I hope.
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Monthly Archives: October 2008
The Right Choice
While Nouriel Roubini comes across as a bit of a kook sometimes, he does make a valid point about investing in infrastructure rather than buying troubled assets as a way to help us get out of our current financial mess.
If the private sector does not spend and/or cannot spend, old-fashioned traditional Keynesian spending by the government is necessary. It is true that we already have large and growing budget deficits; but $300 billion of public works is more effective and productive than spending $700 billion to buy toxic assets. [via Forbes]
As an Austrian School of Ecomomics believer, I feel that the government should just be in business to create policies (i.e. taxes) and incentives that encourage private entities to build new infrastructure using their money instead of the governments. Why keep spending our way to another debt ridden future?
The Race To The Bottom Begins – Part III
I believe that we are fast approaching a bottom based on my market timing model and simulations. I know I’ve said that before but these levels of panic can’t sustain themselves for long without some sort of capitulation. Below is a superimposed weekly chart (from 1990 through last week) of the my market timing indicator relative to the S&P500.
It’s a pretty good indication that some sort of top (not necessarily thee top) was made if a rapid rate of change in the indicator occurs while simultaneously making a new high. Usually at these times I like to skim some profits and put them in bonds or cash.
Likewise, if the indicator experiences a massive rate of change while simultaneously making a new low, you have a pretty good idea that you’ve made a new bottom of sorts. The timing model can’t tell me if I’ve made the BIG top or bottom, so I have to rely on other models to tell what that probability is and gauge how much money to take out or put into the markets.
Granted, we are seeing things in this market that are unprecedented but my model seems to be coping farily well. The scary thing is I just watch my indicator blow through the 3.0, then 4.0, and now approach the 5.0 level without blinking. These markets are in a free fall and I’m feeling the pain!
So how far will she go?
A hastily drawn yellow trend line on the chart shows the S&P500 finding support around the 1000 level first and the model issued a major BUY signal at the level. Unfortunately we’ve already blown through 1000 so the next level of support, from inspecting the previous BIG bottom in 2003 is around the 800 level. Then using my Genetic Algorithm model and Monte Carlo simulations, I come up with my most probable BIG bottom. That’s the 700 level, more than 50% off the all time market high.
Could it go lower than 700, you bet! But I’m willing to dump more money into my 401k at that level and then hold on tight.
The Race To The Bottom Begins – II
After watching yesterday’s market plunge, followed by the 9.4% selloff in Tokyo last night, I’m thoroughly convinced that the race for the bottom is in on.
In Japan, the benchmark index dropped the most in 21 years as investors were chilled by a report in the Nikkei business daily based on unnamed sources that asserted that Toyota’s profit was likely to fall around 40% in the year to next March on weak sales in the key North American market and slower growth in China–far worse than the automaker’s previous forecast. [via Forbes]
As I said before, my simulations show a race to 700 for the S&P500. I still have a little bit of cash left to inject into my 401k at that level. If it goes lower I’ll be injecting my capital into new shotgun, spam, and toilet paper.
Crude Oil At A 10 Month Low
The only bright spot I can see for our economy is lower oil. It’s sure to help with heating costs this year as people struggle to heat their McMansions or fill the tank on their Hummers.
“Sentiment is extremely pessimistic, people believe we’ll see a global recession despite the measures being taken by governments,” said Jochen Hitzfeld, an analyst at UniCredit Markets & Investment Banking. “Many commodities like platinum, agricultural commodities or gasoline have fallen below their production costs.”[via Bloomberg]
It might be time to buy a bicycle and start walking to the grocery store. This market crash in equities and commodities will rewrite human history, as it did in 1932.
Richard Fuld Gets Knocked Out
I don’t condone violence but this is funny.
“From two very senior sources – one incredibly senior source – that he went to the gym after … Lehman was announced as going under. He was on a treadmill with a heart monitor on. Someone was in the corner, pumping iron and he walked over and he knocked him out cold. And frankly after having watched this [ed. Fuld's testimony], I’d have done the same too.†[via Businesandmedia]
I wonder if some other “unlucky” CEO from another failed institution were to be dragged into the streets and beat to a bloody pulp, would other CEO’s still be as eager to engage in risky investments in the future?
The End Of The Financial World?
The Market Crash of 2008 continues. I watched the carnage unfold on my market model in real time and I’ve never seen this level of panic before. Scary. The VIX touched 58 yesterday, a new all time high. It probably would’ve touched 60 if we went any lower than the lows yesterday.
Everyone at work is scared about their 401k’s and pulling money out. What did I do? I upped my % contribution yesterday.
The Race To The Bottom Begins
My friends, these are the times that try men’s souls. I believe we are starting “the race” to the bottom (or not).
“We’re seeing panic all over the markets right now,” said Javier Barrio, head of equity sales for Spanish clients at Banco BPI SA in Madrid. “Governments are taking steps to try to reduce investors’ fears but confidence is weak.”[via Bloomberg]
The scary thing is that one of my simulations show the S&P500 could reach 700 rather quickly.
Yen Rallies – Multi Year Trend Reversal
I remember Warren Buffet getting long Yen about a year or two ago. Was he lucky or just shrewd?
After seven years of providing the cheapest source of funds for investors buying higher-yielding New Zealand dollars, Australian dollars and Brazil reais, the yen is appreciating as $587 billion of subprime mortgage-related losses force banks to restrict credit. It strengthened 4.4 percent on a trade-weighted basis in September, according to the Bank of Japan’s effective exchange rate, the most since August 2007, when the seizure in capital markets began.[via Bloomberg]
Shrewd is the answer.
CitiGroup – How I Love and Hate Thee
I know this was so last week but CitiGroup is buying Wachovia’s banking business. Whether or not its a smart move remains to be seen but things *might* be turning around for this bad boy. Any glimmer of hope is welcome news to long term shareholders, like myself. What’ll make me feel really good is if CitiGroup (C) can get back above the 50 WMA. At least my $20 average cost positions would offset my $40 average cost positions. :)
Update: I must be cursed. Right after I posted this, news comes out that Wells Fargo wants to buy Wachovia in its entirety. Ugh!