Friday, May 11, 2012

Public Service Announcement !

The subject is the stock market.  Do you have a 401k or otherwise a large chunk of your nest egg in the market?  Here is some really good reading about what might be happening today.  I'm posting this especially because I read about the market all the time and I can't find anyone to read who even claims to know what will happen to our markets when Europe falls down and goes Boom.  Which it's about to do in slow motion.  For example "Banks are preparing for the return of the Drachma" means that everyone expects Greece to leave the Euro and the European Union and go back to their own currency like any good coke addict would do when they run out of money and nobody gonna give em anymore.

Without further ado, here is the first Excerpt and link to the article.  It is THE BEST Read about how the market works I've ever read.  You know I say the current market is all about the value of the dollar, and the US Dollar has recently broken up out of its months long downtrend.  That will have a drag effect on the markets.  I'm not here to alarm anyone.  The point to this entire post is Caution is Warranted. 

I've discussed this before, but many investors mistakenly believe that stocks are driven by fundamentals, such as the economy, the employment rate, etc.. While it's true that the economy can have an impact on the stock market, it's not for the reasons most people think. The only thing that drives stock prices is liquidity. If there is excess liquidity, some of that cash finds its way into stocks and other assets -- so one frequent by-product of a good economy is a liquid market, which means stocks rise. However, the economy itself is, in reality, only impacting the market indirectly. The reverse is usually true in a bad economy: Bad economies lead to a liquidity crunch and stocks fall. But not this time. In a moment, we'll discuss why.

 

Entire Article



No Excerpt for this next one.  You should read the entire article - This is the Link to it. It is Jeff Cooper, a believer in W.D. Gann market theory and is right a lot more than not.  A lifelong student of the markets as is evident.  Been trading all his life and has enough money to live in Malibu.

So, is a crash coming?  Tough question.  We know the Federal Reserve does Not want a strong dollar and I really believe Gentle Ben Bernanke will try to avoid that, possibly with QE3, but the downward pressure on the Euro is very strong, which will prop up the dollar.  This is going to make it very hard for the market to rally like it has been since the recent market low and Ben does not control the world.  No one does.

None of us or them have the answer, I just think this is not a time to be tossing your retirement fund statements in a drawer without opening them.  If you don't think you can navigate this environment, get some professional help from someone other than some idiot who tells you to keep your money in the market and not worry about it.  

As stated in the articles, the major averages have all broken their multi-year uptrends and that in itself has my undivided attention.  My trading account is cash and can be within any 5 minute span of time.  My 401 is in a money market making zero %.  I'm sitting out the near term.  Just too risky for my taste.


A little music as an aperitif

8 comments :

  1. Market crash? I've been saying yes for 10 years or longer. Love the music...takes me way back kid!

    ReplyDelete
  2. DeanO, Yep, we'll see. Government intervention has really morphed the markets. So hard to game.

    There really was some great music in the 60's !

    ReplyDelete
  3. Do you remember the Japanese scifi movie (1963?) "The Mysterians"?

    Just got out 401k statements and we finally made a little back from our losses. Time to get out of the market for sure, perhaps toss it into a SEP or else convert it and take the big hit in taxes.

    ReplyDelete
    Replies
    1. How knows what's gonna happen Sig, but if your near or at retirement you certainly don't want the majority of your assets in higher risk areas. Too bad the interest rates are so low, 5% on a CD doesn't sound like the worst thing, but that's gonna take a while.

      Delete
    2. PS, Don't know what options you have in your 401 but mine is currently sitting in a money market based fund, which is essentially cash, doesn't go up or down.

      Delete
    3. PPS - I don't know of that movie. Maybe it was in their name. That tune is from 1966.

      Delete
  4. Thanks for the info Kid!
    Luckily, or not, this is one less thing for me to worry about, as I don't have any money to invest.

    ReplyDelete
    Replies
    1. Sorry to hear that Bunni. I wish you every happiness.

      Delete