Successful investing is a lot like surfing; You can't make the ocean do what you want it to do. Instead you catch a ride to where it is going on its own and avoid getting wiped out on the way. Substitute "market" for" ocean".
"Careful. We don't want to learn from this."
--Calvin & Hobbes comic strip
Charts and table up. Cross currents are what it's all about. There were three bubbles. The dotcom bubble, the housing bubble, the energy and other commodity bubble. The dotcom bubble created and destroyed a huge amount of wealth, especially in the Bay Area. The Fed drove interest rates to 1% and created the housing bubble to prevent the bursting of the dotcom bubble from driving us into a deep recession. Low rates and available money combined with the development of Brazil, Russia, India, and China to drive the price of commodities to sky high levels and create the commodity bubble. Politics in the MidEast added a $20 risk premium to oil. And corporate profits expanded like mad across the world. Then the Fed and other central banks, notably Japan's, took back what they had given. Rates went up and liquidity was withdrawn. But there was a lot of momentum in the world economy and the economic activity resisted the pull of gravity. But rates and gravity are relentless. The housing bubble is history and maybe the commodity bubble is too. The house next door went at the peak of the market and today an equivalent house can be had for 20% less. My neighbor is WAY underwater on her mortgage. GM is imploding and might be partnered with a French auto manufacturer?!!?!? Ford and GM merging? Chrysler in trouble too? Three year fixed and interest rate only mortgages are about to reset. There is seven months worth of housing inventory nationwide. Housing prices are going down in flames.
But...Energy prices are on the way down too and so are other commodities. Natural gas is down 66% from last winter and cluttering up the landscape. A warm winter may mean shutting down production even at the price of damaging the wells 'cuz storage is FULL. Oil is down from $78/bbl to under $60. It may go to $40 if the MidEast politics cooperates. That puts money in everyone's pockets. Base metals are down too. A lot of people have jobs and it doesn't look like they will lose them soon. The bond futures are predicting a rate cut next year. Are we going to have a soft landing of the economy? Will we see a replay of the 80's when my union had a ton of work and travel cards from all over the country while the unemployment rate was 12% nationwide? Probably not. This time everywhere else seems to have a ton of work on the books too. I just don't know. Maybe yes and maybe no. Could China blow up or the Mideast explode? Would that create a world wide economic crisis? Is there another bubble out there waiting to happen or just rate cuts and a Goldilocks economy advancing at a walking pace for years to come? I feel strongly about it both ways and neither either. That's why I'm 40% cash and 50% stocks in the three funds I like in the 401 and ready to add to stocks big time or bail out to all cash. I'm anted up and protecting profits and waiting for the next card to be dealt. You play what you're dealt when it's dealt. Only then can you make a rational choice between folding or going all in or someplace in between.
We may yet see the special called meeting on the pension in a month or two. Or not. Stay tuned.
[ view entry ] ( 817 views ) [ 0 trackbacks ] permalink --Calvin & Hobbes comic strip
Charts and table up. Cross currents are what it's all about. There were three bubbles. The dotcom bubble, the housing bubble, the energy and other commodity bubble. The dotcom bubble created and destroyed a huge amount of wealth, especially in the Bay Area. The Fed drove interest rates to 1% and created the housing bubble to prevent the bursting of the dotcom bubble from driving us into a deep recession. Low rates and available money combined with the development of Brazil, Russia, India, and China to drive the price of commodities to sky high levels and create the commodity bubble. Politics in the MidEast added a $20 risk premium to oil. And corporate profits expanded like mad across the world. Then the Fed and other central banks, notably Japan's, took back what they had given. Rates went up and liquidity was withdrawn. But there was a lot of momentum in the world economy and the economic activity resisted the pull of gravity. But rates and gravity are relentless. The housing bubble is history and maybe the commodity bubble is too. The house next door went at the peak of the market and today an equivalent house can be had for 20% less. My neighbor is WAY underwater on her mortgage. GM is imploding and might be partnered with a French auto manufacturer?!!?!? Ford and GM merging? Chrysler in trouble too? Three year fixed and interest rate only mortgages are about to reset. There is seven months worth of housing inventory nationwide. Housing prices are going down in flames.
But...Energy prices are on the way down too and so are other commodities. Natural gas is down 66% from last winter and cluttering up the landscape. A warm winter may mean shutting down production even at the price of damaging the wells 'cuz storage is FULL. Oil is down from $78/bbl to under $60. It may go to $40 if the MidEast politics cooperates. That puts money in everyone's pockets. Base metals are down too. A lot of people have jobs and it doesn't look like they will lose them soon. The bond futures are predicting a rate cut next year. Are we going to have a soft landing of the economy? Will we see a replay of the 80's when my union had a ton of work and travel cards from all over the country while the unemployment rate was 12% nationwide? Probably not. This time everywhere else seems to have a ton of work on the books too. I just don't know. Maybe yes and maybe no. Could China blow up or the Mideast explode? Would that create a world wide economic crisis? Is there another bubble out there waiting to happen or just rate cuts and a Goldilocks economy advancing at a walking pace for years to come? I feel strongly about it both ways and neither either. That's why I'm 40% cash and 50% stocks in the three funds I like in the 401 and ready to add to stocks big time or bail out to all cash. I'm anted up and protecting profits and waiting for the next card to be dealt. You play what you're dealt when it's dealt. Only then can you make a rational choice between folding or going all in or someplace in between.
We may yet see the special called meeting on the pension in a month or two. Or not. Stay tuned.
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