# A Good Hard Beating Awaits You



## dogcom (May 23, 2009)

I believe those who are fooled into buy and hold here will see a classic beating as the next phase of this secular bear market really gets going later this year. The only thing that could change my mind is if they can print enough money to bring the rally I see coming after this latest decline ends to break through the May high. Otherwise we will probably start a large decline in the fall a bounce and then down again as we head to the March 09 low and below. I will probably play gold shares in and out through this time frame.

Or according to Richard Russell and the Dow theory we could be already on our way to that hard beating.http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/05/18/bloomberg1376-L2MW2B1A74E9-10.DTL


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## HaroldCrump (Jun 10, 2009)

LOL, yeah, so it begins.
I believe most folks were expecting some sort of a pullback at some point this year since the rally of post March 2009.
Most of my equity holdings were bought between Oct 2008 and March 2009 so I'm still in the green, but probably not much longer if triple digit declines continue beyond next week.
The other half of the moolah is in cash, GIC and bonds so hopefully I have cushion.
A double whammy would be if we go into a sustained bear market for the rest of this year and followed by inflation/stagflation into 2011 and 2012.
Then even the cash and bonds wouldn't hold value.

Personal situation aside, I believe the European debt situation is well deserved by the countries that have been printing currency to get out of the 2007 - 2009 mess.
The weakest fall first (Greece, Spain, Portugal), maybe followed by the Brits and at some point the US of A.
The 2007 - 2009 mess was bad enough, but the G8 countries made it worse by trying to print their way out of it, ignoring basic classical laws of economics.
Maybe future generations (assuming we don't blow ourselves up first) will look back at this and say _what the heck were they thinking_.
And they will say this on their dinner tables, eating out of gold plates, gold spoons/forks and eating a well cooked medley of gold coins, bullion and gold ETF paper


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## Underworld (Aug 26, 2009)

I sold up my small amount of stock a while back. I want the market to bottom out so I can start my investment portfolio. Full steam ahead!


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## Underworld (Aug 26, 2009)

Quick question regarding a realistic bottom - what do you think the bottom would be? I think the one in the great depression went down loads, went up loads and suckered people in then bottomed out big time.


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## dogcom (May 23, 2009)

Haroldcrump everyone will have to much gold at some point and will be have to line up to sell it for whatever they can get for it. But at this time most currencies are are full of debt attached to them unlike gold which has none. We need to resolve the debt issues and when we do then the next secular bull market will begin and gold will go back to being the insurance only part of a portfolio with little else going for it. Most likely we will see a flight to the penny mining shares like the internet penny shares in 1999-2000 before this gold bull comes to an end.

Underworld a bottom usually comes from a spike up from very oversold conditions under huge volume and then a test of that bottom. You can look at the RSI dropping to near 20 and a very high VIX like 40 or higher as clues that the market is very oversold. A secular bear market bottom will see PE ratios roughly equal to dividend yields.

Looking at a chart of the S&P 500 we could have a bottom for now if 1044 level can hold and we have a VIX at 45 right now so it will be interesting if it can hold here. If 1044 is broken it could go a lot lower so we will see.


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## Dr_V (Oct 27, 2009)

dogcom said:


> I believe those who are fooled into buy and hold here will see a classic beating


Wait, so are you saying that stock markets have hit their all-time high and they will never recover? Wow, that sucks. I guess it's time to buy some guns, water, & canned food, and go lock myself in my bunker. 


(More seriously, I don't disagree that markets are in for a rocky short-term. But long-term investors, who buy strong, well-priced dividend-paying companies with 10+ year investment horizons are unlikely to be in trouble.)


K.


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## MoneyGal (Apr 24, 2009)

Wow, I didn't think this was that kind of site! Runs off to get her whips...


(not really)


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## dogcom (May 23, 2009)

Dr V you are right the market will recover and some day make much higher highs and that could even happen sooner if money is printed to the extreme and put into every market. In this case gold and oil would be the easiest play I would think. But without extreme manipulation you will have to hold through some terrible times and that is very hard to do for most people. And you have to remember a secular bear market can go on for longer then a decade which is again hard to take in terms of the human life span. 

So if short term can be longer then a decade then I would hate to see what is the long term. If however you wait for the good strong companies with solid dividends to come to some extreme low and you know these companies will easily survive then that is a good time to buy.


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## Cal (Jun 17, 2009)

I think the hardest thing to do in times like these is to stay on track with your investing approach.

It seems to be very tempting to go to cash.

I am leaning towards another short term increase then a dip in the market. Long term sideways at best.

I think it is best to be in dividend paying stocks in a sideways market. So for now that is all I own, and will work more on accumulating shares and units via drips rather than the value of them for now. Plus some accumulating cash to buy in at price targets.


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## CanadianCapitalist (Mar 31, 2009)

dogcom said:


> Dr V you are right the market will recover and some day make much higher highs and that could even happen sooner if money is printed to the extreme and put into every market. In this case gold and oil would be the easiest play I would think. But without extreme manipulation you will have to hold through some terrible times and that is very hard to do for most people. And you have to remember a secular bear market can go on for longer then a decade which is again hard to take in terms of the human life span.
> 
> So if short term can be longer then a decade then I would hate to see what is the long term. If however you wait for the good strong companies with solid dividends to come to some extreme low and you know these companies will easily survive then that is a good time to buy.


I beg to differ. The biggest support for gold prices comes from investors, not actual users of the metal such as jewelers. Investors are fickle -- they could just as easily decide to dump gold and chase something else.

In any case, if you are invested in Canadian stock markets, you already have a lot of exposure to gold and oil. IMO, an all-or-nothing bet on gold or oil would either succeed spectacularly or fail miserably (a la the period between 1980 to 2000). Do investors really want to make bets like that?


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## dogcom (May 23, 2009)

CanadianCapitalist you are right about gold as also being hard to own so I have a core 10% holding and play in and out of HGU when the seasons and the conditions are right. I recently sold out of HGU at $14.99 and may try to play a bounce but realistically I am looking at the late July to August period to play the seasonal pattern if the technicals look right. You have to be careful of everything here because of the systemic risks out there and gold should only be held as insurance for most people otherwise hold cash and short term bonds. 

Looking at the stock market it was way overbought going into the unfavorable season so it was easy to sidestep that and go into cash. Right now it is oversold and we will see how the bounce plays out here.


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## Spidey (May 11, 2009)

I do agree that the past few months have been an ideal time to rebalance but there is a certain amout of risk to being completely out of the market, as well. We've all heard the stats regarding missing the few best days in the market. If you're all in cash now, when do you jump back in? Perhaps after another major crash -- but what if things turn around from this point? Then when do you get back in?


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## Sampson (Apr 3, 2009)

CanadianCapitalist said:


> In any case, if you are invested in Canadian stock markets, you already have a lot of exposure to gold and oil.


Not all of us are 100% passive investors, so I've got substantial exposure to Canadian markets, but very little to gold.


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## MortgageMan (May 20, 2010)

We were do for a pull back......I think 10k on the Dow is an important level (I know i'm stated the obvious here) if that psychological barrier gets breached it could be look out below.


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## MoneyMaker (Jun 1, 2009)

awwwww... the sky is falling.. its time to sell out of our fractional ownership of tangible businesses!


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## Broke (May 11, 2010)

Cal said:


> I think the hardest thing to do in times like these is to stay on track with your investing approach.
> 
> It seems to be very tempting to go to cash.
> 
> ...


Well, I have succumbed to temptation...to a point. Today I have switched most of my mutual funds from equities to bonds, and have sold a few stocks (some of them at a small loss) so that I have now some cash parked in my investment accounts. I intend to keep the mutual funds section of my investments mostly in bonds until such time that the market shows a clear direction. I got caught off-guard in 2008 and I (like many others) have not fully recovered from disaster. Therefore, capital preservation has become my highest priority at this time.

If the markets drop, there will be buying opportunities that I can take advantage of. And if the markets recover, I can always jump back in even if I miss the inital part of the recovery.

There is no perfect solution, so time will tell if I did the righ thing or not.


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## MoneyMaker (Jun 1, 2009)

While the sky is falling, the world's greatest investor is doing the following:

“He’s not interested in the macroeconomic scenario, we hardly would talk about what the euro will be doing,” said Moratti. “He’s looking for a business that is of considerable size, that has long-term prospects, good management and comes out for a fair price.” 

source: http://www.bloomberg.com/apps/news?pid=20601087&sid=aESA252KpMBg&pos=5

another good quote:

“Emotion and political circumstances are dictating the short-term move, and understandably,” Birinyi said. “But ultimately it comes down to good companies and proper valuations, and I don’t think there’s a big issue.”


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## andrewf (Mar 1, 2010)

To those who claim that the stock market will always recover and make new highs, please use Japan as a reference. Still down >50% from its all-time high, decades later. They went into deflation, and there is a good risk the US is headed there as well.


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## mogul777 (Jun 2, 2009)

andrewf said:


> To those who claim that the stock market will always recover and make new highs, please use Japan as a reference. Still down >50% from its all-time high, decades later. They went into deflation, and there is a good risk the US is headed there as well.


Main problem with that comparison is that the Dow never topped or even approached 20,000. You have to get spectacularly overinflated before you can spectacularly crash... ala the tech crash circa 2000. You can't have the second without the first.


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> To those who claim that the stock market will always recover and make new highs, please use Japan as a reference. Still down >50% from its all-time high, decades later. They went into deflation, and there is a good risk the US is headed there as well.


Japan is a good example of what happens when the line between the management of govt. and the management of large corporations begins to fade.
When bailouts and protection using public money becomes a matter or norm, rather than an exception.
When the govt. keeps free money flowing in order to keep conspicous consumption going.

But there are key differences between Japan and the US and they may not necessarily follow what has been happening in Japan since the 80s.
One of the differences is a large population and a strong domestic market.


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## dogcom (May 23, 2009)

I can't understand how people can simply push aside the risks we face in the debt markets, do they not understand that this can destroy them. Look what it did in 2008 and look at what is happening now with the explosion of debt from many countries around the world and it is going parabolic. 

Andrewf mentions Japan and it is punted aside. So we could use the Dow between 1968 and 1982 as an example and we are in far worse shape now because we can't raise rates without huge problems developing. And you should also note I didn't use the 1930's as an example because people think your crazy if you do.


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## mogul777 (Jun 2, 2009)

You miss that the debt has already been incurred it is not "going parabolic" now it has already happened. Being reactionary rather than proactive and realistic is typical of your average person and also rather useless. 

Japan was poorly compared, the comparison was discredited. However similarities exist, and deflation is possible. 

Why do you still care what people think of you on an annoymous Internet forum? Post what you think, if they can't fathom it it is there problem not yours. 

BTW, you should be happy that people "can't understand" since you can use that to your profit advantage. Course the problem is some understand more than others.


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## mogul777 (Jun 2, 2009)

dogcom said:


> So we could use the Dow between 1968 and 1982 as an example and we are in far worse shape now because we can't raise rates without huge problems developing. And you should also note I didn't use the 1930's as an example because people think your crazy if you do.


Why would there be a desperate need to spike interest rates when confronted with a deflationary depression scenario?


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## dogcom (May 23, 2009)

The desperate need to spike interest rates comes from inflation if the Fed did manage to print its way out.

Why do I care what people think of me? I don't really care about that but I do enjoy the debate.

In the US I believe the debt is close to going parabolic with the massive deficits they are running, not including the massive unfunded future liabilities that they have.


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## humble_pie (Jun 7, 2009)

o hai everybody you are right markets will recover and some day make higher highs and that could happen sooner if money is printed to the parabolic extreme like they already do in every market in this case gold will be the easiest play but you have to remember a secular bear market can go on for longer then a decade ok than a decade which is hard to take in terms of the human life span i mean if a short term bear is a decade then What The Aitch Is A Long Term Bull, i axe you, what i am saying is play it close and short if the vix goes higher than 45 remember debts and paranoia will destroia so trust no one and nobody even though i hafta admit i like it myself although i did not mention the j-word or the 30s-word but most likely we will see a flight to the penny mining stocks ...
what !!
you're. not. even. listening. to. me.
!!

(signed)
criticalcanine


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## MoneyGal (Apr 24, 2009)

Humble! You crack me up.


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## mogul777 (Jun 2, 2009)

dogcom said:


> The desperate need to spike interest rates comes from inflation if the Fed did manage to print its way out.
> 
> Why do I care what people think of me? I don't really care about that but I do enjoy the debate.
> 
> In the US I believe the debt is close to going parabolic with the massive deficits they are running, not including the massive unfunded future liabilities that they have.


Ok so now the Fed has saved the day, so they jack up the interest rates to slow things back down. No? Maybe? Only in the real world? Still confused...

Massive future unfunded liabilities? Such as the large expenditure on gold? Bars or just more paper in the form of stocks??


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## dogcom (May 23, 2009)

Moneygal you should apoligize for laughing at humble pie, he is only doing the best he can.

Mogul777 I don't believe the US can handle a lot higher rates forced on them like they could in the past without a lot of pain. 

On another note doesn't it seem like everyone in todays society is trying to avoid any kind of pain. In the past you did what needed to be done whether it was to save more or pay down debt. You look at shows like Debt Do Us Part and you wonder how people with enough money coming in in most cases, can find themselves so far behind financially and getting worse without really knowing why,or just hide their heads in the sand.


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## mogul777 (Jun 2, 2009)

They give what you can handle. See that's what's great about modern society... there are plenty of crutches to keep the weak going and the strong lazy. All about equality. 

On a serious note there is obviously plenty wrong with society of today, but pretending everything was great in bygone eras and that everyone worked hard is foolhardy. People evolve (in some cases) they do not change.


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## Spidey (May 11, 2009)

Read an article the other day that made the point that generally times of uncertainty and non-confidence are much less dangerous times than times of certainty and confidence. Think back to the tech boom, where everyone was expecting double-digit returns to be the norm. Or the latest US housing boom where everyone felt that real-estate was a no-lose proposition. Right now, with the possible exception of gold, I see very little of that over-confident attitude.

Sure we are in uncertain times and I realize that there is the possibility of the herd becoming spooked and stampeding over a cliff. However, I think everyone else also has these same concerns. That means that these concerns are likely priced into the market. After all, it's not as if the market has given investors a free ride or has been without a certain amount of built-in pain. We are still about 25% below the highs of a couple of years ago and American markets have been underwater for the past 10 years. That means, despite all the claims of fantastic returns over the past year, trillions of dollars have been wiped out of average investors accounts. So yes, it is a time for caution -- but that may not necessarily be a bad thing.


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## HaroldCrump (Jun 10, 2009)

dogcom said:


> On another note doesn't it seem like everyone in todays society is trying to avoid any kind of pain. In the past you did what needed to be done whether it was to save more or pay down debt.


Interesting you bring that up.
I think folks these days are just sick and tired of these multiple boom-and-bust cycles every few years and seeing their hard-earned money vanish into smoke at least 2 or 3 times during their working years and having to start from scratch every time.
Most of us here have now been through two stock market crashes (2000 - 2003 and 2008 - 2009), some have been through 3 (i.e. the 1987 one) and possibly there are folks around here that remember the stagflation days of 1970s.
People are getting tired of large coporations and their executives making millions and living like medieval robber barons.
People are getting tired of governments that lead us from one crisis to the next, all the while hand-in-glove with the same corporations.
People are disgusted with having to pay 1/3rd or more of their hard earned money as taxes and taxes never being enough to sustain public services, always asking for more and more.
Imagine those poor, hard-working people in Greece who (for no personal fault of theirs) are now living in a country that is essentially bankrupt.
There are staring down the barrel of very hard times ahead.
Either the Russian style inflation or these so-called "austerity measures", which is an euphemism for higher taxes, less public service, longer and harder work, etc.
Yes, people are just tired of this pain, and thus less tolerance for it overall.


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## Broke (May 11, 2010)

HaroldCrump said:


> Interesting you bring that up.
> I think folks these days are just sick and tired of these multiple boom-and-bust cycles every few years and seeing their hard-earned money vanish into smoke at least 2 or 3 times during their working years and having to start from scratch every time.
> Most of us here have now been through two stock market crashes (2000 - 2003 and 2008 - 2009), some have been through 3 (i.e. the 1987 one) and possibly there are folks around here that remember the stagflation days of 1970s.
> People are getting tired of large coporations and their executives making millions and living like medieval robber barons.
> ...


Amen.


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## dogcom (May 23, 2009)

Thanks for that painful answer HaroldCrump. 

Have a look at this funny video to sum up the debt crisis.

http://www.youtube.com/watch?v=thSTpGnWEAs&feature=player_embedded


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## Savingmoney (Dec 28, 2009)

*???*



Underworld said:


> I sold up my small amount of stock a while back. I want the market to bottom out so I can start my investment portfolio. Full steam ahead!


didn't the market already bottomed out? or no?


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## humble_pie (Jun 7, 2009)

a cross between another cmf thread on euro debt & this contemplation of whips, lashes & good old-fashioned bondage.

BNN had a video with tony boeckh last friday. What i got from the live interview, more than from any printed transcript, was a sense of foreboding, an unease in the face of government debt of "wartime proportions," a clear expectation that we will see many more flash crashes, that some will be less flash and more final, that public & private sectors are flirting with meltdown.

boeckh spoke of the retail investor's need for liquidity, saying this poses a dilemma for investors because liquid funds - i assume he meant vehicles like treasuries - currently earn zero interest. My takeaway is that boeckh was suggesting mr and mrs average investor should forego and sacrifice income from the liquid portion of their portfolios, because the shock-proof nature of such liquidity has now become the top priority in troubled times.

also on bnn, michael smedley comments that he doesn't believe any human error caused the flash crash. It was all a confluence of black box or algorhythmic trading, says smedley in his trademark plummy oxbridge accent, and we're going to see more of the same in the reasonably near future.

somehow the journalist host failed to ask smedley if he is keeping his stink bids at the ready.


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## HaroldCrump (Jun 10, 2009)

humble_pie said:


> also on bnn, michael smedley comments that he doesn't believe any human error caused the flash crash. It was all a confluence of black box or algorhythmic trading, says smedley in his trademark plummy oxbridge accent, and we're going to see more of the same in the reasonably near future.


In that I tend to agree with this gentleman, although not so much with the other Mr. Boeckh (haven't watched the BNN video though).
With the advent of automated, AI-based trading software and the viral proliferation of ETFs, mutual funds and other "baskets of stocks", it is hard to believe market valuations of a specific company any more, esp. one that is part of one of the standard indices like S&P 500, S&P TSX, DJIA, etc.
Intra-day averaging down, swing trading, TA based automated trading, etc. accentuates bull and bear rallies to epic proportions.
That is what may have happened on May 6th.
Retail investors are but a speck of dust during such sandstorms of trading by institutions and hedge funds.

But I don't agree that we should just give up and swap our equity holdings for zero interest treasury bills.


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## humble_pie (Jun 7, 2009)

right as usual mister crump.

but apparently i got across a wrong idea of boeckh's message. Might you please notice that i said "the liquid portion of [investors] portfolios."

in a preceding sentence which i left out because it wasn't a transcript, boeckh recommends that investors continue to hold hi-quality common stocks w strong balance sheets. He isn't predicting roubini doom, he's just tweaking portfolios against the downside more than i had thought.

i thought boeckh's warnings about fortress liquidity were relevant. If you remember the height of the 2008-09 crash, everybody was wishing they owned more treasuries, more cdic-insured gics. Although i for one believed that in the event of a total global financial meltdown, the cdic did not & does not have enough funds. to bail out more than one big canadian chartered bank, if that. Witness the current penniless state of the US fdic, beating up still-solvent banks for future dues in order to look after presently-failing banks. Those govt funds were set up to bail out an isolated institution getting into trouble here & there in an otherwise normally functioning world. They were never set up to rescue armageddon.

the way i understand economist boeckh is he's saying go forward with quality investments on high alert; stay flexible; improve the qualilty of defensive liquidity even if this means a cut in return.


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## MoneyMaker (Jun 1, 2009)

Good keynote speech from one of this generations greatest investor on the current situation:

http://www.simoleonsense.com/seth-klarman-notes-may-17th-2010-cfa-institute/


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