Simply Revealed

I have the benefit of being someone who has arrived relatively “fresh” to the market as an investor and trader. I was not an active investor or trader for the past several years. And that being so, it is very easy for me to offer my great respects to the many experienced analysts, advisors and independent traders that I have been following for the past few months. Many of you are to be thanked for your continued wisdom, know-how and sanity.

There is no doubt as a very close friend and ex-professional trader has said to me many times; the market is not rational, it is emotional. It is filled with emotions, fear, disappointment, enjoyment, satisfaction, denial, hope, and at this time ladies and gentlemen, there is a predominance of denial and false hope. But this is not an indictment. It has to be that way now. The economics are going straight to hell. I mean really really really bad news on economic fundamentals, far worse news, is coming down the pike and building steam and it is a global phenomenon. But we the people who are dependent upon a stable societal foundation, and we who are the investors, traders and financial institutions driving the markets are trying to ignore the terrible onslaught of economic reality for as long as we possibly can. Nobody wants to give in, admitting the underlying economic foundation is, I will not say crumbling. It is transforming. It is painfully transforming and it is going to take years and do not spend any more time denying it or believing for a moment we are in anything that resembles a bullish scenario. If we just throw in the towel now and sell, then the play itself would be over and nothing left to do after the curtain goes down. Its not just about dollars, about long and short; it is about the essential existence of trading, bears vs. bulls, nice people who support, greedy bastards who destroy, and everyone in between who is affected.

The 2009 S&P500 forward PE ratio hovers around 30 right now. Do we understand basic reality? Historical comparisons such as suggesting this PE needs to go all the way down for example, to 10 before we resume the uptrend are moot. We can live with it hovering around 20 for a few years, but even that means 600. The parameters are different, direct comparisons have limited validity, the parameters of the past have lost much of their meaning. How many more days of the S&P (^GSPC) staying below 800 before the bulls would give it up? Or a different scenario perhaps; If it is true we have just dropped to a new lower trading range from around 750 to 820, then realize that next month, or the month after that we are going to again drop to the next new lower trading range. That would certainly be a softer, more palatable way to decline than sharp, broad, scary downside breaks.

The EU is financially in ruins, practically even worse than the U. S. economy and government. Yes as I like to point out, China/Asia has lots of cash, great to realize, but their markets and economies will still be slammed by the other downward forces in the coming year.

This situation is not about a recession or a depression, it is far more massive and the basic statistics, not the manipulated shiny ones, simply reveal it. That news is not yet priced into the market because it is too gruesome. We must be in denial of it. Yet, we indeed are in a bear downward sweep, clearly unfolding right in front of us, leading to unprecedented transformation and realignment of the rules and realities that will govern the economies and markets of the future.

Beware of historical correlations and rules which are decidedly out the window, irrelevant, meaningless, like the gold/oil ratio, buggy whips, and vhs tapes. Safeguard and position your assets with prudence and protection in mind. If you are more aggressive, short the market wisely. Heed the wisdom and technical knowledge of the many very smart advisors, investors and traders out there which I will not go into here. Be prepared for the many opportunites in business and life that this unprecedented global economic downturn will bring as it continues to unfold for many more months and longer.

Subscribe by RSS Subscribe by Email

Comment by liz

2009-02-19 09:04:05

Hi Mario, I like your attitude and have read now some of your posts and your webpage. I notice you are getting a little more pessimistic since your 1/29 article, even though you would like to be optimistic. I too believe that oil, commodities and China will be great investments in the future, as well as some undervalued US blue chips. I am sitting mostly in cash and have a whole list that I would like to buy “at the bottom”, of stocks that I like alot on fundamentals and value and would like to own for the future. But I can’t just buy and watch them go down so I have reluctantly come to the conclusion that I have to wait for new lows to implement that strategy. So I am trying some other approaches that I wanted to share with you:

http://www.decisionmoose.com - I like this guy because he shares the results of his model, and even better does not send me emails about it; and his results are great over time. He uses a model that switches to one asset, tho with alot of other good analysis. I started following him in November, made some money on Treasuries, then lost some of it before I stopped out still in profit. Unfortunately I was traveling and did not switch to gold last week as he recommended, but still think I will join the bandwagon today.

marketclub.com - trade triangles that give market signals, and lots of educational material including Adam’s personal videos. I have made some money and lost some here, mainly because I find it hard to be disciplined and hard to short, which have been most of the signals for most stocks and ETFs lately. Somehow I prefer to buy and watch a stock go up and make some money, than to sell it and watch for it to go down in order to make money. I guess I should try the short ETFs. But the idea anyway is market timing, following the market trends as shown by technical analysis, not buy and hold.

The other strategies I am following are managed futures and robot-traded forex, both of these are automated and make money from spreads whether up and down.

The bottom line though that I wanted to make is, a big problem is that there is TOO MUCH INFORMATION and TOO MANY CHOICES out there, especially if like me, much of this is learning, even if I did invest for years buy and hold and thought I was fairly knowledgable. I haven’t even mentioned other strategies I am looking at, like moving some of my accounts from Ameritrade to Everbank so that my cash will earn interest in online savings account while still being available to get back in the market; or GoldMoney to keep gold bullion offshore as a safe haven. Besides deciding on investments, there are judgments about whose advice to trust, who is wise, judgments about what is right for me, etc.

I too am thankful to all the gurus out there, especially the many who make info available free to help others, but this is the big challenge for me, how to manage all the information and focus on what is important to do first and make decisions with all the info swirling around. I wonder if you could write an article about this?

Reply to this comment