I wouldn’t bet a plug nickel on daily fluctuations.
By Daniel at 2 November, 2009, 10:58 am
The big issue is the trend line and, most importantly, when we reach turning points. I’ve personally made good money following trends and reading economic signals. Went to 100% cash at 13,700 and then reentered on the way back up at 6700. Went back to cash at 10,080 and plan to sit on the sidelines until after the holiday season.
So, why am I not long…? It’s because the old buy-and-hold philosophy went terminal in 2007 with an extreme sub-prime leverage bubble. I truly believe the damage done was much worse than most allow themselves to believe. And, as for these corporate profits, look a little deeper. They are coming from expense cuts or from government stimulus dollars. They are not coming from economic strength.
Remember, we are a consumer driven society and even those still working have confidence levels that are unprecedentedly low. The unemployment rate is more than double what’s officially published. Were we to use the same calculation as during the depression, it would exceed 21%. The height of the depression was only 24%.
What’s worse is that, unlike the 30’s, most of the eventual job creation will generally not happen in the US. That’s because we’ve steadily given up our employment engine over the past 30 years merely to reward the top 1%. We’ve transferred wealth to the top such that we’ve now exceeded the concentration of wealth of the robber baron era. Bottom line, the American consumer has been killed off by those that have shipped millions of jobs overseas while being rewarded with billions in public rescue money.
Positive GDP,…. not really. Those numbers are all artificially induced by massive and unsustainable government spending. Furthermore, the engines that have lifted the U.S. economy out of every recession since World War II will be of little help this time around. These include inventory rebuilding, household spending, home construction and payroll growth.
Add to this, the ripple effects of an impending commercial real estate implosion and the huge debt that is in queue to default by private equity firms. Each of these are estimated to rival the level of the sub-prime defaults.
It’s for these reasons that I’ve decided to take my gains off the table and wait awhile. Whether I’m right or wrong remains to be seen…
- PAretiree
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