1. Louise Yamada & Randall Forsyth: Parallels Between the Charts for the 1930s and now: According to Randall Forsyth in his Barron's column, Louise Yamada continues to assert that the current market is tracking 1929-1942, with the period 2002-2008 mirroring 1932-1938. Barrons.com
This is basically the same argument that she made earlier in the year, which was also summarized in Barron's and discussed briefly by me in a prior post. Ken Lewis Made 120 billion in Acquisitions since 2001 and BAC is Worth 28 billion: Good or Bad?
The Great Depression market hit bottom in 1932 after the 1929 crash, followed by a very spirited rally off the 1932 lows. The market then had a number of up and down spasms between 1937 to 1942, as shown in the chart contained in Forsyth's column.
Those up and down moves would have been virtually impossible to trade, a very unstable whipsaw pattern, ending up lower at the start of 1942 then the reaction low in 1938.
Yamada claims that this type of pattern is characteristic of a structural bear market that generally takes about 13 to 16 years to repair itself. So, this is not just an academic argument. If she is correct, it will be several more years before the market will be capable of building a base to start a long term secular bull market.
Those up and down moves would have been virtually impossible to trade, a very unstable whipsaw pattern, ending up lower at the start of 1942 then the reaction low in 1938.
Yamada claims that this type of pattern is characteristic of a structural bear market that generally takes about 13 to 16 years to repair itself. So, this is not just an academic argument. If she is correct, it will be several more years before the market will be capable of building a base to start a long term secular bull market.
The pattern of a long term bear market, such as the one experienced from around 1966 to 1982 has a lot of velocity moving both up and down. When it is over, and you look back 15 years, you are back at the same place where you started in terms of the market average. Those short duration moves are extraordinarily difficult to trade, though that is the only way to make money in a long term secular or structural bear market.
From my perspective, I believe that Yamada has a plausible case, but her use of charts from the 1930s can not produce certain, or even probable, predictions about our future for the next five years or so. Possibly, we can avoid some of the policy mistakes made during Roosevelt's second term that probably contributed to the bear market pattern from 1937 to 1942.
Personally, I am relying more on my VIX Asset Allocation model than trying to interpret chart patterns from the 1930s and then attempting to draw a parallel to a different time, where there are more differences than similarities, in what was happening in the 1930s and in the current decade.
But, I also recognize that a structural bear market takes a lot of time to heal itself. The Masters of Disaster have caused more damage to the world's economic system than they have ever done, blowing up major financial institutions in pursuit of their narrow self interest and destroying trillions of dollars of the stored wealth accumulated by those who came before them while enriching themselves in the process.
In the last analysis it is best for me to remain cautious, to wait and see, and to continue to follow the very restricted trading rules that I am current using for what I call an Unstable VIX Pattern, which requires me to keep undisturbed the 30% cash allocation raised prior to 2008.
Personally, I am relying more on my VIX Asset Allocation model than trying to interpret chart patterns from the 1930s and then attempting to draw a parallel to a different time, where there are more differences than similarities, in what was happening in the 1930s and in the current decade.
But, I also recognize that a structural bear market takes a lot of time to heal itself. The Masters of Disaster have caused more damage to the world's economic system than they have ever done, blowing up major financial institutions in pursuit of their narrow self interest and destroying trillions of dollars of the stored wealth accumulated by those who came before them while enriching themselves in the process.
In the last analysis it is best for me to remain cautious, to wait and see, and to continue to follow the very restricted trading rules that I am current using for what I call an Unstable VIX Pattern, which requires me to keep undisturbed the 30% cash allocation raised prior to 2008.
2. NYT Article on U.S. Dollar Weakness: The NYT has an article in Saturday's paper about the recent weakness in the dollar. NYTimes.com
The chart of the dollar index is worth a view. This chart reveals the dollar has weakened to close to the point where it mounted a rally in late 2008. The value of my holding in BWX, an international government bond ETF, will be very sensitive to the rise and fall of the U.S. dollar. For that particular investment, I would want the dollar to fall in value, particularly against the Japanese Yen, and a similar theme would be applicable to American multinationals who do a substantial amount of business overseas.
When Coca Cola earns money in a strong currency country and those revenues and earnings are translated back into a weak dollar, then KO will earn more, and the converse would be true when the dollar is rising in value against those foreign currencies. Seeking Alpha
When Coca Cola earns money in a strong currency country and those revenues and earnings are translated back into a weak dollar, then KO will earn more, and the converse would be true when the dollar is rising in value against those foreign currencies. Seeking Alpha
I will try to manage currency risk in my international bond ETFs by trimming after the dollar falls in value and then adding back when the dollar has a good rally. This is at best an imperfect way to manage currency risk, but I do the best that I can with the limited tools available to me as an individual investor with no help. I looked at this chart the other day, saw that the dollar was moving down close to where it bottomed in late 2008, so I sold 50 shares of BWX on Friday, and hope to buy those shares back if and when the dollar rallies and BWX falls in value. I will use a 200 day chart of the dollar index. A down move means dollar weakness, up means the U.S. currency is gaining in value. US Dollar Index
That link is to a chart of the Dollar index for 100 days. I will change the period to 200 days.
The alternative to trying to manage currency risk is to do nothing, and there are advantages to doing nothing. I prefer trying to lessen my risk by at least attempting to manage it in some kind of rational way, which may end up working, or maybe not.
3. Liberty University Anti-Conservative at its Core: Liberty University revoked the charter of the student's Democratic party chapter saying the Democrats lack morals. Lynchburg News Advance It would not be uncommon to hear one of the True Believers say that a vote for Obama would be a one way ticket to eternal life in the Inferno.
So, the powers that be at Liberty were probably concerned about their immortal souls by recognizing the mere existence of the Democrat party. The True Believers are in a continuous state of rigid ideology and narrow mindedness, forever in a closed loop information gathering system, and possessing strong totalitarian tendencies and for some reason believe all of that is consistent with being a conservative..
So, the powers that be at Liberty were probably concerned about their immortal souls by recognizing the mere existence of the Democrat party. The True Believers are in a continuous state of rigid ideology and narrow mindedness, forever in a closed loop information gathering system, and possessing strong totalitarian tendencies and for some reason believe all of that is consistent with being a conservative..
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