Or maybe he would say to "go f*&k yourself" as the jobs number just printed with what appears to be a rotten number and rotten revisions to past months.While I am glad for Jack Bouroudjian's happiness over the fact that the negative employment number is the best of all worlds, for me the focus is not to try to solve what this means but to think about what to do if this is recessionary.
First if this means that the market is on its way to a normal 25% bear market decline there will be plenty of time to react. Selling too much too soon is a big gamble that is not necessary.
Admit to yourself you will not get out at the top. Then look at past recessions/bear markets on BigCharts.com or in your Trader's Almanac and you will see there was plenty of time to get out.
I do not know at this point if the number will result in a panic in the market but if it does, it will be like every other panic; it will have some snap back before anything else. Again, regardless of the news and the reaction just stick to whatever you devised to take defensive action (if you have been reading this site for a while hopefully you have devised a strategy and are not flying by the seat of your pants).
10 comments:
Hi Roger:
Thanks for this excellent post.
yours,
Stranger
Then again if you are over exposed to stocks and have a shorter time frame like say within 5 years to retirement then starting to reduce equities now may be more prudent than waiting. Notice I said "reduce" and not outright sell everything.
Human nature is such that most will not have a plan and will in most cases watch as the carnage reaps through their portfolio. At that point most will be handcuffed and stick with it.
I think risks are such that a lower equity allocation to stocks over what you ahve had in most years would be warranted.
IMHO what will happen:
1) Fed will now cut rate
2) Market will rally giving smart money time to get out
3) Market will tank 15-20% over the next 10 months
Most major currencies including yen and gold are running up fast while the $USD is taking it on the chin. I'm glad for my hedges including long T-bonds, short and volatility plays but just about everything else is getting hit; boo hoo. Regardless, unless you're a day-trader, it's probably a good idea NOT to watch this play out minute-by-minute; that can be pretty unsettling unless you already have an asset that was in the sell/buy list and are are targeting an execution point. Better to assess damage over the weekend, line up assets that may need to be sold or otherwise adjusted if needs be, and then see how Monday morning plays out (remembering that the first half-hour of action is notorious for head-fakes one way or the other).
As of right now I'm going to walk the dog, get some non-investing work done and clean my fishing reel for tomorrow morning down by the river.
OT but this bit of satire by Michael Lewis ("Liars Poker", etc) at http://tinyurl.com/2a7dyd is something of a tour de force. To give you some flavor it begins with these lines:
"So right after the Bear Stearns funds blew up, I had a thought: This is what happens when you lend money to poor people.
Don't get me wrong: I have nothing personally against the poor. To my knowledge, I have nothing personally to do with the poor at all. It's not personal when a guy cuts your grass: that's business. He does what you say, you pay him. But you don't pay him in advance: That would be finance. And finance is one thing you should never engage in with the poor. (By poor, I mean anyone who the SEC wouldn't allow to invest in my hedge fund.)
That's the biggest lesson I've learned from the subprime crisis. Along the way, as these people have torpedoed my portfolio, I had some other thoughts about the poor. I'll share them with you." (cont.)
I will just go back to reading my many leather bound books.
As always keep emotion out of the decision making process.
But, I will disagree with Roger as I think we have already seen the first bounce from the highs. It is not clear to me that we already have not seen an excellent exit opportunity earlier this week.
I bought a small amount of some ultra short and am happy I did.
RW
I always liked Ronald Reagen's comment - "The war on Poverty is over - the poor lost."
I am patiently following my strategy of not selling in panic until the market hits bottom, then I'll dump everything, and the market will go straight up.
OG
OG,
Reagan could come up with some zingers and, even when he wasn't the author, he could deliver them beautifully. My favorite is still (WRT Soviet Nukes), "trust, but verify."
You should really switch to my tried and true investment strategy: Wait until the top before buying; it's infallible I tell you, trust me.
In reference to my ability to always do the wrong thing: Today I'm buying spy calls. I'll sell them Monday on the snap back. Can't get much dumber than that, except if Monday is a huge snap back, then I will also buy puts.
To distract myself, called Claymore about their super sector funds. I asked for indexes that it might track. Good news is that the rep was well informed about technicals. The bad news is that I see these funds as offering little that is unique. High correlations...higher than .87 and into the mid.90's. Services tracks s&p financials; information tracks nasdq100 or s&p500tech; and mfg tracks dji.
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