One general observation; news like we had over the weekend about Fannie, Freddie, Paulie and Bennie and the Feds could turn out to be the catalyst for another feel good rally.
I don't think a bear market can end with "I'm from the government and I'm here to help," to quote Mark Haines from this morning, news.
Whether this is a normal bear market (my opinion) or something else it does make sense to think there will be another feel good rally at some point. The one from March to May 19 was longer than normal but shallower than normal.
For all I know, and on second glance, today's
10 comments:
Agree.
Off point. I did peripheral research on buying an almost new 2005/06/07 SUV vs. a new hybrid that does not take a crowbar to seat the driver and leave others playing musical chairs scrambling to find a seat, investing the 50% savings (likely $13000. or more) in energy ETFs or MLPs to recoup the fuel cost difference (about $1750.00/year comp to comp) if energy continues to moderately climb. High yields on MLPs or Canadian oil energy trusts may well negate the fuel cost difference annually.
SUVs are priced to extinction and going lower by the week at a dealer near you, so depreciation is not an issue of significance in most instances. Buying one and investing the difference in energy securities may make sense.
If one is a contrarian, buy ProShares' Short Oil.
Something to agree or disagree with during a sad market.
T
can't disagree but your point brings up, for me, the question of mental accounting.
your $13k is making money one way or another in the energy sector, do you really feel that or think about it when you are putting $88 or $121 into the tank?
personally, paying at the pump is a different compartment than my portfolio.
I've been thinking about a gasoline hedging strategy myself. This article gives an example using UGA: http://www.smartmoney.com/etf-focus/index.cfm?story=20080508-etf-investing
I wouldn't really see this as part of my portfolio though.
I would just like to posit that whatever happens over the course of the next ~6 months this will become, by definition, a "normal" bear market :-)
Roger,
I think you are right about us being due for a rally. I have reduced cash from 100% to 75% today.
The government seems intent on doing what ever is necessary to prevent the 1930's again and I think they will clearly succeed and the sky is falling crowd will be sorry.
But longer term I still think this bear will be worse than normal. They will avoid the worst but that does not mean this will be normal or enjoyable.
As people have been saying, the financials have taken us into this bear market and it will be financials that will bring us out of it. That's why I believe that this will be a worse (than down 34%) than average bear.
"....unfortunately, bank stocks don't usually form a neat bottom and then rebound smartly. They extend their suffering for a long period."
http://tinyurl.com/6b6q4t
My plan is to start to buy good companies with a dividend when the market is down just over 30%. Companies that won't go out of business like GE, MRK, IP, DOW, IBM, etc. Then when the market is down 35-40% I will be buying small cap companies and small cap indexes on down days with the bulk of my money and wait for the recovery. Small caps do better coming out of a recessionary bear market than the big companies.
The first year recovery after a bear market is almost always the best year to be in equities. If you miss these years you have no chance to beat the market averages over long periods of time.
That's why Roger stays in and takes defensive action instead in his managed portfolios to keep them from losing what the averages lose. To each his own, but as Roger has preached here since this blog started, have a plan in place.
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One thing about this market is that it seems like a normal bear, *so far*. It probably wouldn't take too much to add to the woes in the credit markets to make it a worse than average bear. Likewise if commodities suddenly reverse, continuously for several years, we could see a shallower and less painful bear market. It's all relative at the end of the day. With oil prices as they are now it's painful but not disasterous, housing and the banks have seen their fair share of troubles before and it's not the first time billions have been poured into a war on foreign soils. That these three problems haven't had a terrible influence on the markets is, no doubt, due to the influence and stimulating effects of emerging markets who are concentrating their efforts on increasing internal demand through their consumers and infrastructure building. How resilient would they be to further shocks and where could those shocks come from? We certainly live in interesting times.
"Roger,I think you are right about us being due for a rally. I have reduced cash from 100% to 75% today."
And, I have "reduced" stock by 10% by doing nothing......
Anon. 9:43.
I would stay away from Canadian trusts since they are going to instill their new tax law in 2010 and start taxing these kinds of trust companies. Most people will start to flee these funds early next year.
WHX is an American oil trust that's paying about 17% yield, and they are drilling in the Bakken oil field. (Disclosure: I own 150 shares)
Oil could also correct off it's highs if there is a hint of a recession which could be world-wide. Whese kinds of trusts would get hammered as demand drops.
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