Warning....yesterday's metioric stock rise might be a "bear trap" set to catch bulls!

Please note that the Dow Jones Industrial average rose11.1% yesterday, and I am sure it is enough to make a lot of people thrilled.

I am certain that many have proclaimed...."The Bottom Has Arrived".

Well, take a look at the spreadsheet above. You will notice that our 11.1% gain falls in between rows 4 and 5....which means it is only the fourth largest single day percent gain. (though it was the largest total point gain)

But if you look at the above table more closely, you will see that nine of the ten big gain days came DURING the Great Depression!

Yes, the market crash happened in 1929, but the market didn't really bottom out until about 1933.....and all of those big gain days happened in between. (OK, the #1 day might have happened as the market was climbing out of it all...but it was right in there)

What is my point you ask.....stock buyer beware!

Yesterday's market gain might just be a bear trap set and ready to trap people.....I suspect this is one of the reasons so many lost money in the depression....."trying to pick the bottom".....which must have looked to have come several times over between 1929 and 1933.

Look at the fundamentals of the economy.....look at actual things like unemployment, profits, foreclosures, people and companies going bankrupt. This is not the time to "double down" at the roulette table....at least I don't think so.

Check out the rocky ride the stock market had in the great depression in the graphic below.
Lots of great opportunities if you are day trader....but even then, the spikes seem so quick and abrupt.....I suspect it is even difficult for them.

Be safe with your retirement money.....if you have money you would normally take to Las Vegas....go for it...but be prepared to lose it.

There might be a "bear trap" out there ready to *SNAP*!

Yikes....I'd hate to see what the market would do if there was no bailout!

Well, the economy seems to be contracting at an ever increasing rate. I hear that unemployment is up....layoffs were at a high last month. I see that oil seems to have fallen to a very low level of about $88 per barrel.

We all know about the credit crunch, and the $700 billion government bailout....yes, the news is bad, but holy cow, what is the stock market doing now.....the floor about fell out today and the market was down about 800 points at one point.....finishing down about 370 points and below 10,000.

Stock markets around the world were falling....so I suppose it made sense to ours to fall as well.

As I type this, about 11:30pm on the east coast...the Asian markets are down about 3.4% to 4.8%. What a mess!

We shall see what tomorrow brings. In the mean time....SELL, SELL, SELL.

Market Isn't Very Stable.....time to get to safety perhaps?

Ok, so the equity market is bouncing like a yo-yo....everyone waiting for this magic bullet called the federal bailout plan.

I am not sure if this is a good or bad thing....I mean in the long run. I just don't know...but it seems to me that owning a bunch of defaulted homes can't be a good thing.

I'm also thinking that all that money creation must be causing inflation....but I don't know.

I don't like the general idea of the government bailing out companies and home owners who many of which were involved with loans that were just no viable.....where was their common sense?

On the other hand, I don't like the idea of an economy falling out of control because of panic....and over-reaction. But our country is in a world of hurt, and under a mountain of debt. In general, the USA is "too big to fail"! (where have I heard that before)

My plan.....at the moment, my portfolio is roughly apportioned like this:
77% - BONDS (about 6 funds)
11% - Foreign Currency (Cash in Euro, Yuan, Aust $, Canada $, Swiss Franc)
1% - Gold
5% - Equities (two funds at my work 401K)
5% - CD Fund
1% - US$ Cash

I am thinking of dollar cost averaging out of the bond funds into cash....I'm just afraid that some of these "safe" funds have exposure to some more of the "safe" companies that seem to be falling all around us ever day. (yet to fall that is)

I think I might get out about 10% a week.....and at some point, start dollar cost averaging into TIPS or iBONDS......to the point where I have perhaps 40% of my total money in inflation protected government securities.

I might actually "play" with perhaps some of my money and put it in and out of a couple of bear funds.....but that is kind of like gambling.....and that isn't my style.

OMG: 504 Point loss in the DOW....what to do?

Today was another in a string of busy days at work.....it has been this way for about 2 weeks now, and it is both hectic and exciting. Exciting because issues and problems just seem to be piled up everywhere I look....and potential "stop ship" situations have presented themselves more than a handful of times in that time. (and given the time we are at nearing the end of the quarter, this would be the WORST timing if they happened....our product is selling very well, and we need to maximize revenue!)


So Busy I Missed A Big Day On Wallstreet:
I was so "preoccupied" with work that I never really got to look at the stock market today....and I'm glad I didn't look because it was apparently very messy. The market ended up down 504 points, and headlines like those below were posted at the end of it all:

Paulson: Americans Should Remain Confident in U.S. Financial System
Meltdown in US finance system pummels stock market
Dow Down 500: It Could Have Been Worse, but 'Crash' Risk Remains, Roubini says
Big Risk: Surging Debt Makes U.S. More Dependent on China, Russia, Gulf States


Not Meant as a Negative Post:
I know this is a pretty negative post, and I don't mean that. I like to keep this Journal positive.....one might consider my Personal Finance Blog to be negative....but even there, I try NOT to be negative, but try to reason my way in and around my investment ideas. It is true that I have been very down on the US debt in this world....and our outsourcing flood over the last decade.....but even so, I try hard NOT to be negative there.


Learn To Be A Saver:
What to do....well, that's probably a matter better handled in my money BLOG, but I would say that it is time to stay away from debt....become a saver if you are not already. Where to put your savings is the question....well, I was feeling really bad about my move of about 20% of my portfolio into international currency two weeks ago...the dollar seemed to keep strengthening and it looked like a BAD MOVE....but in one 504 point loss day, I feel like an Einstein....I think the USA will have to start up the printing presses and a devaluing dollar might again be in the cards.

Either way....credit will be tight, debt will be messy....and savings is in style again. (IMHO)

Check out this video made by the maker of the Mad Money Machine Podcast.

Check out this video.....pretty scary prediction.

Well actually....YES......I instructed my financial advisor to move my investments to high grade bond funds.

I had initially instructed that it go to cash, but changed my mind when he countered with the BOND fund option. (highest grade corporate bonds)

He did NOT agree with my assesment and my making this move, and put such a comment in our transation notes....but I am not happy seeing my investments slowly eroding. (with no sign of recovery in sight)

The Move to Cash....wise, too late, or too little too late?

Well, I emailed my financial planner and asked him to move everything to cash. Yup....the Fanny Mae / Freddie Mac situation is glowing hot and things are not looking up in the general investment environment.

The market is lip sliding away.....stocks and bonds seem to be eroding as I watch.

So I'm at the point where I'm trying to decide what to do...but I just feel I have to stop the bleeding!

Is this a bad time to fall out, I suppose there is always a potential problem of selling low, buying high.....but I don't think this is the bottom.

What I told my financial advisor this morning......

I went to see my financial advisor this moring before work and we had a long discussion about my goals and risk tolorance.,

He of course suggested I "Stay the course"....which of course makes total sense if you think you can't really time the market and believe in long term returns.

But this market feels a lot like the market in 2001.....shaky and based on a sliding economy. I don't see it as market timing to slide out right now as I don't see a solid economy under-foot.

Well, I decided to back down from my 60% equities / 40% bond position to a 30% equity / 70% bond position. I was worried that I would be locking in losses from yesterday's drop....but low and behold, the market rallied big time today and HOPEFULLY he sold towards the end of the day and I might have hit it on an up-stroke. (also slid a sliver of money into a currency trading "fund" too)

No big deal if it continues up for a couple of days.....I don't see that as a long term thing. If it is...then I suppose I screwed up....but I just don't see why the market has been going up for the last 12 months.....seems like as bubble to me. (perhaps money rushing from realestate to the market....looking for "some place" to go because let's face it.....you lose money to inflation if you just put it in your mattress)

I suppose 12 months from now i will know if I was correct, or just a big wimp..... (I could be both too)

Economy souring.....Stock Market figuring that out finally.....Gold is already HIGH.....Is it Inflation or Deflation......How does one invest now?

THIS GUY SEEMS TO HAVE HAD A GOOD CRYSTAL BALL:
Warren Brussee is a retired Engineer (which brings him up one notch in my book right off :-) and he has written a book titled "The Second Great Depression: Starting 2007, Ending 2020".

I read the book over a year ago, and found it fascinating because it seemed to be describing a path to depression that was quite possible. I mean the signs were on the wall....he simply seemed to have read the tea leaves and seen this as a result.

Well, I have to day that the mess we are in right now has unfolded pretty much as he predicted in his book with housing being the bubble that is pulling all sorts of other areas down. (other areas that were also over leveraged, or poorly set-up with respect to risk)

Here is a radio show that interviews Warren, and lets you hear it right from his mouth. I suggest you listen to the man, and then if you think he makes some sense....buy the book.

Oh.....and READ his Blog for continued analysis of current events as they unfold. He posts to it monthly and analyzes data as it comes out every month and compares it to what he wrote in the book.

BUT HOW DO I INVEST NOW?:
Warren's book recommends Treasury TIPS.....but that doesn't seem like a high interest alternative.....but it is inflation adjusted.

The first question is your take on inflation vs deflation. I used to be a deflation guy....but I think that inflation is the way the USA will get nailed because the dollar will devalue because we ow so much to so many....we will print our way out of it. (we we have already begun doing with the latest government stimulus plan)

Gold just seems to expensive already.....almost feels like a "bubble" in gold....like it did with housing and the stock market in the .COM bubble era.

I hear commodities are a good place to be when there is inflation because these are generally goods that people require in the economy, and so the demand tends to be OK.

How to invest in them though...funds, futures markets, etc.....

Stuff I just know nothing about.

I will talk to my financial advisor and see what he suggests.....I'm sure it will be a fund because he "trades" in funds, and gets paid that way. Also, funds tend to be lower risk.


HOW ABOUT CURRENCY?:
I believe the US Dollar is in for a fall....so I was wondering if holding a basket of currency in a safe deposit box might be almost as good as Gold.....Ok....that is probably a bad characterization.....I wonder if it would be a good idea.

Something like 1/3rd Euros, 1/3rd Chinese Yaun and 1/3rd Swiss Francs? They say currency markets are the most volatile.....but I see the US dollar as being a real problem in the future....we are just in too much debt to everyone.

Any thoughts?

Is The Stock Market Catches Up With The Economy?

I suppose if you look back at my posts for the last year or so, you can see see that I have been a sort of economic pessimist. I have been seeing lots of things from housing sales/prices collapsing, to people going bankrupt and even my brother in-law who is in the middle of a house development struggling to stay afloat.....oil prices upwards of $100 per barrel and even watching gold going through the roof.

I think I even commented that I was surprised that the stock market continued to go up....past 13,000 at one point, and almost not caring about the state of the economy.

Now it looks as though inflation and unemployment is on the rise, and most daming of all, consumer spending for December was DOWN by 0.4%. (apparently only discount stores like Walmart showed an increase)

Well, the last week or so the stock market has been sliding, slowly on some days, and more quickly on others. But will it continue or for some reason rebound? I don't know.....it has been a total mistery to me so far.

Warren Brussee's BLOG (the guy who wrote the book suggesting a "Second Great Depression" would occure in 2007) has started to comment that things are really beginning to notice the downturns....and since much of it is in the various money centers of focus...like banks and mortgage companies....it is all getting proper focus.

So do I believe the current market moves, or not. If I do, what do I do.....putting money into CASH doesn't make sense if you believe that inflation will be the "release" for our economic pressures. If he resulting "escape" is deflation.....cash is the way to go....but deflation would be so very bad for the whole situation and would make our problem a very long term one indeed.

I'm no economist, but I would say that inflation will be the poison pill we take because printing money is well within the governments power and it would "solve" our world debt problem by simply diluting the debt.....of course, it will also mean our very valued dollar would become as valuable as toilet paper........so it might be time to invest in wheelbarrels like the German people needed after WWI....we might need them to pay for bread at the store.

Credit Card Debt problem "pile on" top of Housing Refinance Debt problem.....what next?

Why is it that my person BLOG (Journal) is fairly upbeat, and my personal finance BLOG can be so worried and negative.

Well, there are plenty of troubling signs in the economy....and this is yet another. Credit card debt is mounting as noted in this article.

Apparently as the home refinance crisis clamped down on home mortage refi's, and as house prices fall (making pulling money out impossible) people seem to go to the NEXT well (albeit a high interest source) their credit card! (do you suppose the next stop will be the corner loan-shark?)

This was sort of outlined in Warren Brussee's book about the Depression of 2007.....and then in his BLOG. But while the economy seems to be slowing and sputtering at times, the stock markets seem to stay high.....which makes me think a little about March 2001.....remember the High Tech NASDAQ bubble?

Oh well, there I am being negative again.

What to do, what to do......the ride up over the last year has actually been pretty good......I did go from 70% Stocks/ 30% bonds down to a 50/50 split.....so I did pull-back a little.....but should I pull even further into safer investments? I just don't know.....

I think I have entered the Investment Twilight Zone.....

I was looking at the news flash of the past few days and instantly said to myself.....

"Eeek, our economy is slowing way down. Perhaps I should be worried."

What am I talking about you ask.....

• It started with this report that mortgage foreclosures were way up.
• Then there was this report that the federal government is stepping in to protect us from the increases of forclosure.
• Then there was this news that producer prices have dipped because of a poor outlook for sales and home builders are gloomy.
• Then...I see the Federal Reserve making a bigger then expected rate cut.....ouch, the economy seems to be on the slide to me. They are normally very slow, deliberate and conservative.....this worries me.

So at this point I'm thinking.....yikes, slowing economy, recession.....what do I do with my stock and bond investments?

• But what happens instead......first I see this report where Wall Street seems to love this news with the Dow going up a record amount....the highest single day increase in 5 years!
• But if housing loans are a problem.....we must be stressed for credit, right.....YET, this report shows that credit card stocks are on the rise!
• Maybe I have my mental model wrong....surely housing stocks can't be up, right? WRONG....check out this report as they too seem to have risen today.

How does all of this work? Is this the twilight zone?

What am I doing wrong here? Where can I go to learn how to read the market?

People say the market is the best judge of things.....am I missing something?

----- CONFUSED and WORRIED -----

I've made my Vonage Losses Back!

I had initially invested $3000 in Vonage because I thought the idea of VoiP was a great one, and I thought they had real name recognition and an advanced lead in the market.

Boy was I wrong....and the world began to crash in on my $3000 investment. I sold half of it about half way down and then by the time I sold the second half, my $3000 had turned into a nice small $2000.
(which was easier to fit into my pocket for sure....but that's hardly a GOOD thing when it comes to investments)

So I set along to make my money back.

I decided that I needed to invest in a higher risk item, and that a Chinese stock would be just the ticket.

Well, I chose CHU (Chinese Unicom) and FXI (a Chinese IShare of 25 stocks).

Well, I am happy to say that the value of my investment as of today is $3032.95....so I am back in the money again! in fact, on about July 23rd, my investments here were worth $3436.....so I actually missed a nice high about a month ago. (But then I am more of a buy and hold investor with small reassessments every 6 months or so)

So I am sitting here reassessing once again....it is time. Should I sell? (or do I actually have much bigger fish to fry in my ever larger retirement account.....yes, I think I do. I will "let it ride" for now!)

It still feels good to make money.....

Where do you think the market is heading?

If you asked me this about 3 months ago, I would have told you there would be a correction. How can I prove that....well, I did move from an 80/10% equity to bond split to a 50/50% split back then.....and I was sort of kicking myself for the past few months.

Last night I felt like Einstein.....

I'm not totally sure what suddenly spooked people. The idea that the American economy was slowing....that's not a new concept. The fact that the Chinese economy can not sustain an 11% growth rate.....heck, they even said that many months ago too.

These are some of the things that spooked me, along with China's position to sell some of their dollars and the whole world sort of getting skittish about the dollar. We have also experienced a number ob bubble or bubble-like situation from the .BOMB crash in 2001 to the housing meltdown currently under way.

This notion of a soft landing always struck me as odd....sort of like seeking a slow core meltdown of a nuclear reactor as opposed to an uncontrolled fusion reaction....one seems much worst than the other, but neither is at all pleasant!

So now I watch oil prices sliding up....I see record numbers of people going bankrupt....I see housing sales in the toilet with the nations largest builder explaining away a 70% drop in profits.
I see jobless numbers looking ok, but also knowing some of that is bogus because people fall off the unemployment rolls and then cease to count in the statistics.

So I'm happy with my 50/50% split for now. I had some money coming available that I was going to place in a more aggressive instrument, but I think I have decided that slow and steady wins the race!

Onward and upward!

Market Maps from SmartMoney.COM

Check out this cool and very visual representation of the various stocks in he market. It is sometimes a lot easier to understand the various attributes of a companies finances when you see them in a graphical format.

From the website:

The market at a glance The map lets you watch more than 500 stocks at once, with data updated every 15 minutes. Each colored rectangle in the map represents an individual company. The rectangle's size reflects the company's market cap and the color shows price performance. (Green means the stock price is up; red means it's down. Dark colors are neutral). Move the mouse over a company rectangle and a little panel will pop up with more information.

Check out this page for the market shown this way, and then there is this page that shows the ETF market in a similar manner.

Also, check out this cool website that is a cool way to search for stocks by selecting various parameters to separate what you consider the wheat from the chaff. It looks like a really great tool.

The only problem with these tools is that for analytical people like me, they are addictive!