Is it time to move back into cash?

[MojoMan]

I feel like we're in for a big correction.

 

Thinking about moving all money into cash, then rebuying around 8K Dow.

[dmarc117]

the storm clouds are brewing. be wise, stay safe.

[cre8tiff]

Good Lord. Why don't you guys just by a sign that says "THE END IS NEAR! REPENT!" and go hang out on a street corner?

[TimC]

Good Lord. Why don't you guys just by a sign that says "THE END IS NEAR! REPENT!" and go hang out on a street corner?

 

You're not worried because you expect the Federal Government to take care of you in every way possible. Must be nice to live in the dreamworld. Say hi to the ZOMGers that are completely unprepared for reality.

[Scooby's Hubby]

I think there is some profit taking going on now. Stocks have had a good run lately. However, in my case with the Ford stock I bought at $2.83, I will hold on b/c I am close to having held the stock for 3 years and will get a tax break on my gains after 3 years, so I will not take profits along with the rest, plus, it is just profit taking and will not correct too much.

 

A 20% move is a major correction, borderlining on recession. I do not expect more than a %15 move and would keep my eye on value stocks, money making companies that are oversold. And yes, I was a liscensed broker (liscense has since expired) but only trade my money and am a sole proprieter and have never bought stock for a client, so this is my own advise.

[Perchoutofwater]

I think there is some profit taking going on now. Stocks have had a good run lately. However, in my case with the Ford stock I bought at $2.83, I will hold on b/c I am close to having held the stock for 3 years and will get a tax break on my gains after 3 years, so I will not take profits along with the rest, plus, it is just profit taking and will not correct too much.

 

What is sad, is that you tax policy rather than sound investment strategy determines what so many people do. I'm not knocking you, but rather the tax policy and any taxes that are set up to promote or dissuade certain behaviors.

[Perchoutofwater]

Oh, and I voted Puddy. I think we are in for another significant correction, but I think over the long haul things the market will be profitable. I just think the long haul may be longer than most think.

[dmarc117]

once again, its a trading market these days, not buy and hold. just because someone says there is a correction coming doesnt mean they are nuts. markets move up and down. this one is going down in the near term imo. nothing to prop up these gains. high unemployment, europe on life support, real estate still very fragile, etc. be nimble!

[cre8tiff]

Up we go again!

 

This kinda like a wave, isn't it? hmmmmm

[CaP'N GRuNGe]

I'm thinking of pulling out a chunk as a loan for a down payment on a home and then dollar cost average it back in.

[dmarc117]

I'm thinking of pulling out a chunk as a loan for a down payment on a home and then dollar cost average it back in.

 

 

im thinking rental properties might be a good investment. rates wont be this low in the future. its cheap money right now.

[bushwacked]

I thought everything was supposed to crash last week with the Goldman Sachs news? I don't know if another crash will happen in the near future or not, but I've heard enough "it's about to happen" talk for awhile now it's kind of seems like that cult where their leader keeps predicting he'll turn into the Messiah.

 

For those of you convinced that the DOW will fall substantially before the end of the year there are shares at intrade.com to be bought on the cheap. Of course, in my mind, I'm thinking there is a pretty legitimate reason they are selling on the cheap at the present.

 

 

DOW.CLOSE.2010.<6500

DJIA to close at 6500 or lower on any day before the end of 2010 M Trade 6.1 10.0 10.0 912 0

DOW.CLOSE.2010.<6250

DJIA to close at 6250 or lower on any day before the end of 2010 M Trade 4.0 8.0 6.0 416 0

DOW.CLOSE.2010.<6000

DJIA to close at 6000 or lower on any day before the end of 2010 M Trade 2.0 6.0 8.0 260 0

DOW.CLOSE.2010.<5750

DJIA to close at 5750 or lower on any day before the end of 2010 M Trade - 10.0 7.9 14 0

DOW.CLOSE.2010.<5500

DJIA to close at 5500 or lower on any day before the end of 2010 M Trade - 8.4 7.9 69 0

DOW.CLOSE.2010.<5250

DJIA to close at 5250 or lower on any day before the end of 2010 M Trade - 8.0 10.0 20 0

DOW.CLOSE.2010.<5000

DJIA to close at 5000 or lower on any day before the end of 2010 M Trade - 6.9 8.0 116 0

DOW.CLOSE.2010.<4750

DJIA to close at 4750 or lower on any day before the end of 2010 M Trade - 10.0 19.0 10 0

DOW.CLOSE.2010.<4500

DJIA to close at 4500 or lower on any day before the end of 2010 M Trade - 10.0 - 0 0

DOW.CLOSE.2010.<4250

DJIA to close at 4250 or lower on any day before the end of 2010 M Trade - - 5.0 20 0

DOW.CLOSE.2010.<4000

DJIA to close at 4000 or lower on any day before the end of 2010 M Trade - 3.0

[Brentastic]

My position hasn't changed but my timing has. I think we're still due for DOW 5000 in the next yearish - it might not happen by the end of 2010 like I initially projected, but it's going to happen sooner than anyone wants. This stock market is a joke right now - being long right now is walking on THIN ice.

[bushwacked]

My position hasn't changed but my timing has. I think we're still due for DOW 5000 in the next yearish - it might not happen by the end of 2010 like I initially projected, but it's going to happen sooner than anyone wants. This stock market is a joke right now - being long right now is walking on THIN ice.

 

 

You've been talking a long game about how the DOW is on the verge of crash,and then you just keep extending it.

 

Let's put it down. I bet it will be above 5000 before December 31, 2010.

 

Come closing time either I pay you 1 dollar for every one hundred below 5000 (i.e..closing at 4000 = I owe you $100) or you pay me one hundred dollars above 5000 (i.e..closing at 6000 =you owe me $100). I'll even cap my high end at 10K; just to be fair.

 

C'mon I'm just a guy seeing what I can see, and you are a guru.

[Brentastic]

You've been talking a long game about how the DOW is on the verge of crash,and then you just keep extending it.

 

Let's put it down. I bet it will be above 5000 before December 31, 2010.

 

Come closing time either I pay you 1 dollar for every one hundred below 5000 (i.e..closing at 4000 = I owe you $100) or you pay me one hundred dollars above 5000 (i.e..closing at 6000 =you owe me $100). I'll even cap my high end at 10K; just to be fair.

 

C'mon I'm just a guy seeing what I can see, and you are a guru.

Dude, it's only been 3 months since I officially called the turn and although the market did decline about 800 points for the next 3 weeks, it was not the 'big reversal' I've been calling for - but that's fine, timing will never be exactly accurate. When the Dow reaches 5000, whether it's by Dec 2010 or May 2011 - does it really matter? I mean, there's nobody in the world that can predict market turns to the day with 100% accuracy - but there's also no need to be that accurate. Do you think anyone who shorted the market near the end of the 1929-1930 rally cared if they were off by a few months? Of course not - in the grand scope of things, being off by several months or even a year doesn't matter if the drastic decline I'm calling for comes to fruition. And DOW 5000 is only the short term target - the DOW should carry even lower than that over the next 6 years. This big reversal I'm calling for is going to last for 6 years (it will have it's ups and downs just like any market trend, up or down) and when it's done, everyone, including you and everyone else who thinks I'm a quack, will not deny it's power. The 5000 prediction is the best possible scenario but the more likely scenario is DOW below 3000 or even worse, below 1000.

 

Have you been paying attention to what's going on in the financial world so far this year? The writing is on the wall. Sovereign governments are on the verge of default (see Greece, Spain and Portugal) - and the myth that this crisis is contained is exposed by the increse of CDOs for Portugal and Spain. The biggest and baddest financial services company in the world (GS) is being sued for fraud and this is consistent with what happens in a bear market - social mood demands answers and this is the only time the government acts (in times of crisis). Unemployment is still hovering around 10% in the US. Statel and local municipalities are scrambling for funds to pay their IOUs in the form of muni bonds and pension plans etc... There may be a handful of states that are above water (Nebraska is one) but not many. This deflationary depression will be lead by a major credit contraction which will see many, many defaults - in turn giving the surviving dollars more purchasing power, hence causing the dollar to continue to rise for the next several years.

 

If you go back to 2007 when the DOW peaked, you will see similar events that unfolded. Several months before the peak, Bears Stearns files for bankruptcy, Merril Lynch seizes subprime assets from 2 Bears Stearns hedge funds, American Home mortgage files for bankruptcy, Goldman Sachs bails out quant funds, Bank Group bails out Countrywide and Northern Rock bank sought and received emergency liquidity from the central bank in England. All of this stuff happened and the DOW still continued to climb, eventually reaching it's all time high of 14,000+. History is repeating itself this time around and all the irrationalities are continuing. Investors are being convinced this is a new bull market, when in fact, it's a bear market rally.

 

But to sum up - I'm not betting with you or anyone else. My bet lies with my short positions in the market - I'm short about every major market index, including the Russell 1000 and 2000, S&P 500, the DJIA and the DOW real estate index. I am not long any stocks right now and I'm trying to keep as much cash in the bank as possible - because those 'surviving' dollars I mentioned will be in the form of cash. So you can take your piddly little bet and shove it up your ass

Edited May 1, 2010 by Brentastic

[Avernus]

I think that moving into cash could be the worst idea because it's purchasing power still has to reflect more inflation...

 

I wouldn't want to keep my worth in something that is only slated to go down, based on history anyways...

[Brentastic]

I think that moving into cash could be the worst idea because it's purchasing power still has to reflect more inflation...

 

I wouldn't want to keep my worth in something that is only slated to go down, based on history anyways...

This is where you and I differ in opinion - you are calling for inflation and I am calling for deflation. Even still though - if you believe the market is going to crash, where do you suggest moving your cash? Gold and silver I presume? I think gold and silver are going to decrease significantly as well. Regardless of anyone's view on inflation/deflation - cash is still better than any type of IOU if you believe the market is going to crash. IOUs have a great potential to be worth nothing - having inflated dollars is still better than that outcome.

[Avernus]

This is where you and I differ in opinion - you are calling for inflation and I am calling for deflation. Even still though - if you believe the market is going to crash, where do you suggest moving your cash? Gold and silver I presume? I think gold and silver are going to decrease significantly as well. Regardless of anyone's view on inflation/deflation - cash is still better than any type of IOU if you believe the market is going to crash. IOUs have a great potential to be worth nothing - having inflated dollars is still better than that outcome.

 

 

an inflated dollar is almost as bad an an IOU....I put my worth in something that has use...

 

I won't say deflation is out of the question, I just think there are way more signs pointing to inflation....

 

the value of the dollar has been cut in half of what it was worth 10 years ago...there are just too many cheap dollars in circulation for us to go through a period of deflation...

[bushwacked]

So is this a long drawn out yes or no?

 

If you're convinced things are going into the crapper in the next yearish, I'm not sure why you are so scared to back up a rather modest bet with a 8 month deadline.

Edited May 1, 2010 by bushwacked

[Brentastic]

So is this a long drawn out yes or no?

 

If you're convinced things are going into the crapper in the next yearish, I'm not sure why you are so scared to back up a rather modest bet with a 8 month deadline.

I'm not scared but that bet is meaningless for me and gives me a microscopic window of getting paid. Why would I place a bet on a specific price point by a specific date? That would be a horribly stupid bet for me and says nothing about what I'm projecting. I mean, if the Dow is at 5200 by Dec 2010 I would lose the bet with you - yet my forecast would be right . My forecast/prediction has nothing to do with pinpoint accuracy in pricing or timing - it has to do with a market crash that will carry the DOW to 5000 in the near term and even further down over the next 5 or so years.

 

A more equal bet is if you're so sure that I'm not only wrong but waaayyyyy off base, then you'd be willing to bet that by Dec 2010 the market will be the same price or higher of where it's at now - I'd take that bet in a heartbeat. Even Weigie's attempted bet with me, which I also declined, is at least fair and doesn't penalize me if I'm not 100% accurate - it's the same date parameters as yours but with a price point of 7500. You're not really going out on a big limb by saying if the DOW gets to 5001 by December 2010 - I'm wrong I mean, let's be real about this dude.

[bpwallace49]

I am not a trader or economics guy at all . . . . what I have ben getting out of this whole Elliot Wave thing is that all things are cyclical, and the market will naturally rise and fall (kinda like a wave? ).

 

Isnt that kinda obvious though? That the market will ebb and flow and not eternally rise? That economies will alternate between strong and weak? What differentiates the wave theory from just saying "uhh, everything has a cycle with ups and downs, the stock market is no different".

[Brentastic]

an inflated dollar is almost as bad an an IOU....I put my worth in something that has use...

 

I won't say deflation is out of the question, I just think there are way more signs pointing to inflation....

 

the value of the dollar has been cut in half of what it was worth 10 years ago...there are just too many cheap dollars in circulation for us to go through a period of deflation...

I won't disagree that the dollar has lost value over time - that's a given. 99.99% of the time, dollars inflate - I described all of this in my 'Federal Reserve' thread. Dollars inflate because of the way our government and Federal Reserve bank manufacture new money - it's manufactured at the expense of existing dollars earned and saved by taxpayers. There is never new real money created, only new money by decreasing the value of older dollars (inflation). Only in a depression will deflation occur and this current depression is going to be lead by a severe credit contraction - meaning a lot of IOUs will default, hence a rise in the value of real dollars (not IOUs). I'm not going to gamble on which IOUs will remain solvent.

 

I'm curious though - what do you consider something of use? In other words, how are you holding your worth? Cash is king right now and for the next few years at the least - any other investment is too high risk for this environment.

[Brentastic]

I am not a trader or economics guy at all . . . . what I have ben getting out of this whole Elliot Wave thing is that all things are cyclical, and the market will naturally rise and fall (kinda like a wave? ).

 

Isnt that kinda obvious though? That the market will ebb and flow and not eternally rise? That economies will alternate between strong and weak? What differentiates the wave theory from just saying "uhh, everything has a cycle with ups and downs, the stock market is no different".

What separates the Elliott Wave Theory from the belief that markets are cyclical is that EWT is based on mass social mood that changes. Cyclical theories are more based on consistent timing of ups and downs. Markets can be cyclical at times but it is not absolute - cyclical patterns can be effective if used sparingly and in conjunction with other analysis but that's about it.

 

Since EWT is based on social mood rather than perceived economic cycles, it is absolute in form but not in timing. That's where fibonacci retracements factor in - to aid in trying to determine potential turning points by price and timing. That timing is not always accurate but that's the probabilistic nature of it all. But as I've stated all along - those attempted timing/exact pricing predictions are only probablistic. As long as you know where we're at in the wave count, you can be confident of which direction we're headed and a price range target - this allows accurate forecasting of market trends.

 

For instance, last February (the 23rd to be exact) - my boy Robert Prechter, based on what the EWT was showing, released a special newsletter encouraging all equity investors to cover their short positions. Prechter called for a rally that would carry the DOW to somewhere between 9,600-11,600 range before extending another (and more severe) leg down. This next leg down is what I've been warning about and we're on the heels of it now. When Prechter made that claim on Feb 23, 2009, the Dow was at 7000 and it bottomed 2 weeks later around 6,500. Nobody and no analysis was calling for that kind of rally last February - which, according to the EWT, is exactly when the market does reverse (extreme social mood). When social mood is at an extreme (either extremely optimistic or pessimistic), that's precisely when the market reverses. Although right now, there are certainly more bulls than bears, I'm not sure we've reached the extreme yet. My best estimate of when we'll peak in this current rally - is sometime late summer (July/August). It could happen before that but that's my best estimate.

 

And finally, to answer your question. Any market direction goes in waves, that much is clear. But since the last depression was 80 years ago, people today think that we will only suffer minor corrections or recessions. The reason I've been so persistent in my posts is because this next 'correction' will not be minor. It's going to be of epic proportions to anything we've witnessed in our lifetimes. It's not obvious or else others would be agreeing with this outlook. If you can just understand that investing is a zero sum game - you can quickly deduce that we cannot endure a constant bull market. For every dollar gained, there's a dollar lost. The gainers in this market are all the investors who will be cashed out before the market tanks. The losers will be everyone else remaining long until the bottom - at which point they will finally sell their positions (to the new buyers who will again be winners). It's sort of like a gigantic ponzi scheme, whoever is holding the investment at the end will lose. Either way - this much is certain - any dollars gained over the last 80 years will also be lost.

[Avernus]

I won't disagree that the dollar has lost value over time - that's a given. 99.99% of the time, dollars inflate - I described all of this in my 'Federal Reserve' thread. Dollars inflate because of the way our government and Federal Reserve bank manufacture new money - it's manufactured at the expense of existing dollars earned and saved by taxpayers. There is never new real money created, only new money by decreasing the value of older dollars (inflation). Only in a depression will deflation occur and this current depression is going to be lead by a severe credit contraction - meaning a lot of IOUs will default, hence a rise in the value of real dollars (not IOUs). I'm not going to gamble on which IOUs will remain solvent.

 

I'm curious though - what do you consider something of use? In other words, how are you holding your worth? Cash is king right now and for the next few years at the least - any other investment is too high risk for this environment.

 

 

silver, gold and anything oil related

[Brentastic]

I am not a trader or economics guy at all . . . . what I have ben getting out of this whole Elliot Wave thing is that all things are cyclical, and the market will naturally rise and fall (kinda like a wave? ).

 

Isnt that kinda obvious though? That the market will ebb and flow and not eternally rise? That economies will alternate between strong and weak? What differentiates the wave theory from just saying "uhh, everything has a cycle with ups and downs, the stock market is no different".

One other thing that I didn't make clear when describing price points of EWT projections - there are specific rules in EWT that must be in order for wave counts to be correct. This is why I'm so certain that DOW 5,000 will happen. Actually the only absolute in this next leg down as far as fulfilling EWT requirements, is that the DOW will surpass the low from last year's bottom (6,500). But using probability and likely fibonacci retracement points, 5,000 is a more likely near term bottom. And even still, that's just the forecast for wave 3 (of 5) - there will then be a subsequent correction, labeled as wave 4 and a final motive wave down called wave 5. This entire decline should last about 4-6 years from whenever it begins this year.