Stocks, Banks, Gold-This board has all been wrong.

[privatebanker]

Now there’s a sound investment strategy!

RYTPX = Average 5 year return -15.3%, that’s almost -50% cumulatively.

RYCWX = Hasn’t been around long but year to date has lost – 12.97% and -15% for 1 year’s time.

Sure they may serve as a good portfolio hedge if the markets were declining. They aren’t meant to have all of your money invested in them. Another bright idea by PS. Simply amazing…

[cabinboy]

FormerSanDiegan…I do not disagree with your statement. However, “if you know you are correct about the future direction of given investment alternatives” is a BIG IF indeed.
There is a reason this board is doing better on housing market predictions vs. stock market predictions. Housing is a much longer, more predictable cycle. When someone says they have the stock market all figured out, beware!

[powayseller]

I’m thrilled that the stock market is going up, making my inverse fund go down and its purchase very cheap right now. In essence, I bought at the bottom. I am so happy that these funds are now available, just in time for our stock market crash. The inverse fund works exactly as it should: as the market is rallying, the fund is going down. That’s what it’s supposed to do, and unlike the Profunds inverse funds, the Rydex inverse funds do track the inverse of the index they are supposed to correlate. By next spring, when the Dow is down 30%, my 2005 inverse Dow fund will be up 60%. I have a running bet with Steve Beebo to compare our portfolios in March 07, and I’m happy to have cabinboy and privatebanker join the contest. Winner buys lunch for the other guys, want to join?

Just now, I read Roubini is saying oil prices are down because the economy is slowing, so lower oil prices are a result of a slower economy and not to be mistaken as fuel for growth, i.e. now consumers have more money to spend.

He also writes about this sucker’s rally in the stock market. The market participants are betting on a Fed rate cut, hoping that will stimulate company profits.

“Indeed, in typical suckers’ rally mode the S&P index rallied a whopping 18% in April and May 2001. It was only in June 2001 when even more severe signs of a recession clearly emerged that the stock market started to rapidly tank into a free fall. So, such stock markets suckers’ rallies are very common at the outset of the recession. The reality is that stock markets are often wrong: sometimes they predict recessions that do not occur but, at times like in 2001, they fail to predict recessions that are already ongoing. ” – Roubini

[(former)FormerSanDiegan]

cabinboy – yes … a very big IF.
In my particular case I do not know the future, so I tend to be rather diversified across stocks, cash (more these days), and property. But that’s just me.

[(former)FormerSanDiegan]

powayseller –

I posted charts showing that the current rally over the last 3 months has been identical for the S&P 500 as well as the DOW.

I also posted a 5-year chart showing that the S&P has tracked the DOW over that period and furthermore that chart shows that since the current Bull market started in March of 2003, the S&P 500 has made up ground on the DOW.

Do you still believe that the recent rally is due to a few Dow stocks ?

[powayseller]

I saw your charts, and I said they were very good. However, the Dow rise excludes the transports, so it’s a bearish indicator. Ritholtz talks more about the divergence, “What I find so astonishing about these divergences is the Transports, depsite the 20% drop in oil and 30% drop in gasoline, cannot keep up with the Dow. Intriguing.” 10/11/06 How strong is the rally anyway? “While the Dow exceeded its January 14, 2000 high (11,722) last week, only 10 of the 30 stocks in the index are higher now than they were back then.” 10/10/06. “On Wednesday, we looked at the breakdown of Dow components, surprised to discover that only 10 of the 30 Dow components were above their 2006 2000 highs. Four stocks — Boeing, United Tech, Caterpillar and Altria — were the primary drivers, pulling the Dow higher despite the drag of so many other relatively weak components. 15 of the 20 Dow stocks still below their prior highs are down substantially, with GM and Intel off ~60%, and Microsoft still down by 51%, and Home Depot and Merck off ~ 40%.” 9/29/06

I’m also not impressed with the supposed Dow high. Peter Schiff wrote, “adjusted for the CPI the Dow’s January, 2000 peak would equate to over 14,000 in today’s dollars….n the second place, the Dow Jones consists of just thirty stocks. If you look at broader market averages, such as the S& P 500 or the NASDAQ Composite, the former is about 13% below its 2000 high, while the latter is 55% below.”

It seems like a few stocks are pulling up the indices. This is a weak rally, and is a bet that the economy is slowing enough that the Fed will cut interest rates, causing a second long boom. You already know my position. Again this is proof that the markets are not forward looking, they are inefficient, and whoever these investors are who are driving up the prices are obviously not aware we are a Bubble Economy ready to pop.

[(former)FormerSanDiegan]

LOOK FROM THE PREVIOUS LOW IN 2003 UNTIL TODAY YOU WILL SEE THAT BOTH THE S&P 500 and NASDAQ HAVE EXCEEDED THE RETURN ON THE DOW. These are broad indexes.

By looking back to 2000, your sources are showing you that the DOW fell less than the NASDAQ and the S&P 500 from 2000 to 2003, but since then, the broader indices have grown MORE THAN THE DOW.

The statement If you look at broader market averages, such as the S& P 500 or the NASDAQ Composite, the former is about 13% below its 2000 high, while the latter is 55% below. is due solely to the fact that both of these indexes FELL MORE THAN THE DOW FROM 2000-2003. FROM 2003 to the present they hace EXCEEEDED the DOW

Stop eating this spoon-fed bull$h!t. Look at the numbers yourself. Did you actually look at the chart. Make a chart yourself.

Can you not see that the S&P 500 has grown more than the Dow since March 2003 ? This rally is broader than a few Dow stocks. It’s right there in the data.

If you can’t see it, then I can’t help you. I just want to make sure it is perfectly clear that both the recent rally off the summer lows and the 3.5 year bull market starting in 2003 are broader than a few Dow stocks.

I’m simply trying to be fair and balanced and occasionally provide data and reality checks on this board. There is too much spoon-fed crap that people need to look behind the numbers.

[sdrealtor]

I haven’t looked at any charts but My Yahoo homepage tracks about 100 stocks on a daily basis. I’ve consistently seen a helluva lot more green than red since Spring.

[sdrealtor]

I haven’t looked at any charts but My Yahoo homepage tracks about 100 stocks on a daily basis. I’ve consistently seen a helluva lot more green than red since Spring.

[cabinboy]

PS….

You say you are “not impressed with the Dow high” and that only 10 of the 30 are above January levels. You then go on to say that this supports a hypothesis that the market is weak. However, what if you’re wrong and it means the market still has room to rise without being overvalued from a historic perspective?

The current rally is pretty broad. Specific indexes aren’t the only thing you can look at. Just look at your mutual fund performance. My small to midcap fund is up 3% over the last month, and my mid to large cap fund is up 4% over the last month. These are broader than the Dow or S&P.

Finally, lots of folks use individual sectors as leading indicators, with varying degrees of success. Some of the biggies are keeping an eye on retail, consumer cyclicals, and healthcare. Watching transport and making inferences not as common. Maybe the flight from a predictable commodity sector like transport into other things shows optimism in more complex sectors and the market as a whole. Maybe it doesn’t mean anything.

Finally, I’m wondering if you could comment further on the timing of your flight to inverse indexes. Why did you do it before the bulk of the summer earnings reports? Do you know something we don’t? Are you planning to make 10% this month by getting in early on the Armageddon? (I say that with tongue in cheek.)

[qcomer]

PS you wrote:
“I’m thrilled that the stock market is going up,”.
I am sorry but I don’t believe you. If you own inverse funds, you would be rather happier if market was going down. It’s natural because the loss that you have incurred is real and the profit you are expecting is thin air no matter how sure you are that it will materialize.

You then wrote: “By next spring, when the Dow is down 30%, my 2005 inverse Dow fund will be up 60%.”
I am amazed by your confidence. I cannot even predict with 100% confidence that Dow will be down in March 2007 rather predict it will be down exactly x percentage. What makes money in markets is skepticism and what loses money in markets is over confidence. Comments like above, if posted on your investment advisory letter, will make investors laugh.

A month or two back, you were almost sure about $100 oil and that COP is cheap at P/E of 6 at $65, right? Also, when this 3 month rally started, you said it wouldn’t last 2 weeks and posted Fleckenstein’s opinion. Let’s face it, we all can be wrong, there are no 100% certainties in markets or life. Sometimes I just wonder how similar your posts in tone are to comments from George W Bush.

PS wrote: “whoever these investors are who are driving up the prices are obviously not aware we are a Bubble Economy ready to pop.”
Poway, I would have said that these investors maybe don’t agree with the theory of a bubble economy and a recession in the next year. But do you really think all investors putting money in markets in last few months are igorant, dumb or lacking in research and just don’t see the dangers the US economy is facing? Do you think it is possible for investors to maybe see the same data that you see but infer different conclusions?

I hate making personal comments about people and only do so when I really feel someone can benefit from it. Right now, I feel you can use some healthy skepticism about your point of view. And I hope you didn’t invest 100% of your money in inverse funds.

[rseiser]

I do agree with powayseller, vrudny, Roubini, and Fleck, and I also think if one wants to risk the inverse funds or options, go for it. Just don’t use up all your money (like me, haha).
And I want to stress, that all of us have an opinion and an opinion only. This is a free forum and nobody should take advice literally. Rather chuggle if he doesn’t agree with others, and time (and profits) will tell who is right. I was wrong several times, and always I learned a lesson I will never forget.

Yes, I absolutely do believe that most people that drove up that rally do not have a clue. The same way any rally in 2001 happened, where nobody had a clue. If so much profit comes from the finance industry, and everybody has all his 401k in stocks, no wonder nobody cares to do the math anymore and just be bullish. The same way PALM at $160 didn’t add up if one divided the market cap by likely users. That’s why it went to $1 (and maybe for other reasons, too)

This is a rally like any other upside or downside trend, that has nothing to do with who knows what better. It just happens. Again this is just my opinion, and I am very happy that it is a contrary opinion, except for a few users on this board who agree.

[powayseller]

qcomer, I have laid out my predictions and my position. I took Zeal’s advice on the COP, and it bad advice, so I sold my COP, figuring I could make better returns on the inverse fund. Why now? Because I finally got around to it. It was pure luck that I didn’t buy the inverse funds this summer.

I still think that long term, oil will go up to $100, but in a recession, the demand for oil drops and so does its price. I had not considered this temporary drop in oil due to a recession, so I made a bad decision in buying COP right now. All the Zeal recommendations I followed have been duds.

We’ve got a stock market bubble today. The S&P P/E ratio has been around 14 since 1881, but in the last 25 years, has steadily risen to 45 in the .com boom, and now is still at 25. In the most productive years of our economy, from 1929 to 1982, the Dow increased 300%, but in the time of slower and stable economic growth the Dow increased 1000% in less than half that time (20 years vs. 54 years). So the price of the stocks has grown much much faster than the earnings, partially due to the inflow of foreign investment into the US. So we have a stock market bubble, a real estate bubble, a deficit bubble, etc. I am positioning myself to profit when they fall. Thankfully, there are plenty of people taking the other side of my bet, allowing me to profit handsomely.

I appreciate all the charts provided above, but they do nothing to change my mind that this rally is built on a quicksand foundation. So I am firmly in the corner with Roubini and I find myself in good company.

[sdappraiser]

Maybe I missed this, PS, but could you post your actual trades.. shares bought and date bought. What exactly does the fund purchase to create such a negative correlation? Some pretty crazy ass derivatives I bet. Do you actually understand what the portfolio is comprised of, if so please explain.

Tell the truth, how many times did you check the intra day Dow and S&P charts today? Yikes.

[powayseller]

Bear funds buy put options, and I verified this by calling Rydex. If you look at “holdings” on Yahoo finance, it says cash,because put options are not one of the categories. If you are interested in this, just google “bear fund”. I can’t tell you the # of shares, because that is confidential. I did not check the intraday charts, and there is no need. Eric Janszen told me today that these bear funds should be held only for a few months, so you can profit from the dips and rises in the index. In 2000 – 2003, you could make a lot of money by holding the bear fund for 4 – 9 months. They are not long term investments; they are like put options, so they are for market timing.

[Author]

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