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Who's jumping in front of the freight train?



September 30, 2011 – Comments (20)

Can't let it go a full year since my last post!

If you're buying stocks now, I'd like to hear your rationale.  I'll probably end up regretting being so cocky about this, but it seems blindingly obvious that equities are headed lower, a lot lower.  Sure, the market may pop on hope and short covering due to government announcements and shennanigans, but I can't resist saying that it has never been more clear to me that a crash is imminent.

Love to hear some counter-arguments.

20 Comments – Post Your Own

#1) On September 30, 2011 at 1:15 PM, EnigmaDude (61.00) wrote:

OK, I'll bite.  I just added to a couple of my long positions in my IRA.  My rationale is that new 52-week lows gave me some cost-averaging ability to reduce my cost basis for 2 long-term investments, GAIN and AINV. 

Both of these are BDCs which are trading to a discount to NAV and stand to benefit from prolonged low interest rates.  They both have high dividend yields (10% and 15%) and I intend to hold them for a long time - 10 years or more, hopefully.  Yes they may drop a bit lower in the short term but the dividends will still get paid and if the share price drops even lower I will look to add more.

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#2) On September 30, 2011 at 1:27 PM, Teacherman1 (< 20) wrote:


But only when it stops at the station to load and unload.

I guess it depends on whether you are investing or trading.

As Yogi would have said. "Anything can happen and sometimes it does".

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#3) On September 30, 2011 at 1:43 PM, TheDumbMoney (67.19) wrote:

Indian stocks have already been slaughtered and are getting hammered because interest rates are at a high.  Yet at the same time India has not had the same real estate boom that China has, at least not to the same extent.  So I recently added to my India ETF, which is EPI. 

From the standpoint of a technician, there is ZERO reason to add now.  The technical bloggers I read are extremely certain that we are about to go over the next cliff. 

From the standpoint of a fundamentalist, there are bargains out there, on a cash flow basis, even if one assumes earnings will be cut 20-30% in a downturn.  Which is not to say things won't get cheaper.

I'm adding monthly, because I always do.  That's just my trading rule as a long-term investor.  But I am still holding a lot of cash that I will only deploy if:  a)  Europe melts down and the S&P gets below 1,000 (or maybe even 900), or b) Europe's crisis is to my mind finally resolved without a meltdown.

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#4) On September 30, 2011 at 1:50 PM, Frankydontfailme (29.38) wrote:

I'm buying gold and silver mining stocks :)

Yes.... the market will go lower (after some absurd dead-cat-bounces)

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#5) On September 30, 2011 at 2:04 PM, chk999 (99.96) wrote:

I might start nibbling on a few things. Maybe a little PEP or CCSC. But just nibbles, no pigging out yet. That's later.

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#6) On September 30, 2011 at 2:29 PM, amassafortune (29.20) wrote:

No counter-arguments here.

Technical analysis indicates downward pressure.

S&P earnings appear to have topped. 

Stats today indicate savings are net negative again. Combined with other numbers, Americans appear to be tapping savings for day-to-day needs, rather than the pre-2007 negative savings that was based on high consumer confidence and a contented complacency. 

The Fed's tools seem to be limited. They should be raising rates to stimulate savings and investment, but economic weakness is too severe to risk added slowing forces.

Everything the euro is going through, the dollar is only delaying because of its current relative safety. 

U.S. voters have mal-invested in congressional leadership. As a result, the Fed was allowed to take the leadership policy role since 2008, even though they were the root cause of many poor oversight gaps, creating the housing bubble, and lobbying against derivative controls and conservative bank reserve ratios.

Republicans could make some progress even without the suport of the executive branch, but they seems more concerned with winning as a party than succeeding as a nation.   

Even well-connected hedge funds are dissolving, returning cash to investors, or posting poor results. If those guys can't make money, the average investor should be very cautious. 

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#7) On September 30, 2011 at 2:37 PM, leohaas (30.11) wrote:

" seems blindingly obvious that equities are headed lower, a lot lower."

Not to me. Maybe you can explain why equities are headed lower? There are plenty of stock out there with low P/Es, high dividends, growth potentials, etc. In other words: good fundamentals. Why would you not buy them when the market puts them on sale? It is how Warren Buffett made a fortune!

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#8) On September 30, 2011 at 2:45 PM, MaxTheTerrible (88.19) wrote:

I'm not exactly jumping in front of the freight train, just walking alongside it (however dangerously close). Just last week initiated WM, before then added MSFT, INTC, PWER & UPL. Considering upping my position in UPL at this point. If WM goes back below 29 I may increase that position as well.

However negative short term picture may look like, there appears to be quite a few bargains especially among large caps right now and with some of them yielding more than 4% in dividends I can afford to wait a few years (or decades) for the macro-economic outlook to improve. 

If your prediction of "a lot lower" comes to fruition I will be looking at initiating positions in DEO, IBM and other stocks that so far refused to go to the bargain-level prices.


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#9) On September 30, 2011 at 5:18 PM, FleaBagger (27.54) wrote:

leohaas - I think StatsGeek's point (and I don't want to put words in his mouth here) is to wait until stocks really are on sale. "low P/Es, high dividends, growth potentials" sound like homebuilder stocks in 2005. Some of us believe that earnings have contracted sharply and that it will soon be reflected in statements and P/E's.

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#10) On September 30, 2011 at 5:22 PM, Frankydontfailme (29.38) wrote:

well said amass and FB

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#11) On September 30, 2011 at 7:23 PM, walt373 (99.83) wrote:

The Chinese RE bubble is popping as we speak and getting no attention due to the crisis in Europe, FT link (registration required). Assuming Europe doesn't actually melt down, China is the far bigger worry. If their landing is as hard as I think it will be, we're on the edge of a nasty bear market.

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#12) On September 30, 2011 at 8:52 PM, rexlove (99.55) wrote:

if I could predict when the market has bottomed I'd say sure - wait til then to make some stock purchases. But since I can't I think you have to nibble on some stocks here and there in the event we have bottomed. you never want to be totally out of the market.

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#13) On September 30, 2011 at 8:58 PM, truthisntstupid (79.37) wrote:


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#14) On September 30, 2011 at 9:34 PM, AvianFlu (< 20) wrote:

I agree with Fleabagger that this seems a lot like homebuilder stocks circa 2005. I would definitely stay away from financials as I don't think the public will be in the mood to bail them out again...even if it were possible.

Personally, I am just sitting in a very defensive position and patiently waiting for something to hit the fan. I have a lot in diversified currency ETFs (Merk funds) which for some reason can't be entered as a CAPS pick at last check.

Chips off the table. Sitting this one out. In general.

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#15) On September 30, 2011 at 9:39 PM, walt373 (99.83) wrote:

Also, the ECRI just made their recession call official today. These guys are 3 for 3 in recession calls so far (and no false alarms).

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#16) On September 30, 2011 at 11:32 PM, sentinelbrit (55.45) wrote:

I am less than 50% invested. I took profits earlier in the year but unfortunately held onto my financial for too long. It does look like the market is headed lower. ERCI says were entering a recession. I don't think that is consensus yet. As you have written, a lot of people think the market is headed lower.  I get the sense that we need a big wash out before the market can stabilize i.e. we need some panic selling. That will come when people acknowledge we're in a recession and then ask how deep it wil be. A slew of bad economic numbers will send the market down. Worst case for me is the S&P goes to 960. But who the heck knows. With the world heading into recession, will the calvary come to the resuce. I expect China, Europe and the U.S., to announce some more policy initiatives. That is why we could get a bounce. Stocks are reasonably valued but not really cheap - except for sectors like financials. Ahhhhhh....if only they could rally...

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#17) On October 01, 2011 at 12:42 PM, outoffocus (22.83) wrote:

I still have alot of cash on the sidelines in my IRA. I did buy more of one my dividend stocks because It was yielding almost 8%. But thats about it due to the volatility. I'll make further moves when I'm a bit more sure on the direction of this crazy market.

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#18) On October 02, 2011 at 3:05 PM, FleaBagger (27.54) wrote:

rexlove - If you feel like you can't afford not to be invested, I would recommend looking at an industry that has had earnings go down a lot for a long time (for reasons other than obsolescence - e.g. avoid newspapers), and invest there, because these things go in cycles. Find an industry that everyone (more "everyone" than with gold) thinks is invincible, because earnings have been going up for 10-15 years, and short the hell out of it, even if P/E's are low. If you must be invested, at least don't be net long when the S&P is topping.

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#19) On October 06, 2011 at 1:08 PM, EnigmaDude (61.00) wrote:

Nice job!  Looks like you just about called the bottom (without meaning to).  Well, as Maxwell Smart would say, "missed it by thaaat much"!

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#20) On October 22, 2011 at 6:22 PM, yippiekiyeh (97.48) wrote:

I'm always looking for a deal. One does not freak out at the Ferrarri Dealership (Aston Martin Dealership, et. al) when they're having a 1/2 price sale. The same goes for those Ferrarri-like stocks, you shouldn't freakout because everyone else is, you freak out only when no one else is!

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