Sunday Morning Coffee

The news from the stock market is making its way into the mainstream of consciousness. This probably does not come as a shock but I had some anecdotal evidence of this.

At fire training on Saturday a couple of guys older than me were talking about things in the market after one of them asked me if this made me busier than normal. Stock market stuff never comes up at the fire station.

Two of our part time neighbors (most of the houses near us are vacation homes), coincidentally, called us on Saturday and both of them asked Joellyn if I was freaking out. Very amusingly Joellyn told them both what I have been writing about for a while, "the market goes down sometimes and the market warned ahead of time." Very funny.

On Monday and Tuesday I will be attending the IMN World Series of ETFs in Phoenix. I will be moderating a panel about portfolio construction using ETFs and also giving a presentation on that same panel. I think it will be a great chance to see what people are doing and thinking in the midst of all this beef. Should be a good learning opportunity, at least I hope so.

Blog traffic tends to go up during times of greater volatility (not just me, other bloggers have noted this effect too) which often leads to more comments and questions which is always appreciated.

One reader left a comment about trying to buy VT which is the Vanguard Total World ETF. He said the "bid was 46 (but) when I got it it was 49...yikes...very low volume...please help thanks."

First, as a buyer you are more concerned with the offer than the bid. A market order to buy is entitled to the offer. The bid means very little unless you are trying to split the middle with a limit order. Based on the one day chart on Yahoo Finance it appears he executed during the minute of 9:37 which undoubtedly was a fast market condition as the market was in the process of panicking up. The reader says low volume, yes, it appears the fund's last trade of the day was at 12:33. It wasn't halted, just a lack of interest.

This is not really my type of trade but whatever you had in mind with this you have probably surmised by now that the strategy would have been better suited to something that trades a bazillion shares instead of something that trades 83,000 shares. VT is a broad proxy, there are plenty of other broad proxies with more volume.

Another reader asked if I would stick reequitizing if we went above the 200 DMA on Monday. The short answer is yes but there are a few more moving parts. The way I have always worked around this is the day it first goes above (or below) is not the day I do anything. I wait to see what happens the next day. If, late in that next day, it looks like it will hold then I make a move. Notice I say "a move." As I said in the video and in countless other posts, I wade in slowly, not all at once. The impact on the client is less if the move turns out to be a head fake or I am otherwise wrong, which has happened before and will happen again.

If SPX were to take back the 200 DMA so quickly (even if we are talking further out than Monday too) I would be inclined to add exposure for now with an ETF (sorry, can't front run clients with a specific name) as opposed to a an individual stock.

The idea with that is that if it crossed back over so quickly the 50 DMA would probably still be below the 200 DMA and the 200 DMA would probably still be pointed down. Both of these give me less confidence of being correct with that first move if it needed to happen so soon. The reason to stick with it is that you can look at a chart for the last year and a half to see how it has worked and I think it is a bad idea to switch in midstream. The start of the next bull market would be a better time to reassess as to whether a tweak to the idea makes sense or not. Again, just a slight tweaking of the concept.

In describing this you hopefully noticed I am preparing to be wrong. If you manage portfolios, even just your own, you will get things wrong. We know this. The next move you make might be one of the things that goes wrong or not but there will be things that do not work out as you hope. If you know that now you don't need to have an emotional response to it then.

Barron's had an interview with Felix Zulauf that was rather bleak. He seems to be very focused on deleveraging causing this malaise to continue longer than most people think. While I don't know about years more of this the notion that (repeat theme coming here) the "worst financial (whatever this is) since the great depression" results in a milder than normal bear market with no declared recession seems very short sighted. We can kick up our heels if that is what happens but expecting it seems like the wrong path.

It stands to be another interesting week even if it is less volatile. It might be worth your time to check out CNBC Asia or Bloomberg TV when they kick up their coverage later today.