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October 01, 2007 – Comments (2)

I used to pay extremely close attention to what the markets were doing as well as what was being said about them. Everyday I would spend several hours reading what the analysts were saying about the markets or more importantly about stocks.

I really didn't have any preference when it came to stocks, I figured if the analysts said a particular stock was the one to own, then that was the one, and I dutifully added it to me watch list. Eventually of course I bought many of the stocks the analysts had said were the "ones" to own, and for a time I felt like the wizard of Wall Street.

I watched the value of my little portfolio steadily increase. I keep thinking if it will move just a little bit higher, I would sell out and retire. There were actually a couple of times that the value of my portfolio increased by more than $100K in a single day! Not bad for a portfolio that at the time totaled less than $750K.

[Sigh][Wistful Thought]

Of course....the bubble burst...pop...and before the wizards of Wall Street could change their socks, the value of my little portfolio had fallen by just a little under $400K.

Gone were my hopes for an early retirement...palm trees swaying in the ocean breeze, island girls in grass skirts bringing me refreshing drinks in coconut shell cups, dancing till dawn, sailing to Tahiti...you know all of the things that sound so appealing but you would never actually do? Not because you couldn't, but because all those things really suck and you never actually wanted to them in the first place?

Yep...those things.

Eventually I pulled my head out, assessed what I had left, went back through all of the things I had learned about investing, and then tossed all of that out, with one exception.

The thing I kept was actually a reminder from my days as a construction electrician. What I kept was...Never bet on another man's trick.

Think about that. Who knows the trick better than the person the trick belongs to? If you believe that, who knows Wall Street and the markets better than the folks that work there? So why do so many folks pay attention to Maria Bartiromo and all the rest the CNBC news folks?

Enter MoneyCentral's Jim Jubak. I've never met this guy, but just looking at his picture sort of makes me want to take him to the Ice House and buy him a beer...swap stories...make outrageous claims about anything...try to out lie each other.

The reason I sort of like this guy is because my perception of him when it comes to investing is that he could care less if you read what he writes, listens to what he has to say, or get hit by a bus on your way to a public toilet.

In a recent article titled Will the Fed Keep the Rally Going he loosely examines what the recent Fed rate cut has done to, and for, Wall Street. Since I think the rate cut was 100% political, intended to forestall a recession until after the 2008 elections, I almost passed on the article.

But the more I thought about the title, the more I thought that finally a voice of reason has been sounded.

The long and the short of all of this is that Mr. Jubak believes, as I do, that the markets are being propped up by the recent rate cut and by the belief that another rate cut is imminent. As I said earlier, I believe the recent rate cut was 100% political, and depending on how the Republicans are doing in the polls prior to Christmas, there may indeed be another rate cut.

But the fact of the matter is, housing is hurting, and once lenders have had an opportunity to figure out what is going to be a realistic fix that will help folks not only afford a home, but be able to pay for it longer than a few years, the housing industry is going to rebound.

In the meantime, think about all of the things in your home/apartment, furniture, pots and pans, glassware, flatware, carpeting, linens, appliances, and the list goes on.

And what about the implements of frustration and aggravation for the chores outside your home? The lawnmower that won't start, the edger with a broken blade, the string edger with no line, the snow blower that you can't get to because the bass boat and the kids bikes are in the way. Which begs the question how is it the kids always manage to get their sleds or hockey sticks or ice skates out without moving the snow blower?

Hmmmm?

So with a housing slowdown continuing, for how long who knows, a generally slowing economy thanx in part to all of the prior rate increases by the Fed, with jobs moving to places we can't pronounce, with folks wanting to eat organic though nobody has a clue what organic means, and with anything else happening that you may want to add to this ever expanding list...

I'm going to ask you to consider one more thing. Election day is coming, and while I know everyone is tired of all of the political rhetoric now, it's only going to get worse as we get closer to November 2008.

This election, instead of selecting the usual assortment of liars, thieves, and cheats we call politicians, instead of betting our futures on another man's trick, why not take the time to understand just what it is we could be getting before we cast our ballots?

Why not invest in our own trick, by investing the time required to make an informed decision. Who knows, one day, that snow blower may end up in front of that bass boat.

Wax

2 Comments – Post Your Own

#1) On October 02, 2007 at 2:10 AM, SH2F088 (89.95) wrote:

Hey great write up.  I like your sentiment and writing style.  Don't buy the bit about rate cuts for election, though -- those Fed geeks care way more about getting it right and the economy than about politics. 

Besides how does a propped up market get indpendents to vote R?  Most of the market players already go that way; and the ones that don't are too savvy to be swayed.

Conspiracies are more fun though. 

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#2) On October 02, 2007 at 6:15 AM, wax (97.28) wrote:

Keith;

My thought behind propping up the markets was this.

If the current administration headed by the President who happens to be a Republican, wants to prevent the Democrats, headed by nobody in particular at the moment, from capturing the White House in 2008, then the current administration had better make damn sure there's a chicken in every pot come election day.

Given that it takes about 6-9 months for interest rate changes to work themselves through the economy, it sort of made sense to me that the current administration would "have a short word" with head Fed dude, which resulted in a pretty strong rate cut.

Now, the current administration has fired the first salvo in keeping the economy from deteriorating should the housing/credit crunch really start to become a problem.

By taking aggressive action now, the current administration forestalls (they hope) an severe slowdown in the economy at least until after elections.

But wait!!!! there's more.

So the economy stays afloat...the status quo is maintained and now the Republicans have at least a chance of maintaining the government offices they current hold.

Or the rate cuts don't do squat in time for the elections and the economy falls on it's face, which allows the Democrats to be swept into office with a majority in both houses of Congress and the White House.

Americans cheer and cheer and cheer some more...happy days are here again!

Two weeks later Americans are blaming the Democrats for all of the bad things happening in their lives and in 2010, the Republicans again start recapuring seats in Congress.

In the mean time, the just regular folks get it up the wazoo with higher energy prices and higher taxes, not to mention the lack of toe nail clippers made in China and the abundance of truck parts made by Sven, who actually lives in Alabama but fishes in Utah.

Damn I love America!

Wax

 

 

 

 

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