Sunday, October 12, 2008

It's Not Your Father's Stock Market And Long Term Investing Is Dead

From bottom to top on Friday we did move 1,006 points and the futures market as I write, is up substantially. Will it last for more than a day or two? I don't know, no one knows. I do know that if you owned a basic mutual fund for the last five years you are probably in the red. The Vanguard Growth Fund is down 35% this year alone and we aren't done yet. Their performance the two years prior to that was also in the red. Guess what? No down side protection-at all.

At this immediate point in time it seems like the world is "all in" as it relates to the complete socialization of the global economy and Bloomberg reports that our government is "watching" how things unfold in Europe. Yes, I know we bailed out Chrysler back in the day but what do we do with the two drunks that are trying to hold each other up now, GM and Ford? Will it end with banks or spread to autos? How about oil companies? Forget windfall profit taxes, if oil keeps dropping some of these companies could actually go out of business a year from now. I think solar could use a hand here too. Anybody putting solar panels up with $50 oil? Hey Boone, how about a windmill? How about the folks drilling for oil in there own backyard? Eerily reminiscent of the folks that built bomb shelters during the cold war or wrapped cellophane around their homes during the Anthrax scare after 9-11.

This is what Dennis Gartman says:

"We have lived through what we have considered to be periods of chaos previously. 9/11 was obviously chaotic; the weeks of the Russian/Emerging market/Long Term Capital Management collapse was chaotic; the assassination attempt upon President Reagan was chaotic; the weeks and months of the Watergate and the Clinton Impeachment goings-on were chaotic; the final weeks of the massive bear market of the summer of '74 was chaotic, as were those final days in the summer of '82 when the stock market made its last final low. We recall the Friday, the Saturday and then the Monday of Paul Volcker's Saturday Night Massacre when monetary policy was stood upon its head and the capital markets were shaken to the very core; that was chaos of the first order. We have lived through them all, and we have traded through them all, and what we are seeing now, and trading through now, and trying to make sense of now makes them all seem like quiet, lazy, rainy Sunday afternoons around a game board. What we are seeing now is unlike anything we have ever...EVER...seen in the thirty +years we have been doing this. What we are seeing now is something we wish never to see again."

We've all seen hard times in the market and I was there at my trading desk in 1987 and again in the early 90's when we hit Iraq for the first time and we have all seen what this market has done lately, but I have never seen a world in such distress as it is now. Whenever we have thrown money at a problem it usually ends badly and I don't think this time will be any different. Sure we will catch a rally, but buy the euphoria at your own peril as it won't last.

The DOW hit an intraday low of about 7882 on Friday. For my own comfort level from the long side, I would love to see it tag 7416, which is the low it hit back in 2003.


About Me

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I am a former hedge fund manager, broker and capital markets dude who now trades for his own account. I love what I do. I will try to post some stocks and an occasional chart that looks attractive for entry.I will also try to point out the idiocy of conventional wisdom and the lack of value added by the mainstream financial media. These postings should not be viewed as recommendations.