Market Low?

Elizabeth, there is no way to predict short term market directions with any consistent level of accuracy. So I pretty much ignore anyone who tells me what the market will be in 1 week, 1 month, 6 months, or

1 year. I do know that the market overall is now fairly priced to undervalued. I have no idea whether this foretells which direction the market is heading. Personally I will continue to buy equities as I think now is a good time to buy stocks if you have a long term horizon. I like to read this guy. He writes an article a week and posts it on this site on sunday evenings,

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In 200 words or less? Oh, goody! Asset classes ... the ones I know of are down, except for cash. This is a deflationary environment.

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Information (financial disclosure) has also been short-circuited. That makes it hard, because analysis is then just guesswork. On the presumption that one already has stocked up on end-of-world provisions ... at some point, many believe inflationary forces will kick in as the money the government is pumping out in stimulus comes back to haunt, and there is little discussion of government liabilities in social security and medicare.

The stock market may make new lows DJIA 6800(?), but there are severe undervaluations of select companies. It should stage a bear market rally back to DJIA 9000(?) The soundest companies will survive and prosper. In my scenarios, investment in producing assets (people, equipment, management) is better than hard metals.

Cash is still going up relative to what I want to buy, so I'm not buying anything yet. Stocks will I hope recover two years out - the companies with sound earnings. We're moving through the aftermath of a real blood-bath of greed and lying. A minority are guilty as sin. I'm trying to remember that man is basically good, and that most are honest. With a positive outlook, we will emerge from this.

In the meantime, I'm going to confession a lot.

Well, my co-author Will and I are still in the money because the S&P 500 is hanging on by its fingernails. It was 741 on 11/20 and 779 this afternoon.

I'm also retired and staying the course. I did some stock buying in November and haven't regretted it, yet. I also pushed some money I expect to need in a couple of years from short term munis to long term munis. A multi-year cash and near-cash cache is real peace of mind.

It is hard to argue stocks are cheap. It looks like 2008 S&P 500 earnings are going to come in at about $28, which gives a trailing 12 month P/E of about 28 or 29.

This is a deflationary environment. Everyone from the Treasury, to the Fed, to Congress is doing their best to fix that. They are going to succeed sooner or later. But who knows when? Are they going to overshoot?

-- Doug

I'm not changing strategy and staying fully invested in the stock market, but I am looking for better ways to diversify my investments.

I am buying a new hybrid crossover SUV thanks at least one dealer's willingness to discount from MSRP.

I have previously advocated investment in the GLD ETF and selling calls against that. Gold has gone up so much, I now think that is a little risky. I need to find another commodity that doesn't have much of a downside.

-- Ron

Sorry, I published without you. Unfortunately book sales are not as robust as I had hoped...

-Will

william dot trice at ngc dot com

Are we really talking about market timing on MIFP? I thought we generally preached against that in this newsgroup.

Elizabeth, I'm not trying to pick on you. I realize you said you're not doing anything differently. I'm just curious as to why the topic even came up in the first place.

--Bill

No, I'm certainly not talking about market timing. If I had thought a year ago there was something better to do, I would have done it. Just because the market is in turmoil doesn't make me inclined to change paths. But I'm an amateur, and I can't help but be curious as to what others might have chosen to do in this climate, if it's different that what they expected to be doing, etc. And I can't help but be curious if others actually *planned* for this turmoil, and if so how. Since I believe that this market fluctuation will end, eventually, I continue to have some funds invested in equities (just not as much as there used to be).

Elizabeth Richardson

Last summer I took nearly everything in my 401k out of equities and put it in a stable value fund that is returning 4.9%. I read and listen to Dr. Ravi Batra and he predicted this down to almost the day. He isn't always correct. For instance he predicted a depression in

1991. Things got bad but not that bad and he now thinks that Chinese infusion of cash kept us from going into a depression then.

I don't care where the bottom is because I will get back in on the upswing. Will I miss some positive movement? Yes, but guessing the bottom is a sucker's game. I got lucky this time.

Mentally it's hard to get out when you have lost 10-15% because you are locking in a loss but sitting things out with a small loss worked out well so far. Everything pointed to this collapse last summer. Thumper

"Elizabeth Richardson" wrote

I ended 2007 with a mix of 70% cash and bonds, 30% stocks. In Jan 2008 I incresed cash and bonds to a mix of 80%/20% The portfolio held up quite well for the year, -2%.

This Jan I increased bonds (GNMA) because of the poor return on money markets. Currently it looks like this:

Cash 70% US Stock 9% Foreign Stock 2% Bonds 19%

YTD I'm down -1.8% even with this more conservative allocation. I should have purchased some short ETF's last year in Jan as they did very well. Same this year. If for no other reason but to hedge against further stock market declines. My guess for a bottom, 13 months ago, was Dow 7,000. We are knocking on that door and the possibility of further declines seems likely. Even though economic activity has slowed, I think it has more to do with confidence. People like Larry Kudlow and the entire Fox News team slam Obama with every breath. This is worse for market confidence than slowing earnings in my view. The Dow opened the year at 8,772 and I have difficulty believing it will close the year higher.