll know it when he sees the "horns of the bull."

Doh! You're right! I missed that reference. I'll keep watch on the horizon for those horns.

[ERD50]

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Originally Posted by TromboneAl To paraphrase: "No one can know what's going to happen. When the Dow hits 10,000, we will know what's going to happen."

That's how I read it too, T-AL. Seems to me the only thing we will know is that anyone in the DOW now will be up 21.7% (plus divs) at that point.

Where will it go from there? I have a prediction:

Someone will post that we won't know what the DOW might do, until it reaches 12,000.

Sorry, I don't get the "horns of the Bull" thing.

-ERD50

[Rustic23]

When the DOW reaches 10,000 we know the Dow will go up, we also know it will go down. We just don't know how far it will go in either directions.

Just think, a long time ago, the first time through, people would say the same thing about 8,000. Asset allocation and hope for the best!

[Dennis]

I agree! All this Gloom and Doom garbage is so Misleading...
1. So what if it cost someone an extra $1-$2k yr in more taxes , IF?
A. It keeps their Overpaying Jobs ( ave making $50k yr each and Households making $75k ave )
B. It Allows "InWestors" to get back their Losses...
C. And so what if alot of scumbags get alot more than they deserve in Salaries and Bonus's for doing a lousy job.. ( Congressmen and CEO's )
Who In here wouldn't pay an extra $1-$2k in their taxes to get the above?

Just ask the Average Senior who lost -$10,000 per $100k invested last yr.. Would you be willing to pay $1,000 more in your taxes to get that other $10k+ back?
In a Heart Beat !

If all this Bail Out $ is Such a Loss $ down a Hole? Then how come we're going to get from 8-10% Interest on it? And How come Since we're Guaranteeing they will stay in business? What's the Down Side?

Didn't we do the same thing In the Bank S&L Bail out in the 80's and Didn't we Make $ on that deal too?

Bailing out States? Blame your State Polititians, not the Fed for bailing them out..If they don't bail them out? Last person Leaving the state , Please turn out the lights..
You want all those Californians ( 4 Million Illegals by lastes guess) Immigrating into your Town? and living off you?
Do you want Not to have TV or Movies anymore? No More Hollywood...
and the whole State goes back to what it was .. a DESERT...
Oh, they're going to Run out of Water again in the spring...? Gee what's new! but hard to beleive since they only Drink and Use Bottled Water..from the Midwest..

Tell them to use their Bottled Water...in their toilets now..

Cal. Debt now at -$41 billion in the hole..
about $2,050 per Resident but over $22,000 per every TAXPAYING Legal Resident.!

[ziggy29]

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Originally Posted by TromboneAl To paraphrase: "No one can know what's going to happen. When the Dow hits 10,000, we will know what's going to happen."

To quote Warren Buffett, "if you wait for the robins, spring will be over."

[Dennis]

Re: Good Luck Trying to market time?
FYI- Even those Conservative Indexers 'market time" but they don't either know it or want to accept it..
Why? When they Allocate a Different % into a Fund than the others? They're Guessing that Sector Fund will either out or under Perform the others..in the following yr., R they not?

and seeing as Amature Investors are Wrong 91.4% of the time per Kiplinger? Seems to me just investing Equally into every fund you own or you Buy a Balanced Fund (or 2) and let them do the job for you.. ( The top 10% ranked , have been right the ave of 61% of the time)

For retiree's? Add enough extra Treas/TIPS/Corp. Bonds to have a 35/65 Mix..and your good to go..
During 03', if you waited until the end of the 2nd qtr? You missed out on 40% of the recovery rtns. for that yr..
'There is over $7 Trillion $ sitting on the sidelines, just waiting to Pounce into the market.. The Market may have to be Shut down due to Over Buying and too may buy orders a few times.., while the S&P and DOW goes up in 10%+ per day Increases... Only thos who are Already Invested will benefit the most.. "Money Makes Money"

"He Who Hesitates, Looses"

[Hobo]

The logic is fairly simple. Right now we know that virtually ever sector of the market is at historically low valuations (based on P/E ratio) - so stocks will go up sometime. But when? From an investor psychological point of view, something needs to happen that shows us some good news - and then people will start to think. Maybe not act, but start to think more positively.

My father was a stock technician from the early days of chart reading - he died a pauper. However, most people can see a downward trend. The sign of continued weakness is when you see a downward trend recover half its value on weak volume - meaning no real support for a real upward move, and plenty of room for further fall. We've been through that stage.

Now we are in a sidewards moving market that is called a trading range market. It is jumping up and down, testing old highs and new lows - but never seems to make any new trends. Right now we are between Dow 7 -9,000 trading range. Some people will call this the accumulation stage when people have fair confidence we have seen the bottom and are now buying stock at a low price. But now, the volume is low, so this is probably a drifting market with no sentiment except despair.

When we see some larger volume on the upside and lower volume on the downside, that is a true accumulation stage - in theory. I remind you all this is chart reading, or technical analysis which has a timeless link to people's psychology of when they will buy and when they will sell. But real time events need to be considered as well, ie, what is happening in the real world - not just in the charts.

Something like the 10,000 mark is a powerful point of resistance. When the market breaks through this point of resistance - with plenty of buying volume, and plenty of good economic news to support the uptrend, then you are seeing the horns of a bull market - but we certainly have not seen the head or the body yet.

But these are all positive signs and by all rights it should be a good time to dollar cost average into the market for the next 12 months. That is both a technicians and a value traders analysis of what should be happening. In other words, our team is marching down the team with the ball. Of course, plenty could happen to stop the bull market - which is why we dollar cost average.

Double dip recession, record inflation, or a number of things could kill the beast. But one thing is for sure... we will have flushed out all of the MAJOR issues, such as sub-prime lending with Wall Street and the government's complicity. We should have both the liquidity market, the credit market and the housing market back on stable ground.

We should have slain the big dragons when the Dow passes 10,000, and just like Black Jack if you've been counting the cards, their comes a time to increase your stakes in the game because the odds are the you will come up a winner. No guarantees, still a gamble - and I ain't got a crystal ball. But that is logic that makes more sense to me than a talking head just winging it on TV.

[ERD50]

What you say *may* come to pass. But what is *guaranteed* is that you would miss 2000 points of recovery.

And, if you are wrong, you might get in at 10,000 and see it drop right back to the "7 -9,000 trading range.".

I may be wrong also, but I think the time to get in is when valuations look better than they have in the past.

-ERD50

[samclem]

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Originally Posted by Hobo But that is logic that makes more sense to me than a talking head just winging it on TV.

I'm sure you believe in what you wrote, but to those of us who are nonbelievers in the faith-based art known as "technical analysis", your explanation does appear to be "winging it."

Trends, bounces, share price support levels, etc are all concepts that are clear only in hindsight. Staring at the charts and reading into the magic lines some hint as to what will happen next is more akin to numerology than reason-based analysis. It doesn't work. The record of the chartists is a sad one.

[ziggy29]

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Originally Posted by samclem Trends, bounces, share price support levels, etc are all concepts that are clear only in hindsight. Staring at the charts and reading into the magic lines some hint as to what will happen next is more akin to numerology than reason-based analysis.

I prefer the Magic 8 Ball, thank you.