Being long in 2008 was clearly the wrong strategy, and the Noiseless Return trading single proved to be dead on with the S&P 500 have being sold on Jan 12th 2008, the Nasdaq having a sell on Feb 12th 2008, and the Dow having a sell on Feb 14th 2008. Both the Nasdaq and Dow gave false buy signals early in the year, but quickly reversed well in advance of the sharp declines in October.
I stopped posting at the end of September because I didn't feel the need to pile onto a market that was already getting pounded from all sources. I'd like to take the time to quote myself from some previous posts that I did make last year, before things turned rather nasty.
And there are many other posts where I point out, even pound the table, that energy was the market leader and it was going to lead the market down, even when it did not look so at the time. I just wish more people had been reading this blog and listening to me as I said time and time again: Energy was the market leader in 2007 and in 2008 when it reversed course and corrected. In the end it wasn't falling home prices that lead to the collapse of the house of cards that was the over leveraged debt, it was the fall in oil and the global recession that ended up taking down the house of cards.
September 14, 2008
This week saw an upturn in the financial, consumer services and consumer good sectors; all pointing to signs of a potential recovery for the markets. On the other side Energy continues to fall and the short term damage is starting to drag down the longer term view. Of course, because of Lehman Brothers the world may end up looking very different come Monday. These moves in the sector averages and the news on Lehman Brothers has me believing that a day of decision is approaching for the markets: One that will see us starting a new bull or one that allows this bear to really sharpen its claws.
August 15, 2008
Right now, if you view the market as a means to bet on the future, people are betting that the worst is behind the markets. There may be more shoes to drop, but they won't alter the long term picture. Unfortunately I believe people are just excited over the major drop in oil and energy prices, that they feel a slight drop in oil prices will suddenly get consumer spending again and that will power the economy forward. I just don't see that happening, the consumer still has reasons to worry about their job and their wealth. I just don't see them spending their money any more freely because they suddenly have to pay a little less at the pump.
In the end, nothing has really changed for the market, in my opinion. The credit crisis still looms, the economy is still weak and getting weaker, all that has really changed is oil has dropped in price as demand has fallen. Which, in the end, is also a sign of a weak global economy. None of these things are good for the markets, however new bull markets do start by climbing such a wall of worries, but I feel this mini bull is going to fall on it's back.
July 31, 2008
The Market and Energy are showing signs of starting to trade In Line with each other vs. inversely related - In case you missed it today oil was down and the markets were down. Up until recently a drop in oil prices would mean a good day for the markets. Even Jim Cramer used the price of Oil to try and justify that the markets were undervalued by some 6%. This just isn't the case as Oil, and energy prices, are high for a reason; strong global economic demand. Take away that demand and all the market has to look forward to is a weak global and US economy, a bleak picture for stocks indeed. I've said it before and I'll stay it again: If the markets are going to start a new bull Energy will be the sector that leads it higher, if Energy fails here the markets will end up following it after the short term bounce.
It was a very tough year for the Long only Noiseless Return portfolios, as in 2007 the main bet was on the continued rise in energy and commodities. Obviously that didn't pan out as expected, but the portfolios have started to adapt now with a quarter of the funds being bought at the start of the year. The portfolios look to be taking a much more defensive posture with heavy buys in healthcare and utilities, the two sectors bought for the ETF portfolio.
The Year that Will be 2009
The crystal ball for 2009 is very cloudy and the outlook for 2009 is standing on the knives edge of a single political question: Does Obama have the strength to stand up to his own party? If the answer to that question is yes, then we could see an economic recovery start to take shape in the third quarter of this year. If the answer to that question is no, the economy and the country will suffer for a long time to come.
The reason for this is a simple one and can been seen quite easily in the microcosm that is General Motors. GM isn't breaking under a huge debt load or even under the pressure of a tough economy, it's breaking under the financial inflexibility that happens when the average Joe is took looked after. The unions, the individual dealerships, even the suppliers have all made it impossible for GM to take the steps needed to quickly adapt to the changes in the economy. Looking at GM, could end up being our country, where the little guy is looked after as the company, or our country, crumble into nothingness around it.
The problem is a rather simple one, you cannot look out for the little guy when the big guy is in trouble. In GMs case the UAW, the dealerships, the suppliers should all be willing to face a little pain so that GM itself doesn't have to face all the pain (and eventually fold or be totally owned by the government). This, sadly, is the path that the democratic leadership would like to take the entire country, one where all the pain is felt by those that are trying to create products and jobs, the ones truly taking the risk. The problem with this vision is that people and businesses do not have to take that risk, and the second that risk becomes greater than the reward the risk is no longer taken, businesses no longer expand or stay in business.
When the pendulum swings too far to those that create jobs you end up getting excesses like the .com boom at the end of the last decade. You get all sorts of risky, fast growing companies that end up being little more than firecrackers. The result is a lot of high paying, though insecure, jobs for workers. When the pendulum swings too far to the workers you end up with businesses that don't higher, don't expand, and people that might be willing to take on risk to create jobs no longer do so. The result for workers is that it becomes harder to find employment and wages suffer overall. This may just sound like a standard boom and bust cycle that you would get under normal economic cycles. Unfortunately this isn't the case, this could be a major policy shift that could stagnate economic growth for decades regardless of the current economic cycle.
In 2008 things still favored those that create jobs, in 2009 we stand on a knives edge of swinging to the other side, and it will be Obama that decides if we do indeed plunge to the other side. I'm a small business owner, of course I'm a supply side buy, but the policies that are enacted now will have a huge effect on me and my business for years to come. In all likelihood I'll be closing up shop in the next few months because of the policies enacted in response to a crisis. The second I have to stop making decisions based upon the business and base them upon taxes or other regulations, is the day I close shop and things are already very close to that.
Now with all that political crap out of the way I can get on with my 2008 bullet point predictions. (With these predictions I think you can tell which way I feel the political question is going to go).
- Q1 will be the strongest Quarter of 2009. There was a small bit of pent up demand from the total shutdown from Q4 in 2008. Things will continue to deteriorate economically for the balance of 2009.
- Q1 and Q2 will continue to see monthly job losses north of 500,000 per month
- Q3 or Q4 will see a monthly job loss total in excess of 1,000,000 in a single month, with the average for this period in excess of 600,000 and unemployment will hit 10% with "true" unemployment nearing 20%
- For all of 2009 over 6.5 million jobs will be lost
- The markets will break out from their current triangle patern to the downside and lose another 25-30% of their value. The markets will get a true panic bottom (without a real bounce) In May or June.
- The stimulus plan will top $1T (passed in two installments, the first being $800B, the second being between $300-500B), will include additional $50B in loans to GM and Crystler, and will not actually stimulate the economy.
- Small businesses outside of healthcare, technology, and finance will all but vanish.
- The Treasury Bond market will bust, along with the dollar, once the world realizes there will not be an economic recovery in the US in 2009. Yields will end the year north of 7% and mortgage rates will rise to 8.5%, preventing any recovery in housing.
- Personal savings rate will top 20% by the end of the year
Posts
0 comments:
Post a Comment