# Three Bear market indicators flashing.



## Pluto (Sep 12, 2013)

http://www.marketwatch.com/story/3-market-warning-signs-predict-20-stock-tumble-2014-08-01

Be interesting to see how these ones pan out. 

Quote from the article: - "no bear market has occurred without these three signs flashing at the same time. Once they do, the average length of time to the beginning of a decline is about one month, according to Martin. "


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## james4beach (Nov 15, 2012)

S&P 500 and TSX are still virtually at all time highs. I think it's a little early to call a bear market.

Selling volume is also not that high.

When in doubt I keep my eye on that 200 day moving average. Get below that and then we have some interesting things to consider. But way up here where we are, this is _nothing_.


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## gibor365 (Apr 1, 2011)

james4beach said:


> When in doubt I keep my eye on that 200 day moving average. Get below that and then we have some interesting things to consider. But way up here where we are, this is _nothing_.


Yes, it wil be interesting to watch considering that in last 30 months S&P rebounded of 200 SMA about 10 times


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## Pluto (Sep 12, 2013)

http://blogs.marketwatch.com/thetel...ing-on-a-correction-soon-may-be-disappointed/

Here is a don't worry, be happy one. 

Just keeping track of a few of these articles to look at later...see how they pan out.


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## lightcycle (Mar 24, 2012)

Personally, I think there's a lot of itchy money on the sidelines waiting for an entry point, those that have missed the rally or sold out early. From what I'm reading, a lot of people seem to be eying October, so much so that the market should frustrate them being that's what it does.


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## Pluto (Sep 12, 2013)

I believe it could be a year to a year and a half before a 20% or greater correction, but I'm not betting my cash on it. I can't remember where I read it, but I recall reading that in the US the retail investor is back in big measured by 10 x's more money going into mutual funds compared to a year ago. I'll be a confident buyer when I hear of historically high redemptions from retail investors.


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## fatcat (Nov 11, 2009)

there will be no large correction ... that will _last_
the world is awash in capital, wealthy and especially middle-class people are floating in capital ... they _need_ to earn 

there is *simply nowhere else to go* it _must_ go into the market

will someone, anyone, in this thread tell me where else money can be placed that will both grow and earn and stay ahead of inflation and be an alternative to the stock market ?

because harold is right, we are knee deep in inflation (i am seeing steep rises in everything i pay for except electronics and technology) and if you don't pay attention to it, it will crucify you over even relatively short spans of time

i would love to find a more secure alternative to the market ... there is none


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## MoreMiles (Apr 20, 2011)

fatcat said:


> there will be no large correction ... that will _last_
> the world is awash in capital, wealthy and especially middle-class people are floating in capital ... they _need_ to earn
> 
> there is *simply nowhere else to go* it _must_ go into the market
> ...


You can buy real estate at where you live, Victoria BC, or Vancouver, or even Toronto... oh that would not work. You can deposit it in bank and earn 5% from GIC... oh that would not work either.

Yup, you are right, there is simply nowhere else to go, unless you want to see your saving losing 3- 5% of purchasing power per year due to inflation. Unless there is an alternative, stock will have to be the one.


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## gibor365 (Apr 1, 2011)

_i would love to find a more secure alternative to the market ... there is none_ agree! this is why I'm not selling anything (and I own mostly blue chips and same ETFs), if I sell, what I gonna buy?! ATL5000 with 1.25% interest?! or GIC for 5years with 2.5%?! btw, imho GIC for long term - not real guarantee .... if interest rates/inflation will go up, GIC holder will lose real money.... I'd like to see GIC something like 2% + inflation% , but there is no such thing.....

The only real alternative I can see - private REIT like Skyline who paying 8% yield for a long time, but I'm not comforatable with minimum 150K to get accreditation and with all paper mess to deal with...


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## sags (May 15, 2010)

If most people cared about the negative affects of inflation...........80% of TFSA capital wouldn't be parked in GIC and HISA accounts.

Capital preservation is at the top of most people's list.....and investing to offset inflation isn't on their agenda.

The negative effects of inflation.....can be dealt with at the time of spending. Alternative spending....."on sale purchasing"......or not spending at all are options.

If people stay wholly invested in declining stock markets...there isn't much they can do to offset the losses....except wait.

I suppose the GIC crowd adhere to Warren Buffets number 1 rule........."don't lose money".........although he really doesn't always practice it himself........like a lot of his "quotes" about derivatives etc.

However........Berkshire reported a 41% increase in profit.......and Buffet is now sitting on an astounding 58 Billion in cash. 

In the last recession.........people who were soon to be retired.........were devastated by the stock market declines, and have never recovered. Many had to continue to work......or return to work to stretch their remaining capital to meet their long term needs. 

The combination of withdrawing and a declining pool of capital..........is a recipe for disaster.

With the current demographics, and a tidal wave of retirees on the cusp of leaving their employment...their risk tolerance is almost zero.

It isn't difficult to understand why they flock to "safe" investments to preserve capital........despite losing to inflation.

My wife has enough "lifetime" income to pay all her expenses for as long as she lives. Her personal capital is "extra" and there is no way she is going to risk any of it in equity markets. It is all parked in GIC accounts and will remain there.

I disagree with her about it. I think she is in a perfect situation to "accept" the risk...........but her viewpoint is.......I don't need the money.......so why risk any of it?

The logic is difficult to combat. When I suggest the cost of things will be higher in the future.......she doesn't care.

She just smiles and says........"well then, I won't buy something if it costs too much"..........

If a lot of people are thinking like my wife......then it is consumer retailers most affected by future inflation.

And that is the way the world goes round...............


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## james4beach (Nov 15, 2012)

I disagree with you guys that the world is awash in capital and that everyone's pockets are overflowing with extra money that they need to invest. I really don't think this is the case.

If people really had so much spare money, why would they be taking on such enormous new debts? Debt-to-income in Canada has reached all time highs, even higher than America's went. If people really have so much spare money, why are one-fifth of Americans on food stamps?

Rather, I think that even aging boomers are generally low on money and are much closer to liquidating their investments than they are to buying new investments. And the younger generation is not buying equities and bonds. They don't have any money... they can't even find jobs.

My expectation is that once the boomers really start retiring in droves, there will be persistent downward pressure on the stock market for 20 to 30 years as people will have to liquidate assets. This doesn't mean the stock market will decline, but it probably won't rise very fast.

I think the perception of "lots of money out there" is created by the central banks, as they are buying bonds and even equities.


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## sags (May 15, 2010)

Yea..........I have been kind of wondering where all this "sea of cash" is residing these days.


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## james4beach (Nov 15, 2012)

Leverage and debt is a very interesting thing. It always creates the perception that there's lots of money out there.

Take corporate balance sheets for example. People keep repeating the mantra "tons of cash on the sidelines" whereas in fact, much of the cash is accompanied by debt. Companies don't have cash on the sidelines any more than I would have cash on the sidelines if I walk up to an ATM, put in my credit card, and take out a $1000 cash advance.

Same is true for households. People have enormous debts (mortgages, but also lines of credit) that fuel their spending and even their investments. A family that has a 500k mortgage and is investing 50k into stocks, doesn't really have 50k spare cash to invest. They are simply employing leverage.


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## sags (May 15, 2010)

Randy Cass talked about that today on BNN's Market Sense.

He said the posted 4% GDP growth in the US, was largely from corporations borrowing cheap money to buy a lot of inventory, hoping to sell it in the future for increased profit margins.

If it works out....the corporations sell for higher profits. If it doesn't work out...corporations lose money and merge, layoff employees and cut overall expenses to maintain profits.

The GDP gains were largely an illusion..........pulling future inventory buying forward.

How it affects future GDP numbers.........depends on consumer spending.


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## james4beach (Nov 15, 2012)

Yes, like all leverage it's an amplification and a gamble. You can employ leverage in your trading account for the same purpose.

If it works, it really works.
If it fails, it really fails (2007-2008 is a good example... tremendous financial system leverage that didn't work out so great)

Currently, Canadian households are ridiculously leveraged. It will either work out great, or fail spectacularly.


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## lonewolf (Jun 12, 2012)

Pluto said:


> http://blogs.marketwatch.com/thetel...ing-on-a-correction-soon-may-be-disappointed/
> 
> Here is a don't worry, be happy one.


 Amazing

"Don't worry, be Happy" (song) was a big hit right before the crash of 1987, Wow things are setting up nicely for be bear, be


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## gibor365 (Apr 1, 2011)

james4beach said:


> I disagree with you guys that the world is awash in capital and that everyone's pockets are overflowing with extra money that they need to invest. I really don't think this is the case.
> 
> If people really had so much spare money, why would they be taking on such enormous new debts? Debt-to-income in Canada has reached all time highs, even higher than America's went. If people really have so much spare money, why are one-fifth of Americans on food stamps?
> 
> .


it's not the reason.... "one-fifth of Americans on food stamps" and another one-fifth or more sitting on tons of cash and don't know what to do with it


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## Pluto (Sep 12, 2013)

lonewolf said:


> Amazing
> 
> "Don't worry, be Happy" (song) was a big hit right before the crash of 1987, Wow things are setting up nicely for be bear, be


Yep. And when the next Bear arrives, for those who are over invested or over leveraged, the song will be "Its Crying Time Again". I prefer being prepared and singing "It's buying time again".


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## Pluto (Sep 12, 2013)

sags said:


> If most people cared about the negative affects of inflation...........80% of TFSA capital wouldn't be parked in GIC and HISA accounts.
> 
> Capital preservation is at the top of most people's list.....and investing to offset inflation isn't on their agenda.
> 
> ...


Sorry your wife thinks that way. If she trusts the bank enough to deposit her money there and pay her interest on GIC's, I wonder why she wouldn't be trusting enough to buy the stock of her own bank? (Not necessarily now, of course, but at a good price. Like say, in the future when BNN announces that bank dividends are the highest they have been since 2009, that would be a good time. ) I wonder what her answer to that would be? 

I don't understand folks such as your wife myself: if in 2009 during the financial crisis folks such as your wife did not withdraw all their money and fill a mattress, they are already assuming the risk, but not getting paid for the risk.


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## Pluto (Sep 12, 2013)

fatcat said:


> there will be no large correction ... that will _last_
> the world is awash in capital, wealthy and especially middle-class people are floating in capital ... they _need_ to earn
> 
> there is *simply nowhere else to go* it _must_ go into the market
> ...


Well, Just a Guy seems to be doing very well buying discounted rental properties. But for a truly passive investment, I guess stocks are the way to go. Not at any price, in my opinion. For the time being, I'm quite happy with a wad of cash ( and a few stocks) until my favorite stocks present better prices. I don't care how long it takes. Every baseball game ends, we just don't know precisely when. Too, as do it yourself investors, we are not required to step up to the plate and take swings at pitches from the other guys best closer. I'm not really prepared to try and squeeze ever last nickel out of this game. the market is only a good inflation hedge if one buys right. Otherwise, it is a bottomless pit to throw money at, don't you think? I guess I'm responding to your word "Must". I don't think it is necessary. I think we can pick and choose a time.


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## Pluto (Sep 12, 2013)

james4beach said:


> I disagree with you guys that the world is awash in capital and that everyone's pockets are overflowing with extra money that they need to invest. I really don't think this is the case.
> 
> If people really had so much spare money, why would they be taking on such enormous new debts? Debt-to-income in Canada has reached all time highs, even higher than America's went. If people really have so much spare money, why are one-fifth of Americans on food stamps?
> 
> ...


People take on debt when they feel fairly rich, secure, and the lenders feel safe in lending. Otherwise, they hunker down. There is lots of capital out there. That's how the Russel 2000 stocks got way ahead of themselves, and why cash going into mutual funds is 10 x's higher than a year ago. It's people trying to buy a ticket to the end of the rainbow, and they do that when there is lots of money available. (Time to reread Lynch's "Cocktail Party") People feel 1. safe. 2. they feel fairly rich, but want to be richer, 3. Lenders are greedy and feel safe so they throw money at people. Some of that money ends up in stocks. The Ogre is getting ready to eat them for desert.


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## MoreMiles (Apr 20, 2011)

I would suggest going to Niagara or Toronto sometimes and observe.... Hotel rooms currently packed with people spending $300 per night and dining room at $100 per person spending... yup QE has worked to revive the economy, because rich got richer, overflowing with capitals. Porsche has full page ad on Chinese newspaper magazine every week! Russian caviars are being sold for $250 per small jar, yet people still consume them.


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## Siwash (Sep 1, 2013)

another negative day on the markets... don't know what I am gonna do... i have a bit of cash and wanted to fill up my TFSA with some e-Series... or continue to hack away at my damn line of credit... 

What would you do?


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## Pluto (Sep 12, 2013)

Siwash said:


> another negative day on the markets... don't know what I am gonna do... i have a bit of cash and wanted to fill up my TFSA with some e-Series... or continue to hack away at my damn line of credit...
> 
> What would you do?


hack away at the line of credit.


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## My Own Advisor (Sep 24, 2012)

Kill the line of credit, then save some cash for lower prices this fall....corrections might be on the way!


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## Siwash (Sep 1, 2013)

Thanks guys - I was leaning toward that decision... at 7% interest, the way it's going now with the market, I don't think my returns will outpace that interest rates. 


debt is an albatross..


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## sags (May 15, 2010)

Siwash said:


> Thanks guys - I was leaning toward that decision... at 7% interest, the way it's going now with the market, I don't think my returns will outpace that interest rates.
> 
> 
> *debt is an albatross*..


Yup, even if you can easily afford to pay the debt..........it is still always in the back of one's mind..........or at least it should be.

I have a young relative who recently bought a home and took on $750,000 in mortgage debt.

I can't even imagine sleeping at night with that lingering in my mind........despite the nice surroundings.


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## RBull (Jan 20, 2013)

^that's a lot of debt. I'm the same as you on that one. 

Most I've ever taken on was at age 30 when I got married - mortgage on a new house we built that was 90% x our annual gross earnings and it was paid off in 69 months. So regarding your relatives mortgage I would have to be making something like $900K to be as comfortable as I was 25 years ago. :hopelessness:


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## Siwash (Sep 1, 2013)

Wow that is a lot o debt. If interest rates go up your relative might be screwed, even with a modest increase.

I just started self-directed index investing (7 months ago). What I've struggled with is whether I should just focus on paying down my existing debt or pay it down and add some cash to the funds. I worry that I won't have as much as I have planned for my retirement investment. But I suppose if I get this debt out of the way quickly (will take me at least 1.5 more years) I can supercharge my contribution to the funds in a few years... (I'm 42)


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## jcgd (Oct 30, 2011)

I found I never got anywhere paying down debt. It seemed like I was always one step behind. I started focusing on saving and it became the momentum I needed to succeed. Eventually my net worth became positive and any debts were dwarfed by my savings. 

Even though it costs me more in the long run, I still operate that way. I know how I should manage my money, I just have a heck of a hard time actually doing it.


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## Pluto (Sep 12, 2013)

Siwash said:


> Wow that is a lot o debt. If interest rates go up your relative might be screwed, even with a modest increase.
> 
> I just started self-directed index investing (7 months ago). What I've struggled with is whether I should just focus on paying down my existing debt or pay it down and add some cash to the funds. I worry that I won't have as much as I have planned for my retirement investment. But I suppose if I get this debt out of the way quickly (will take me at least 1.5 more years) I can supercharge my contribution to the funds in a few years... (I'm 42)


I think you should chip away at the debt. In another thread someone pointed out that Buffett and Munger have 55 billion in cash. They are not buying stocks big right now, so why should you worry about buying stock? If you pay your debt off, then you have more credit available for stocks around the time Buffett and Munger get greedy.


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## Siwash (Sep 1, 2013)

Pluto said:


> I think you should chip away at the debt. In another thread someone pointed out that Buffett and Munger have 55 billion in cash. They are not buying stocks big right now, so why should you worry about buying stock? If you pay your debt off, then you have more credit available for stocks around the time Buffett and Munger get greedy.



Agreed!! :encouragement:


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## hboy43 (May 10, 2009)

Hi:

One of the features of margin is that I always have a default investment that yields a 3% riskless return.

Then I keep an eye on the portfolio to see who is in the doghouse. I came back from 2 weeks on the North Channel to find NBD had dropped another ~$5, so I bought another 1000.

hboy43


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## Pluto (Sep 12, 2013)

Here is another don't worry, be happy one. Market could go up for another 10 years. It's not impossible. He states main reason for lots of upside is too much pessimism right now. No euphoria. Hmmmm. 

http://www.marketwatch.com/story/th...ocks-up-another-70-2014-08-07?dist=lcountdown


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## My Own Advisor (Sep 24, 2012)

Pluto said:


> I think you should chip away at the debt. In another thread someone pointed out that Buffett and Munger have 55 billion in cash. They are not buying stocks big right now, so why should you worry about buying stock? If you pay your debt off, then you have more credit available for stocks around the time Buffett and Munger get greedy.


Once the big boys are buying, time for us small fish to do the same.

Until then, save money and kill debt. That's my boring recipe.


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## Pluto (Sep 12, 2013)

30 buy indicators. 


http://www.marketwatch.com/story/exclusive-there-will-not-be-a-stock-market-crash-2014-08-12


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## HaroldCrump (Jun 10, 2009)

james4beach said:


> I disagree with you guys that the world is awash in capital and that everyone's pockets are overflowing with extra money that they need to invest. I really don't think this is the case.


Yes, and no.
It is not small, retail investor money that is driving the market these days (actually, for at least the last decade).
It is institutional money - hedge funds, pension funds, sovereign wealth funds, private equity, etc.

The former group is drowning in wage slavery, broke, and indeed does not have the capital to invest at this scale.
Whatever "capital" they do have is tied up primarily in their residential R/E.
Those that may have a few crumbs of capital buy 100 shares of Facebook, 10 shares of Apple, 20 shares of Google, etc.

However, the latter group is indeed "awash in capital".
Do you have any idea of the simply staggering amounts of capital controlled by funds such as Norway's Sovereign Wealth Fund, or the Chinese wealth fund (CIC).

Just as an example of the buying power of these behemoths:
*Norway’s Wealth Fund Buys $576 Million of Mayfair Area*

But why go as far as China...consider the awesome buying power of our own, home-grown sovereign wealth funds such as the CPPIB or the OTPP.

That is the whole point of ZIRP, Q/E, LSAP, etc. - providing unlimited amounts of interest free loans to large capital pools for investing in the risk markets (equities, bonds, derivatives).
When institutions are able to borrow at essentially 0%, there is _no need _for retail investors to keep the markets going.

This is also known as _financial repression _and _interest rate apartheid_.

If you are truly interested in the how's and the why's of this, I suggest you read a book titled _*Monopoly Capital*_ by economists Paul Baran and Paul Sweezy.
Ironically, the book was written in 1969, but you can't tell that - if you don't look at the publication date, it feels like the book were written in 2009/2010.


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## liquidfinance (Jan 28, 2011)

gibor said:


> _i would love to find a more secure alternative to the market ... there is none_ agree! this is why I'm not selling anything (and I own mostly blue chips and same ETFs), if I sell, what I gonna buy?! ATL5000 with 1.25% interest?! or GIC for 5years with 2.5%?! btw, imho GIC for long term - not real guarantee .... if interest rates/inflation will go up, GIC holder will lose real money.... I'd like to see GIC something like 2% + inflation% , but there is no such thing.....
> 
> The only real alternative I can see - private REIT like Skyline who paying 8% yield for a long time, but I'm not comforatable with minimum 150K to get accreditation and with all paper mess to deal with...


Gibor. Did you consider Truenorth Commercial Reit. Might be for you if you wanted some risk without the $150k of Skyline.


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## humble_pie (Jun 7, 2009)

hboy43 said:


> Hi:
> 
> One of the features of margin is that I always have a default investment that yields a 3% riskless return



wherefore this 3% riskless, hboy?

one could go out 5 years in GICs maybe but how will they do any good for a margin that's gone wrong today?


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## Pluto (Sep 12, 2013)

http://www.marketwatch.com/story/4-...t-is-on-its-last-legs-2014-08-13?pagenumber=2

Bull market on last legs, according to this article. We'll see how this pans out. 
Retail investor cash level falls to lowest level since 1999. When they get bold, the bull is old.


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## Moneytoo (Mar 26, 2014)

Listened to BNN Market Call yesterday, here's from the news letter:

*FOCUS:Technical Analysis

Market Outlook:*

As the current bull ages - we are seeing typical sector rotation which is driven by investors moving away from utilities, telecom – soon the banks and the consumer space and into the lagging materials and industrial sectors

*Strategy:* 

– use ETFs to rotate through the North American sectors and global equity markets 
- also some stock picking would enhance returns

The normal North American *sector rotation order* is:

*Leading* - Financial, Utilities & Telecom
*Coincident* - Consumer, Health Care, Industrial & Technology
*Lagging* - Energy & Materials

The best technical tool to track sector rotation is to use relative analysis or spreads – this is where the BNN comparison graphs come into play – some explanation here for the viewers.

The normal *Global Market rotation order* is:

*Leading* – The NASDAQ Composite, the S&P500
*Coincident* – Western Europe, Asia Pacific, TSX Composite
*Lagging* – Emerging Markets – Latin America – Eastern Europe

Heard similar "it's a rolling correction, don't buy industrials!" (soon after I bought Boeing shares... lol) on Mad Money - wonder if anybody here follows this "rotating strategy"? Is there a chance when "investors move away from the banks" to buy them cheaper?


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## hboy43 (May 10, 2009)

humble_pie said:


> wherefore this 3% riskless, hboy?


Pay down debt.


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