Ok, a little late, but this time the market is going down pretty hard. That little "computer error" that caused the previous collapse was indeed a computer phenomenon...but it was not entirely computer generated.
What did likely trigger the massive and quick collapse was limit sell orders being placed, which means people tell their computers to sell a stock if it reaches a certain limit. A whole lot of those being placed at once can cause computers to enter into bidding wars without buyers, driving a stock price to near zero.
They blamed it on a computer error...something about a decimal point misplaced. Nonsense, it was human error made worse through computers.
The damage from this error? A blip...nothing really...but take it as a message of things to come.
What would cause a lot of people to put sell orders on stocks at once. A lot of termoil around the world (earthquakes, volcanoes, flooding) for one...but the underlying cause of it all, is a lack of confidence. It's something that's creeping up on all of us...the realization that nothing is really getting better around us...could this be...a false recovery?
That is, in fact, what the past year and a half have been about. It was a sigh of relief that armeggedon had not reached us, then an overzealous rally had us partying like it was 1999 again.
The false recovery has sustained because nothing has been around to trigger it. Enter Greece, then Portugal, and probably a few more problems and the Euro drop will intensify, which will help drive world markets back down.
I sold into a whole lot of bonds last fall, and they have actually outperformed the market since. Mostly safe stuff, immediate term bond funds will give you a decent amount of appreciation and shelter you from the big hit to come.
Expect some more rough days for the markets in the near future, as European money issues drag us all into a recession. On the bright side, if you're on the sidelines as far as the markets, you'll enjoy some cheap gasoline and TV's while the rest of the country is depressed over their 401k.
Sideline yourself, and soon. The rumors of a full recovery are premature.
Wednesday, May 12, 2010
Thursday, October 1, 2009
Oops....missed it
I got greedy, I should have called the top Monday afternoon.
We've been there, and we're not going back. The tide turned this week and we're looking down from here.
A piece of advice...if you haven't sold out of any risky positions...do it now. The dropoff is going to be quite severe, so I would do it rather quickly.
Sit out the slide, which should be beginning shortly. Get ready to watch from the sideline.
Sell...sell...sell!!!
We've been there, and we're not going back. The tide turned this week and we're looking down from here.
A piece of advice...if you haven't sold out of any risky positions...do it now. The dropoff is going to be quite severe, so I would do it rather quickly.
Sit out the slide, which should be beginning shortly. Get ready to watch from the sideline.
Sell...sell...sell!!!
Monday, September 28, 2009
The last week
This week represents the calm before the storm. One last little breath of good news before we all settle in for another nightmare in our financial markets.
The Dow is sitting at about 9800 right now...it may rally to 10,000 this week, maybe not...but it's not the time for nickel and diming the market. This is a warning, get out of anything risky this week, it will probably be your last chance for quite a while to do so.
Behind the scenes right now, the real panic is starting. Small and medium sized banks are scrambling to unload a ton of commercial real estate, and they're finding no buyers to hold on to overbuilt strip malls and liquor stores. It's essentially the same situation we had last year...when everyone wants to sell a particular asset at the same time, that asset becomes valueless.
I may do a post about the mark-to-market and the effect on a bank's balance sheet, but that's a discussion for another time. In short, it's a new form of accounting that banks must do...and it's going to cause a whole lot of banks to fail.
It's going to start a chain reaction, which will hurt the markets, especially the stocks.
So...if you have your 401k in a lot of growth funds...it might be time to start trading those in for some bonds or money markets.
When I say it might be time...it is time...the time is now. Get on it, don't say I didn't warn you.
I'm not calling the top yet, but I am saying that it will happen before this week is over.
The Dow is sitting at about 9800 right now...it may rally to 10,000 this week, maybe not...but it's not the time for nickel and diming the market. This is a warning, get out of anything risky this week, it will probably be your last chance for quite a while to do so.
Behind the scenes right now, the real panic is starting. Small and medium sized banks are scrambling to unload a ton of commercial real estate, and they're finding no buyers to hold on to overbuilt strip malls and liquor stores. It's essentially the same situation we had last year...when everyone wants to sell a particular asset at the same time, that asset becomes valueless.
I may do a post about the mark-to-market and the effect on a bank's balance sheet, but that's a discussion for another time. In short, it's a new form of accounting that banks must do...and it's going to cause a whole lot of banks to fail.
It's going to start a chain reaction, which will hurt the markets, especially the stocks.
So...if you have your 401k in a lot of growth funds...it might be time to start trading those in for some bonds or money markets.
When I say it might be time...it is time...the time is now. Get on it, don't say I didn't warn you.
I'm not calling the top yet, but I am saying that it will happen before this week is over.
Tuesday, September 8, 2009
Get out of the banking sector this week
The first shoe to fall in our annual autumn crash will be the banking sector. It started the fun last year, and I have every reason to believe that it will be the same this year.
No one is talking about commercial real estate now, but by year's end it will be part of the conversation. The commercial market is almost as overextended as the housing sector...ie there's too many malls, strip malls, and drug stores to support the demand for these things. That means empty commerical buildings (seen any in your neighborhood?) which means that the banks may not be getting their loans paid on these buildings.
These things add up slowly, but then hit you in the face all at once. The real pain for businesses didn't come until late last year, and it came suddenly when everyone panicked and stopped spending their money. Now it's been a year, and those Bennigan's and Steve and Barry's closures are beginning to hit banks, and the worst spot to hit them is in their capital.
Many many banks are struggling with this, but mostly local and at most reigonal banks. The big banks haven't been lending to businesses for a while.
This will either incite the stock market fall through a rash of bank failures, but more likely Obama will be act. I'm betting that it will be a creation of bad banks the government will start. Basically, it will start buying up commercial real estate paper (buy their mortgage) and collecting them in big government owned banks. Their mission will be to split these assets up and start selling the best, slowly selling the rest once the market improves and eventually closing the banks with a zero on the dotted line.
Regardless of the actual damage done this fall...the drop in the market will occur for 2 reasons.
1) The economy is not as healthy as it would appear. We still have some pretty bad problems.
and
2) Because everyone will suddenly realize that #1 is a reality, and will be racing to sell.
It is going to occur in 2009, and the smart ones who sell out soon will be ready to scoop up the same stocks for 25% less than their sale value today.
Predict the market, don't be the fool that reacts too late. Sell your financial stocks today.
No one is talking about commercial real estate now, but by year's end it will be part of the conversation. The commercial market is almost as overextended as the housing sector...ie there's too many malls, strip malls, and drug stores to support the demand for these things. That means empty commerical buildings (seen any in your neighborhood?) which means that the banks may not be getting their loans paid on these buildings.
These things add up slowly, but then hit you in the face all at once. The real pain for businesses didn't come until late last year, and it came suddenly when everyone panicked and stopped spending their money. Now it's been a year, and those Bennigan's and Steve and Barry's closures are beginning to hit banks, and the worst spot to hit them is in their capital.
Many many banks are struggling with this, but mostly local and at most reigonal banks. The big banks haven't been lending to businesses for a while.
This will either incite the stock market fall through a rash of bank failures, but more likely Obama will be act. I'm betting that it will be a creation of bad banks the government will start. Basically, it will start buying up commercial real estate paper (buy their mortgage) and collecting them in big government owned banks. Their mission will be to split these assets up and start selling the best, slowly selling the rest once the market improves and eventually closing the banks with a zero on the dotted line.
Regardless of the actual damage done this fall...the drop in the market will occur for 2 reasons.
1) The economy is not as healthy as it would appear. We still have some pretty bad problems.
and
2) Because everyone will suddenly realize that #1 is a reality, and will be racing to sell.
It is going to occur in 2009, and the smart ones who sell out soon will be ready to scoop up the same stocks for 25% less than their sale value today.
Predict the market, don't be the fool that reacts too late. Sell your financial stocks today.
Tuesday, September 1, 2009
Not yet...
Today was a rough day...markets tanked a little bit...but this isn't it quite yet. We still have some more to climb before we start our long decent. They're right today...the markets have climbed too far without any huge fundamentals supporting it.
The tanking we saw today was most of the smart money coming back from vacation...most traders take August off and don't return until the 1st of September. They got back to their desks and were happy to see the climb had continued, but bailed because they knew it won't last.
It won't last much longer, we're going to see a tank pretty soon...but my bet is that we have a few more weeks to go.
Pay close attention to financials...they are going to lead the fall. Also, keep an eye on Friday bank failures...you're probably going to get a slew of them just before the market tank happens.
Probably a good time to start backing out of your most overpriced pieces of your portfolio. Get out of bank stocks by the end of next week for sure.
Today was bad, but we'll make up this ground by the end of the week.
Wait for it...
The tanking we saw today was most of the smart money coming back from vacation...most traders take August off and don't return until the 1st of September. They got back to their desks and were happy to see the climb had continued, but bailed because they knew it won't last.
It won't last much longer, we're going to see a tank pretty soon...but my bet is that we have a few more weeks to go.
Pay close attention to financials...they are going to lead the fall. Also, keep an eye on Friday bank failures...you're probably going to get a slew of them just before the market tank happens.
Probably a good time to start backing out of your most overpriced pieces of your portfolio. Get out of bank stocks by the end of next week for sure.
Today was bad, but we'll make up this ground by the end of the week.
Wait for it...
Friday, August 21, 2009
The cracks are starting to form...wait for it...
The markets keep chugging along this week, after some initial worry that the rise may be over.
Not just yet...we've still got some optimism to dry up before the markets can start their drop. Another month, maybe a little more...but we're getting close.
July was a pretty bad month for the small banks. Up until now, we've seen banks going under because of residential real estate...but creeping in slowly but surely are commercial real estate loan defaults. Remember last fall when it seemed every bank was going to fold? We're probably going to be getting a taste of that this year.
It won't be as widespread or huge...because it's going to be the mom and pop banks that go under, not your giants. That's because the giants saw the writing on the wall a little earlier this time, and bailed from the commercial market. Not your huge projects like Trump's building...but your strip malls, liquor stores, resale shops...local business. Most of those local businesses got their building loan from a local bank. Big banks stopped lending to these markets, and aren't interested in derivatives for these either.
Most likely, Obama is going to take some action this fall to again support the banks. At least, he is going to pump some dough into the FDIC (because they're going to run out of money soon.) It's hard to get a read on him right now, but he may do something (along with the Treasury or Federal Reserve) like opening up a series of bad banks, to dump assets no one wants for a premium...then slowly selling those assets off to close the bank with a zero.
Like I said...it's hard to guess what Obama and co. plan to do, but rest assured they are going to take action. We can only pray it will be limited.
This is the news that will drive the market lower this fall.
The cracks for this are already forming, and are plain as day when you know where to look.
Check out PPI and CPI, both measures of the value of the dollar. Both were showing mild inflation through most of this year, but with July took a tumble towards deflation. Deflation, as I've said before, is bad for debtors...and that's most of us. When banks go under, money is destroyed. Not like dollar bills are being burnt, but fake money invented by banks being destroyed has the same effect as burning dollar blls.
July was a very bad month for banks...19 banks failed. Bank failures aren't really felt from a direct sense...everyone's money is replaced and immediately available, all assets are transferred so you just write your mortgage check to someone else next month. But the effects of a bunch of banks going under at once is felt in the value of your dollar.
We're probably going to feel a mini deflation again this fall. It'll be like last fall, oil and commodities will ease down, the stock markets will come down a little harder. Housing sales is going to slow down again (they're really doing well right now.)
That means get ready to take action...don't sit on your ass and watch your retirement shrink again, get ready for it.
Get ready to sell into safe stuff...money markets and bonds...and sit out the correction.
Don't sell just yet, as we've still got a little more climbing to do, but get a gameplan together. Figure out what's most overpriced in your portfolio, get ready to sell that first. Figure out what you're buying into, but anything that won't feel a market correction.
The fundamentals are starting to look a little worse, but the optimism is going to keep up a little longer. Just know that it's coming.
I'll keep posting until I think this is the top...then I'll try to call the top. We'll see how well I guess. Then, I'll try to call a bottom when you take the money sitting on the sidelines and cherry pick underpriced stocks and especially commodities.
...wait for it...
Not just yet...we've still got some optimism to dry up before the markets can start their drop. Another month, maybe a little more...but we're getting close.
July was a pretty bad month for the small banks. Up until now, we've seen banks going under because of residential real estate...but creeping in slowly but surely are commercial real estate loan defaults. Remember last fall when it seemed every bank was going to fold? We're probably going to be getting a taste of that this year.
It won't be as widespread or huge...because it's going to be the mom and pop banks that go under, not your giants. That's because the giants saw the writing on the wall a little earlier this time, and bailed from the commercial market. Not your huge projects like Trump's building...but your strip malls, liquor stores, resale shops...local business. Most of those local businesses got their building loan from a local bank. Big banks stopped lending to these markets, and aren't interested in derivatives for these either.
Most likely, Obama is going to take some action this fall to again support the banks. At least, he is going to pump some dough into the FDIC (because they're going to run out of money soon.) It's hard to get a read on him right now, but he may do something (along with the Treasury or Federal Reserve) like opening up a series of bad banks, to dump assets no one wants for a premium...then slowly selling those assets off to close the bank with a zero.
Like I said...it's hard to guess what Obama and co. plan to do, but rest assured they are going to take action. We can only pray it will be limited.
This is the news that will drive the market lower this fall.
The cracks for this are already forming, and are plain as day when you know where to look.
Check out PPI and CPI, both measures of the value of the dollar. Both were showing mild inflation through most of this year, but with July took a tumble towards deflation. Deflation, as I've said before, is bad for debtors...and that's most of us. When banks go under, money is destroyed. Not like dollar bills are being burnt, but fake money invented by banks being destroyed has the same effect as burning dollar blls.
July was a very bad month for banks...19 banks failed. Bank failures aren't really felt from a direct sense...everyone's money is replaced and immediately available, all assets are transferred so you just write your mortgage check to someone else next month. But the effects of a bunch of banks going under at once is felt in the value of your dollar.
We're probably going to feel a mini deflation again this fall. It'll be like last fall, oil and commodities will ease down, the stock markets will come down a little harder. Housing sales is going to slow down again (they're really doing well right now.)
That means get ready to take action...don't sit on your ass and watch your retirement shrink again, get ready for it.
Get ready to sell into safe stuff...money markets and bonds...and sit out the correction.
Don't sell just yet, as we've still got a little more climbing to do, but get a gameplan together. Figure out what's most overpriced in your portfolio, get ready to sell that first. Figure out what you're buying into, but anything that won't feel a market correction.
The fundamentals are starting to look a little worse, but the optimism is going to keep up a little longer. Just know that it's coming.
I'll keep posting until I think this is the top...then I'll try to call the top. We'll see how well I guess. Then, I'll try to call a bottom when you take the money sitting on the sidelines and cherry pick underpriced stocks and especially commodities.
...wait for it...
Friday, August 7, 2009
Questions?
I try to always write in the simplest terms necessary, but if you would like anything further clarified, please feel free to ask questions...and I will do my best to respond.
Also, any questions you'd like to ask in general, please feel free to comment...I will respond asap.
Just to qualify myself as qualified...I am an amateur economist...but one who predicted the crash in oil and all other commodities, and the soaring value of the US dollar last year. I called the bottom of the gold and silver market (after advising against them for a year) in December 2008...and they haven't been close to that level since. I also predicted the bottom of the market this year, earlier this February.
Also, any questions you'd like to ask in general, please feel free to comment...I will respond asap.
Just to qualify myself as qualified...I am an amateur economist...but one who predicted the crash in oil and all other commodities, and the soaring value of the US dollar last year. I called the bottom of the gold and silver market (after advising against them for a year) in December 2008...and they haven't been close to that level since. I also predicted the bottom of the market this year, earlier this February.
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