I’ve had many, many interesting discussions since my last post…generally ranging from “I don’t believe you,” to “I believe you, but I’m not going to anything about it.” First, let’s just say this. I could be wrong. And after playing years of poker, training my brain to make bets with limited information, based simply on probabilities, I’ve learned that I’m often wrong. In poker and investing, no one is right 100% of the time, so you learn from your mistakes and attempt to minimize future losses. Now, let’s look at my investing track record. I started seriously investing in 2008. And by that I mean I determined that there was not one stock on the market that I thought was valued fairly enough to warrant purchasing. Based on very, very simple financial math, I stayed out of the market. Look what happened…the market crashed…one of the worst crashes in history. In March of 2009, a friend called me saying she had been laid off. I said to her, “You know what, I bet you got laid off on the very day of the bottom of this thing.” I determined that by the absolute sheer panic that was emanating from CNBC that day…and from my research, this emotional bottom is almost always when the stock market bottoms. I started investing in Apple and other leading stocks one week after that day. And I’ll never forget, about a week after that (two weeks after the bottom) I told some co-workers that I was back in the market, and they implored me to get out — they were practically screaming at me. They thought I was crazy. Well, look what happened. We had an absolutely wonderful 2 year bull market. And when did I get out of that bull market? About a week after the top, a few months ago. Why did I get out? Because by then I was a much better trader, and could read charts. And the leading stocks were indicating major problems with the market. So once again I was in cash for the recent “mini-crash.” And from the sidelines I then watched the market go absolutely crazy. The volatility was so enormous that serious, serious red flags were going off in my head. So I started more research to find out what was going on…something way beyond my original hypothesis of an 18 year real estate cycle was happening. And then I ran into Elliot Waves, Robert Prechter and fundamental analysis on the world wide debt bubble…which to me explained everything. It fit so well (as I’ve written in the past), that I could not help but to believe it. Robert Prechter was on CNBC the other day…even the announcer didn’t believe him…and that’s been my experience: no matter how much street-cred I might have gained with the above story (you CAN time the market), if you don’t want to believe me you won’t. It’s the reason why those in the know will always be able to take advantage of those who choose to simply ignore what is happening and hope for the best. And by the way, there are plenty of other sources now saying the same thing…the crescendo is getting quite loud. So if/when this crash hits, if you read this blog, don’t be one of those who says, “How could I have known?”
And what kills me the most about those of you who are still in the market, yet who read this blog, is that there are very few instruments yielding more than 1%!!! And if you’re in stocks, they take far longer to go up than they take to crash. So let’s say there’s a remote 1/6 chance that I’m right, here’s the math: If you’re in bonds: you’re reaching for 1-2% yield and playing russian roulette with anywhere from a 25-100% loss. Would you put a single bullet in a 6 shooter, spin the barrel, and put a gun to your head and pull the trigger if someone said I’ll give you 2% more lifespan if you don’t kill yourself? It’s the damned same bet!!!! If you’re still in stocks…the only thing that will save them is if Europe miraculously solves its problem, and the U.S. puts itself on a path to fiscal sanity. And you’ll know exactly if and when both of those events happen. Until then, stocks are going nowhere – same crazy trading range they’ve been in for some time – or they’ll die. If you get out, the worst case is that you’ll lose a few days of upside. That’s your bet: a few days of upside versus a potential catastrophic loss of your savings. Doesn’t make sense to me…
Stay safe. Please.
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