Some Personal Obsevations

Take this with a grain of salt but fwiw I think the story below may typify where alot of investors and their advisors are at this point: One Investor watched as his portfolio dropped from $1,000,000 to $500,000 over the last 5 months.......was he a high risk trader chasing beta? No, a 77 year old heavily invested in Energy Trusts chasing Yield, and he is stubbornly staying 100% Invested. Next, my parents, 83 Yrs old, (shouldnt be invested in Equities) however they have a guru advisor (what do I know I just use Carl's 17/43 weekly cross to get out) their portfolio is down 35% (safe mutual funds, there goes my inheritance!) their guru is advising that they stay fully invested because everyone knows that you cant time the market and if you get out you will miss those 10 huge up days that make up the brunt of all gains. Sure this is a small sample but I think more common than acknowledged........this logic built around hope almost guarantees new lows and will be accompanied by the fear and hopelessness sentiment that makes up bottoms....... Another leg down will crush alot of these people, even the ones seeking the shelter of low priced commodities and high yielding Equities, a good rally from here will only entice more to get on board and confirm the advice given by advisors...... I am a Trader, not a bible thumping Bull or Bear........I know that this is not hardcore TA but would be interested in other peoples stories. Just saw OGM's post below..probably should have added this to that thread..... CW

Edited by Woody, 03 February 2009 - 12:24 PM.

I have a wealthy client, a retired CPA and multi-family real estate investor. He was lamenting about a friend who got out of the market in 2007 and advised him to do the same. He didn't because you "can't time the market." He is not going hungry but his kids saw 1/4 of their inheritance disappear. Others have told me that they do not even look at their "201-k" statements.

Edited by Rogerdodger, 03 February 2009 - 12:28 PM.

In the last 20 years, if one had been long a rising 200 and short a falling 200, they would be in high cotton right now, especially if they had switched over to the new 2x funds. Silly little bit of TA trumps funny analysis.

I know several people who are in cash in their 401ks. I've got plenty of clients asking why we aren't shorting the market right now. And who have castigated me for any longs I take. Most people expressing fear and distrust of everyone including me. I also have a smaller number of clients who think the market is near a bottom. Sentiment is pretty mixed IMO. Also a lot of people asking about gold- they heard its a safe investment. A lot of people convinced energy and aggriculture are good investments still. Most other advisors I work with are bearish neutral and are not looking for the market to recover until late 2009 early 2010. This is just what I hear FWIW, not my opinion necessarily.

Actually, I think that the hopelessness and disgust will come later. After we've rallied 50%, getting a bunch of folks back in, and then coming back down to these levels. This is a bad problem, but it's getting a ton of liquidity thrown at it. So, it's going to rally, and soon. But the basics of the problem will remain or will be replaced with inflation and the need to kill it or at least to control it, which will take rates up and the market back down. This will take years to play out. Don't expect it all at one time. M

I think the issue is more deeply rooted. Like Pavola's dog, the constant drumbeat by the markets and various gurus, plus our own experiences if we win causes us to believe that if we hold out long enough some other smuck will come along and pay more for our asset (stocks, coins, gold, bonds, etc.). That's the risk for gambling (Wall Street calls it investing).

Edited by dw85745, 03 February 2009 - 01:00 PM.

Actually, I think that the hopelessness and disgust will come later. After we've rallied 50%, getting a bunch of folks back in, and then coming back down to these levels. This is a bad problem, but it's getting a ton of liquidity thrown at it. So, it's going to rally, and soon. But the basics of the problem will remain or will be replaced with inflation and the need to kill it or at least to control it, which will take rates up and the market back down. This will take years to play out.

Don't expect it all at one time.

M

Mark you are likely right, it always takes longer than our usual back of an envelope analysis......I will throw in a few (uneducated) comments,

Didnt Japan throw a bunch of liquidity at their markets for over 10 years....my point is that I'm not sure when/how that liquidity gets employed/gains traction

We did rally 27% off of the Nov lows, maybe thats all there is for a bit, or maybe we need more down before more up.

In the 2000- 2003 bear we rallied to the 275 dma, currently at 1033, which equates to a 50% rally from about 755, so a drop to 755 followed by a honkin bear mkt rally....I can buy that!

Two other things I've been hearing : 'I don't look at my 401k statement anymore' What do you think about infrastructure?

Actually, I think that the hopelessness and disgust will come later. After we've rallied 50%, getting a bunch of folks back in, and then coming back down to these levels. This is a bad problem, but it's getting a ton of liquidity thrown at it. So, it's going to rally, and soon. But the basics of the problem will remain or will be replaced with inflation and the need to kill it or at least to control it, which will take rates up and the market back down. This will take years to play out.

Don't expect it all at one time.

M

Mark you are likely right, it always takes longer than our usual back of an envelope analysis......I will throw in a few (uneducated) comments,

Didnt Japan throw a bunch of liquidity at their markets for over 10 years....my point is that I'm not sure when/how that liquidity gets employed/gains traction

We did rally 27% off of the Nov lows, maybe thats all there is for a bit, or maybe we need more down before more up.

In the 2000- 2003 bear we rallied to the 275 dma, currently at 1033, which equates to a 50% rally from about 755, so a drop to 755 followed by a honkin bear mkt rally....I can buy that!

No, Japan wasted a lot of money on infrastructure that nobody needed. We'll do that, too (waste billions and billions on stuff nobody needs), but they didn't do what we're doing and further, they're whole system was ludicrously overvalued. Now, real estate here got pretty overvalued, but not everywhere, by a long shot. Our stock market never came close to similar levels. We have less far to fall, yet we're doing much more to off set it.

Mark

In the last 20 years, if one had been long a rising 200 and short a falling 200, they would be in high cotton right now, especially if they had switched over to the new 2x funds. Silly little bit of TA trumps funny analysis.

100% agree. I truly believe that it's all about the nature of markets which are 180 degrees out of phase with human psychology. Some time back here I posted a couple of articles comparing the market to "The Mattrix", and I believe that this is a great methaphor for how things work. We see what we believe to be reality, but behind the scenes the market has its own reality.

Even as I write this I hear Bill Griffith on CNBC asking "when should we buy?" That reflects human nature- looking at this market and hoping to pick the right point, buy, and make a lot of money. But the trend is clearly down, as Selecto indicates- falling 200 day MA, falling 13 month MA- measure it as you will. Our reaction should be the opposite--FEAR, not hope. We should recognize this as a bear market and either stay out if one is buy and hold, or be short if a trader.

Likewise, when markets are going up, investors fear buying because they think it is to high, instead of buying and hoping the trend will continue- which is the appropriate response to rising markets.

As the script said "The Mattrix Has You" We hope when we should fear, fear when we should hope. Our ways are not the markets ways. We simply are wired differently than the market. Our job is to recognize this difference and change our thinking to conform to the market's ways. Not easy by any stretch, though.....

JMHO. D

http://stockcharts.com/c-sc/sc?s=$SPX&p=M&st=1980-01-28&i=p39183268817&a=149688849&r=751.png