|
Yesterday I went into a local bank. Some guy working there I
knew in high school stopped me on the way out. He wanted to know what I was
doing in the market. He looked nervous. Maybe he was worrying about his 401k.
I told
him "nothing." "I've got a little position in something, but I
have a lot of cash and I'm not doing anything. Hopefully it will go up,"
I explained.
He wanted
to know if I thought it was a bottom. I told him I'm not going to try to buy
the exact bottom. I've got a lot of money and I'll buy a few months after it
comes when I know it is in, because "no one" knows when the exact
bottom is coming and everyone is losing money trying to guess it.
I don't
know if he understood what I was saying. He just looked scared. I left
quickly, because I didn't want to be around his nervous energy. No matter
what I told him he was not going to listen to me, what he was looking for his
reassurance and I can't give that to him, because it would require lying. All
he needs to do is cut on the TV to get that.
This
market is a mess. And I need to tell you something really important. This is
a bear market and no one really knows when it is going to an end.
First of
all it has already dropped faster than anyone expected. I don't know anyone
who thought it was going to fall this bad. I was bearish myself. In May and
again in August I shorted the market and told people I thought the market was
going to have a meltdown in the Fall due to Fannie Mae going broke. At the
same time though I thought that would make gold go up, because the Fed would
print like mad to buy Fannie and Freddie.
Well I
was short into the drop and covered in September right before the big
collapse happened. And of course gold stocks fell with the rest of the market.
The point
is I was right more than most people. I actually made money in the drop and
got stopped out of my gold positions before they collapsed so didn't lose
much money there - but despite being right more than practically everyone
else I was still wrong about some things.
The
market fell more than I thought it did and gold stocks dropped too.
Well
flash forward to right now. I have a heavy cash position. For the past few
weeks I've been looking for signs that the market was stabilizing to put in a
rally and have been planning to go long for a trade once we saw them.
I had
thought we might see this process happen this past week - which would have
lead to a nice rally around the corner. But those signs don't look like they
are going to happen at the moment, because the market fell right back down to
support the other day.
There is
a risk that the market will break down and fall again unbelievable as that
may be. But even if the market holds up here it will take longer for it to
rally. It got damaged more by falling back to support and will have to base
more now before it can have a sustainable rally.
There is
no way we can be sure that is going to happen, because this is a deadly bear
market and in bear markets the surprises are to the downside. What is more I
don't see a new bull market beginning for probably at least a year, because
this economic recession is just picking up steam. I don't see it ending until
real estate prices bottom and the futures markets aren't projecting that to
happen until 2010. Any moves up we get until then will be just temporary
rallies.
So bottom
line is that this is a big bear market and that means it's very difficult to
trade on the long-side. Most people right now are desperate for a bottom and
take any positive day in the market as hope that it is here.
But in
reality no one knows when or where the bottom is going to come in.
That is
why even though I thought - and perhaps hoped - we were bottoming and going
to have some sort of rally I did not act on that. I did not have proof that a
bottom was in or a rally was right ahead of us and I don't commit money in a
market like this until the market shows me proof that a trend has changed. What
I knew was that one would think we'd get a bounce after this big drop - and
if so I knew what the market would have to do to rally.
That is
what I looked for. I knew the signs we would see before a rally began and
simply kept my eyes out for them.
Well, the
recent drop has made them disappear for now.
That
means I'm just going to have to wait and continue to be patient for the
market to do its thing.
I'm
willing to do that, because I like to make money. And making money in the
market means not guessing and making wild predictions based on hope of what you
want to happen, but waiting for the market to come to you and show you the
technical signs that indicate a real turn has taken place.
We are in
dangerous times.
And there
is a final thing you need to know - while the Wall Street experts calling for
bottoms really have no evidence for one and are just talking their books -
the rulers in Washington have no idea what they are doing.
They do
not know how to stop this bear market or economic recession. It is not
because they are stupid or incompetent - although there is plenty of that to
go around - but because it is simply impossible to use command and control
methods to move the economy in the way you want to.
Joseph
Stalin tried to use 5 year plans to build up the Soviet economy and all he
did was succeed in starving people to death. When they revolted on hungry
stomachs he would throw them in gulags.
Central
planning when it comes to economics does not work, because the economy is
simply too complicated for one person to understand. Everything the government
does to try to interfere in the economy has unintended consequences.
Remember
the big bailout bill Bush, Paulson, and Democrats crammed down our throats? The
one that they said had to be passed or we would go into a Depression? The one
that was going to be used to buy up worthless mortgage securities off of the
books of the bankers?
Well
yesterday Treasury Secretary Hank Paulson said that he wasn't going to buy
the mortgage securities after all. Now he thinks it won't work. He isn't sure
what to do.
Never
forget that it is the central planning of the Federal Reserve under Alan
Greenspan that has brought us this current crisis. We are living with the
unintended consequences of a Fed that for twenty years has worked on behalf
of international bankers and against the interests of the entire country. A
central bank that bailed out Wall Street bankers over and over again in
crisis after crisis. Each crisis simply got bigger until we are now at this
final moment.
And now
more central planning is not going to fix it. It will simply take time and
the natural workings of the economic cycle to pave the way for the next boom.
Unfortunately that means lots of bankruptcies in inefficient businesses are
going to occur over the next year.
I am
involved in several businesses besides my website and trading accounts - the
latter making the most money for me. Both businesses(and I consider my
trading account a business) are doing great. The website is doing better than
ever with more and more people signing up to my email list every week.
But one
of my other businesses is not doing so good. It is a small limo business I
started up with a friend for fun really five years ago. It never has made a
real profit and just broken even. It is going to get in trouble and start
losing money unless we make big changes.
Here is
the deal. I believe the economic slowdown is really just starting and is
going to get worse. I expect a trough in the downturn to come in about a
year, but the road from here to that trough is going to get worse.
What this
means is that for 90% of the businesses out there revenue is going to
decrease. Businesses that do not or are unable to cut costs will simply go
out of businesses. The business with a huge profit margin is rare.
Smart
businesses will streamline themselves right now and begin to reduce costs
right now. That is why companies are laying off people. The US post office announced they were letting go 45,000 people.
But most
businesses - and especially small businesses - do not really see what is
coming. They are not thinking of cutting costs. They see a slowdown right
now. But they are simply hoping that things will pick up and get back to
"normal" again.
Those
that do not think about getting costs now will eventually be forced to cut
costs to zero all at once when they go broke.
That is
why there can be a huge wave of bankruptcies next year - especially when it
comes to small businesses. Mix this brutal truth with the likelihood of
higher taxes and you have a dangerous recipe.
In the
next year the strong will survive. The businesses that can actually grow in
the next year will become leaders in their markets afterwards.
That is
what I see happening with all of the businesses I'm involved in except this
limo business.
Ah now
this applies directly to trading and investing.
The
downturn is already wiping out people who don't cut expenses. And when it
comes to trading expenses are losses. Those that did not cut losses months
ago have lost money and if the bear market continues those that do not cut
losses will end up losing lots of money over the next - perhaps enough to
knock them out of the stock market game completely.
Those
able to be patient and maintain heavy cash reserves will make a fortune in
the next bull market by buying right as it begins.
Many
small businesses are inefficient. They live by month to month and hang on a
thread. When it comes to traders and investors most people just throw money
at the stock market with no game plan. When they buy they just think things
are going to go up forever and make them money. They have no plan on when
they will sell for a profit or cut their losses if things go against them.
Those
that develop and stick with a plan make fortunes in the stock market. It is
markets like this that will transfer money out of the hands of the masses and
eventually hand them to the smart and nimble in the end.
How does
this happen?
The
masses try to hold on and then eventually sell out and give up on the stock
market. It is then that the people who make the real money in the stock
market step in.
Are you
one of these people? If not then it is time to be serious about making money
in the stock market. It is time to read my stock market course if you haven't
already. It is time to read the Stan Weinstein book.
In
business the businesses that succeed the most usually do so by doing one
simple thing - they do a little bit more work than their competitors. They
satisfy their customers more. That's why this website is growing while most
financial websites are about to face tough times. A lot of market analysts
are going to disappear. By providing more value than my competitors I will
grow and may even become a market leader when this is over.
And when
it comes to investing the successful investors are those willing to do the
work it takes to learn. They are willing to read a few books and use their
brain.
They make
up a very tiny fraction of the people in the stock market. Think about the
people you know. How many of them have retirement accounts? I'm sure you know
hundreds of people invested in the stock market. How many of them have taken
just a few days of time to read a few books and learn how the market works?
Hardly
anyone.
That's
why just about anyone can succeed in the market, but almost no one does. People
simply are too lazy or do not believe in themselves enough to think they can
use their brain and think for themselves. Almost all of the money in the
market is in the market because someone literally threw it in there with no
thought at all. It will be yours for the taking.
Right now
that may mean you need to learn about the market, cut some losses, and come
up with a plan to make a fortune in the next bull market. Think ahead. If
this was 2002 before the start of the last bull market what is a game plan
that you could have used then to identify the start of that bull market and
be able to sell and take your profits before this bear market began?
If you
can come up with an answer to that question you can make a fortune in the
next few years. It's laid out in the first few lessons of the stock market
course. We'll apply the concepts together when the time comes.
I know
one day next year or in the first half of 2010 I'm going to see sector after
sector line up to start a new bull market. It is going to be an incredible
day. And when everyone is down and scared about the market now that is what I
think about. I think about this huge opportunity that I know is going to
come.
I'll be
able to take advantage of it and help thousands of other people do so too and
that is an exciting thing to think about.
Until
then I need to get as many people as I can ready for it. And in the meantime
to make money that means some short-term trading on the long-side when things
line up right, maybe one more rally to short into sometime in the next few
months, and a careful eye for some sector or market in the world that goes
into a bull market before everything else. Maybe that is commodities, but we
will see.
Mike Swanson
Editor,
Wall Street Window
Disclaimer:
Michael Swanson is the President of USA Capital, Inc., which provides
management, support, and research for institutional investors, hedge funds,
and mutual funds. The ChartWizard is also an employee of USA, Capital, Inc.
Both Swanson and employees and associates of USA Capital, Inc. may have a
position in securities which they mention on WallStreetWindow or any of its
services. In such cases, appropriate disclosure is made. Under no
circumstances should the information received from WallStreetWindow represent
a recommendation to buy, sell, or hold any security. WallStreetWindow
contains the opinions of Swanson and the ChartWizard and is provided for
informational purposes only. Neither Swanson, the ChartWizard, nor
TimingWallstreet, Inc., which owns WallStreetWindow, provide individual
investment advice and will not advise you personally concerning the nature,
potential, value, or of any particular stock or investment strategy. To the
extent that any of the information contained on WallSteetWindow may be deemed
investment advice, such information is impersonal and not tailored to the
investment needs of any specific person. Past results of WallStreetWindow,
the ChartWizard, or Michael Swanson are not necessarily indicative of future
performance.
WallStreetWindow
does not represent the accuracy nor does it warranty the accuracy,
completeness or timeliness of the statements made on its web site or in its
email alerts. The information provided should therefore be used as a basis
for continued, independent research into a security referenced on
WallStreetWindow so that the Subscriber forms his or her own opinion
regarding any investment in a security mentioned by WallStreetWindow. The
Subscriber therefore agrees that he or she alone bears complete
responsibility for their own investment research and decisions. We are not
and do not represent ourselves to be a registered investment adviser or
advisory firm or company. You should consult a qualified financial advisor or
stock broker before making any investment decision and to help you evaluate
any information you may receive from WallStreetWindow.
Consequently,
the Subscriber understands and agrees that by using any of the
WallStreetWindow services, either directly or indirectly, TimingWallStreet,
Inc. shall not be liable to anyone for any loss, injury or damage resulting
from the use of or information attained from WallStreetWindow.
| 
