Down goes the Dow

Ghost of Igloi wrote:

Racket,

I think the metals are a good hedge. I prefer GLD for its traditional characteristics. I have a feeling the metals will preform much better than equities over the next several years.

Igy

I'm actually going to buy palladium ETF shares tomorrow morning. I think it has great upside and demand is expected to increase over the next few years since it's used in high end catalytic converters to reduce emissions (and all manufacturers are under the gun to reduce emissions more and more) and in electric vehicles.

Gold is overrated as a hedge, but keeping a small position is understandable. Balance that with oil for a proper hedge.

some of the predictions I saved from over the year:

Bill Gross calling a top for bonds in January 2018. Pretty good call. But mild...bonds lost the grand total of 1% this year. A rare down year, so kudos, but not a disaster.

https://finance.yahoo.com/news/bill-gross-signals-bond-bear-091147747.html

Here's GS in 2014 predicting a 1% return for the 10 yr treasury and 6% for the SPX, for four years.

Eyeballing...

He was wrong on bonds - that bond has been up around 3.3% for that period. Although timing is unclear.

On stocks...GS predicted a 6% return. I'm going to eyeball that as a massively wrong prediction. The real numbers seems to be around 11% per year.

So GS was unnecessarily bearish. So much for the 'brokers are always too bullish' theme.

I will say those eyeballs are not exact.

http://blogs.wsj.com/moneybeat/2014/08/05/goldman-sachs-heres-what-will-happen-when-fed-raises-interest-rates/?mod=yahoo_hs

I noted in 2013 that CAPE levels were very very high globally in 2013. Now, five years later did those high CAPE levels mean returns were awful?

No, of course they didn't. CAPE is bogus. Global returns weren't great - around 6% per year for that period. But not terrible.

In the US, a high CAPE meant zilch - 5 year returns are 10% per year, even at the bottom of the current correction.

CAPE is lame.

Here's GS at the beginning of 2018 predicting a 10% return for the SPX.

Right now we're sitting at zero, so I suspect GS will prove overly bullish on this one.

https://finance.yahoo.com/news/goldman-sachs-forecasts-sp-500-will-rise-11-2018-135706308.html

This guy predicted a global slowdown, in April 2018. Pretty good call. He was looking at the USD or something like that.

https://finance.yahoo.com/video/markets-us-dollar-warning-global-191903570.html

Here's a good call from earlier in the year. Predicted that the trade wars would heat up. he went on to say it would all end in a smoldering mess of destroyed economies, and that hasn't happened yet. But good call on the trade wars escalating.

https://www.barrons.com/articles/albert-edwards-the-ice-age-is-herefinally-1521125760?mod=article_inline

that's about it. Also a few politics stories - all of which proved to be overreacting. That trump would start a coup, that HRC would be in jail, etc.

point here is how absurd it is to try to predict anything.

agip wrote:

that's about it. Also a few politics stories - all of which proved to be overreacting. That trump would start a coup, that HRC would be in jail, etc.

point here is how absurd it is to try to predict anything.

Including Wall Streets 10% mark-up to stocks each year.

heh

Here are the positive bets this year, so far, per Morningstar's great 'category returns' page

US Large cap growth stocks

US convertibles

US Short term bonds

all kinds of munis

Utilities

US health sector

US Tech

US reits

I only got two: real estate and tech. I was underweight the rest.

Not a great year for me - most accounts are down 2% or so. Weird thing is that it doesn't really matter if it was an aggressive or conservative account. Since bonds and stocks did around the same.

All my accounts are globally invested, so can't look just at US stocks. Obvi the US did far better than overseas in 2018, so have to take a look at negative returns overseas when benchmarking.

I use VSMGX as a general benchmark...that is down 2.9% this year, so I'm fine with the benchmarking.

Looks like today is turning into a bloodbath.

If we don't turn around by closing, we could have a real build up of panic over the week-end with a real massacre upon opening on Monday

agip for the love of God please don't sell until I'm done unwinding. Also lol VIX is only at 21.50. This is gonna be a -1000 day

Also, I bought some puts on JNJ this morning thinking I'll get 10% or something after the news.

Holy. F.

they're gonna get halted at this rate

Bloodbath wrote:

Looks like today is turning into a bloodbath.

If we don't turn around by closing, we could have a real build up of panic over the week-end with a real massacre upon opening on Monday

yeah or a bunch of dip buying boomers coming in like "lots of great stuff on discount here! can't believe all the deals! Buy low sell high that's what I always say!!!"

Racket wrote:

agip for the love of God please don't sell until I'm done unwinding. Also lol VIX is only at 21.50. This is gonna be a -1000 day

Also, I bought some puts on JNJ this morning thinking I'll get 10% or something after the news.

Holy. F.

they're gonna get halted at this rate

F this. I'm going for a run before I do something stupid

and before we say the market is going to zero, let's remember that we were up 20+% last year, stocks are flat for the year, and valuations are the lowest in around 4 years.

In two months, after another excellent earnings season we could easily look back at this and wonder why we didn't load up on cheap US blue chips. It might look so obvious in retrospect.

or not.

My current hypothesis is that china might be blowing up, which is messing with all the financial instruments out there. Banks, bonds, etc. They have so many bad loans...now that their econ is slowing to normal speed, many of those loans will go bad, putting a lot of banks under. Except the gov't will paper over the losses, making things tricky. I'd guess a lot of people are selling assets around the world, getting cash on the balance sheet to deal with a possible china debt blowup.

the q is if the debt blowup there spreads to also highly indebted US and Europe.

here's GS during a past correction, which we don't even remember anymore. No doubt it was equally scary.

It happened in Jan 2016. GS said meh, we'll get through it and end 2016 at SPX 2100.

In reality 2016 ended at SPX 2278. GS was way too pessimistic.

point is during a scary correction it's hard to see the way out. But every time we get out. eventually.

https://finance.yahoo.com/news/goldman-recession-fear-overblown-11-182251462.html

Bloodbath wrote:

Looks like today is turning into a bloodbath.

If we don't turn around by closing, we could have a real build up of panic over the week-end with a real massacre upon opening on Monday

Right on cue. Literally 5 minutes after this was posted, the daily trend reversed. Well done!

agip wrote:

Racket wrote:

agip for the love of God please don't sell until I'm done unwinding. Also lol VIX is only at 21.50. This is gonna be a -1000 day

Also, I bought some puts on JNJ this morning thinking I'll get 10% or something after the news.

Holy. F.

they're gonna get halted at this rate

F this. I'm going for a run before I do something stupid

Good idea, do it.

Hope you are all well, in the midst of recent market activity. Some observations:

We are in the midst of a tectonic social shift away from free action and free markets, to a central management condition, at least in the US. As I have observed for years, and as I have known for a fact, there is a lot of “market” management happening. Why? Because the locusts have moved on from metals to RE to the USD to debt to derivatives to the equity markets. What do I mean? I mean that for the benefit of the few, the many need to be managed, to be balanced on a knife edge, so that the few can continue to live in the lap of luxury. The main tool of that management has varied through the succession of tools I just listed.

It’s not about people actually having it good, it’s about them thinking that they have it good. As long as they think that, they will keep their heads down and keep working. Pension funds are totally effed, and everybody knows that SS is dead ever since Clinton raided it years ago. To maintain stability, 401k-type vehicles were expanded and people were pushed into it: i.e. bonds and equities. The main tool now, to prevent revolt, is price management in these two areas. Yields no longer matter in equities, because earnings cannot be successfully or easily centrally managed. What can be managed, and what IS managed, is price. Yields could be zero. Everybody talking “fundamentals” can shove it. “Free cash flow”, lol. Doesn’t matter. Prices are what matter exclusively, in equities. Bonds are a little different because both price and yield can be managed by much the same mechanism, and both are.

This game has been going on for years. Early on I didn’t know if it would be successful, or exactly how it would play out—but with time came understanding, and with understanding came gains. This calendar year alone I am now up 82%, on very conservative one-way bets. Those who are slightly less conservative and also bet on the way down could be up 200%. My point is that there are actors OUTSIDE the managed societies, who have figured it out, and who are exploiting the stimulus-response nature of the programmed management machines and critical actors at certain banks that receive the marching orders. Who do I think is the #1 actor?

RUSSIA.

I said it before, years ago, on this board, and I reiterate it now. Russians are the only ones who are predatory enough to perceive current actions as a weakness, sophisticated and experienced enough to understand the mechanisms, crafty enough to sense the opportunity for exploitation, and smart and savvy enough to figure out how to actually do it. I said years ago that if I knew any Russian I could trust, I would be on board at the drop of a hat—and that was years ago. Problem is that there aren’t any who can be trusted, they are ruthless and deadly to outsiders to their own little groups.

So I pick around the margins from a safe distance. But there are people pumping the Fed (i.e. US taxpayer) just the same as milking a cow. The US taxpayer, and anybody connected to them, is being played for a sucker of epic proportions.

Don’t listen to the talking heads, they don’t matter—they are just useful idiots who willingly and publicly maintain the diversion. They lack the mental ability and contacts to see what’s really going on. It will be interesting to see how long the pumping continues. Others have seen what has been happening, and are in a power struggle to see whose manipulations will carry the day. There is a highest-level power struggle going on right now to see who can keep the skim shunted in their direction. It’s dangerous to play around these fighting giants, and that is why smaller fish in the know are getting out of the markets, to avoid being collateral damage.

Although I still trade a bit, I am mostly watching from a distance, which is one reason I see a different picture. My gains this year serve only as validation that I currently understand something about what has been happening, to the extent that I can predict certain moves in certain things. I have a 100% hit rate this year: 100%. I don’t know if anybody really can understand that, even I have a hard time wrapping my head around it. I have not made one wrong call. Part of that is because I am conservative, part of that is because I am patient, part of it is substance—but it is insane. This has been my best % year ever, and also my lowest trading pot ever! Of course. Whatever. Like you, I was, and still am, skeptical of my story this year—and rightfully so.

Re: gold. Such a small market, that it takes only a tiny bit of money to move the whole thing. Has been manipulated rather than managed for a long time...but might prove to be a sapling that will be developed into a mature tree, because it is so small that it represents opportunity, a new frontier. Same as cryptos were being heralded as the next frontier, until they were kayboshed for the time being.

Take your money out, diversify currencies, buy real assets in various good jurisdictions, trade smartly and cautiously, don’t bank on US or other gov’t policies that are subject to change, and make sure you have leverage over your counterparty risks. Take a page from the Russian playbook: know your banker, and where they live—and once they have committed, tell them that you know. It’s getting to be a real thug world, and will only get more intense as the future unfolds, IMO.

And above all, make sure to enjoy today, because life is great. Enjoy that lunch, hammer that run, push yourself, enjoy your freedom and what control you have over yourself, and really enjoy friends and family that you feel you can trust, and take some time out and enjoy what you have, whatever that happens to be.