Thursday, October 09, 2008

This is truly a historical event...

I'm sorry I was right, truly. I would rather be wrong, trust me. We are witnessing what very well may be the meltdown of the entire economic system. As I write this the futures are down another 250 points. The DOW is down over 20% in 7 days. The Russell is down from 750 a few weeks ago to now approaching 450. The stock market is no longer a viable means, and hasn't been for a LONG time, way of investing for your future, or for anyone's future.

While the powers that be continue to pound the table on the idea that if you have a long time horizon you should "hold on, it'll come back" is flawed beyond belief. As I've stated here, if you aren't willing to buy, you shouldn't be holding. A friend of mine who is a bond trader told me that one of his mentors used to say that "every day you rebuy the stock you own". I like that a lot. Think about it. Stocks are marked to market, as they should be and as assets should be, thats reality. So, if you own IBM today and its $90 at the close, then in order to hold it for tomorrow you have to rebuy it. Not literally, but figuratively for sure. When we do seminars in Las Vegas I always make the analogy that if you are playing Blackjack and you are "up" $5000 and then you play the next day and you lose $5000, to me you lost $5000 the second day. Most people, I think, look at it as they broke even. To me if its in your pocket, or your chip pile, then you own it, its yours. If you then lose it, then you, well, lose it. You lost $5000, you didn't break even. If you use this logic with your IRA or other investments then you have no choice but to be aggressive and not passive and you need to decide every day if you want to hold them. The stock market hasn't gone up in over 10 years. In fact, its down DRAMATICALLY! So, the notion that in 10 years you'll be ok is fatally flawed, right? I mean, if you used that same logic 10 years ago then you are down at least 30% and probably a lot more since most Blue Chips are down a lot more than 30% in that time frame and some are down 70 to 80% or more (EMC, C). So, this FALSE notion that if you have a long term time horizon you should hold is very much fatally flawed.

I've really ranted the last couple of months, I know. I won't apologize, I care deeply about my clients and my country and the world around us. And, what's being fed to us is garbage. This market is a sitting duck, its not coming back, probably EVER. There will be other markets, but not this one, this one is shot, stick a fork in it. How do I know that? Well, I don't "know" it, I don't know much of anything in life, I make and have made a LOT of mistakes in my life. That's what we humans do, we make mistakes and hopefully we learn enough to not repeat them again, or again and again.

I've mentioned it here several times, but the thing that has happened in every Bear market I've ever studied that is that the market ALWAYS underestimates the degree of pain and the magnitude of the decline. ALWAYS.

This Bear Market IS different, folks. This is a historic event, its kinda like Charlton Heston in Planet of the Apes in the last scene when he sees the the Statue of Liberty and out blurts "they finally did it. Damn you, damn you to hell!" Or something to that effect. Well, they finally figured out how to break the markets. This isn't about Bulls and Bears, this is about a system that is fatally flawed and that is BROKEN.

OK, I know, I know, I am and have been repeating myself. Oh, goodie, as I write this the futures have bounced and we're only down 150 pts. Rally! Now, here is the deal, just remember that any rally will be sold into so the upside here is limited. One strong trend is that when you have this type of environment that redemptions are going to escalate, margin calls are going to be unwound and reality will set in. The government proved that they really don't have an interest in saving the capital markets, which makes sense. They are now taking equity in the banks because a ton of them are bankrupt, their liabilities outweigh their assets. WM, WB, gonzo. AIG, FNM, FRE, LEH, BAC gonzo. Next in my opinion?

I'm putting together a list of stocks that I think are going to go under. I'll preface this by saying that I am NOT an expert in this type of research. I'm just a trader. A lot of what I am basing the list on is the option market and the way stocks are trading. I'm going to be sending out an alert shortly, either tomorrow or over the weekend. Hopefully they aren't all out of business by then!

Again, while I am making money, I would much rather be making money as stocks go UP. And, that does and will happen, but mainly because I think its very very sad that people who have saved to retire and trusted blindly a fatally flawed system are going to have a hard time retiring.

I'll repeat what I've said 100 times now. There needs to be a moratorium on government intervention in the capital markets. Clearly they are not helping. There is a law of physics, every action has an equal reaction. There are others, the law of unexpected consequences. When the Fed does one thing to patch up one leak, it creates another. There should be a moratorium so that a REAL solution can be found. This is INSANE what they are doing in the name of "we have to do something!" Yes, they do - NOTHING until they get a REAL SOLID LONGER TERM solution. Instant gratification has never gotten anyone anywhere, it's highly unlikely it'll cure the markets ills, folks.

I'm sorry, hopefully at least the majority of you have heeded the market calls we've made at and helped save you and make you some Ka-chingos.

I'll be back here tomorrow. It'll be a volatile day tomorrow for sure, its going to be that way for a while and thats what we traders love.

FSLR folks, its still $119 and today a report came out that said that estimates are going to come down. Take it for what its worth, you couldn't give me money to buy FSLR with. $119 solar stock in this? See ya at $25, baby, see ya at $25!

This is historic, but that doesn't make it any less painful for many people. I never feel guilty about shorting things and making money, its very impersonal, its a job, but I do feel badly that people are being sold down the river - Like lambs to a slaughter.




ben said...

WAXIE you are not repeating yourself just simply pointing out other trends to follow. So we have learned FED action = GO SHORT. Talking heads calling bottom = GO SHORT. As always when in doubt get out!!! End of day = cash. Thank you and please keep the trends comming. P.S. Take good care of what matters those two girls enjoy they grow very fast trust me. the only advise I can offer you is time is the most precious commodity you can't tade it or buy it. Hope to see you on the other side one day peace....

Jeanne Mancuso said...


Sorry for emailing and posting so much but I get so excited when I make $4000 in a half an hour! And I'm back in cash. You probably saved me $50,000 in the past 8 days and I'd like to kiss your bald head! Thank you, thank you, thank you. You're on my Christmas list whether you like it or not!


Rich said...

Hi Waxie

I remember you saying during the bear hunting class that you though oil could go to 75. Well, it's almost there. I also believe I remember you saying you were a believer in the idea that the world has reached peak oil, as do I. I was wondering if you had any thoughts on if and/or under what circumstances you thought oil/gas futures/stocks might break away from the market trend and start moving up.

Nice to be a ninja again, btw!