Trader’s Depot

If you’re looking for new posts, I’ve moved them.

I’ve decided to put them on the web site that I use to introduce people to my Personal Investment Management Services. You can still poke around on TradersDepot if you want, but the info here is going to get real dated, real quick… culminating into an auto-forwarding situation to the other site.

Click here to go to the site.

Don’t forget to sign up for email notifications of new posts and change your bookmarks to my new URL: http://www.jrscm.com

See you there!

Even I am a little surprised at this one… Here’s the quote, clipped straight out of a MarketWatch article:

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Let me paraphrase my favorite part….

“You can look at all the great fundamentals in the world, but if there’s not a demand for the stock, it really doesn’t matter. I learned that point blank in the last few months.”

OK, two points… First, if the only financial thing you’ve ever done is to have a garage sale, then you know that if there’s no demand for something, it ain’t going to sell… no matter how lifelike Elvis looks on velvet.

Second, if you get all the way to chief investment officer before you figure this “no demand” thing out… and only in the last few months?? Well, I don’t even know how to explain how “squishy” that makes me feel.

The ending of my last post went something like this:

If that’s the case, I wouldn’t want to be a “buy and hold” investor, but if you’re willing to be nimble and cynical, there’s a lot of money to be made during this whole period of economic malaise. If you need an historical precedent, go back and look at a chart of the market during the Great Depression after the initial, monster selloff. What a great time to be an investor with actual cash!

All we have to do is have some cash left at the end of the monster selloff that we find ourselves in today.

And… of course, I didn’t show a chart of the stock market during the Great Depression. I can’t believe I’m so lazy as to make a reader look it up for himself! So, you bum… here it is… Now, get back to selling pencils already!

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Occassionally, for one reason or another I’m forced to take a moment and tame some of the squirrels that are running on the treadmills of my mind.

My most recent session was prompted by a friend who wrote me an email asking about an article she’d read. The article discusses the French Revolution and how the government ran their printing presses churning out money to the point that it destroyed their economy and precipitated a revolution.

Actually, rampant inflation is just about the one thing that the common folk just can’t take. Not only did revolution in France present the opportunity for Napoleon to jump onto the world stage, a similar situation in Germany after World War I put the German economy in such a rotten place that Hitler’s promises of prosperity at any price resonated with a desperate populace.

So, yes I think by trying to print ourselves out of the current crisis we might be putting ourselves in a precarious position… but I differ a bit from the article because I think we will probably recognize this as our next problem before anyone goes to the guillotine. The next solution becomes to raise interest rates and keep them elevated for an extended period.

I imagine that this will be necessary, but in the process it will dampen our future economic prosperity for a very long time to fight some very stuborn inflation. I feel certain that our leaders will choose this option over revolution.

Anyway, here’s the meat of my reply to her email:

Interesting… Obviously, I’ve been a huge fan of cash the past 16 months or so! It’s funny also because adding TIPS (inflation protected treasuries) is a part of my “Going Forward” plans that I’m presenting to clients next week.

As for gold… Well, I just can’t quite stomach it at $1000 per ounce… I’m feeling it’s a bit like oil at $145 per barrel last summer. Everyone said it was easily going to $200.

I look to implement a lot of the ideas from the article.  But I’m hoping to do it in a manner that doesn’t just kill my client’s prospects forever if we are wrong. Everyone’s uncomfortable right now and maybe even a little bit scared, so I don’t want to do anything too radical, no matter how rational it sounds at this moment. Sometimes these decisions and rationalizations that are made during very turbulent times end up being huge mistakes and we look back and can’t imagine how we thought such thoughts.

So, I’ll march forward incrementally. At present, I’m thinking that we’re probably looking at some serious deflation for a while and then a very muted, long term half recovery that could stretch out to a decade or so.

This leads me to a place where cash is king at the moment for most of our money. But, somewhere in the future there is going to be the opportunity, as interest rates rise, to buy these TIPS and hunker down for the possibility of some real ball-busting inflation.

Fortunately, these things usually unveil in slow motion. So slow in fact that people begin to dismiss their earlier premises and question their previous conclusions even though they are probably still correct.

As an example, I thought the housing market and the stock market were overpriced going back into late 2005. But, after another year-plus of both markets continuing to escalate, it was only reasonable that I doubted my own previous conclusions. I was right, but early. Being too early is the same as being wrong as far as our pocketbooks are concerned and I was on the edge on this one. Honestly, it coulda’ gone either way.

So this is kind of my big-picture picture. What I don’t say in the above letter is that while the economy may stagnate for the better part of a decade or more, I firmly believe that the stock and bond markets will experience continued strong rallies and significant selloffs. It’s not a longshot bet that the stock market will end up right where we are today in another decade or two.

If that’s the case, I wouldn’t want to be a “buy and hold” investor, but if you’re willing to be nimble and cynical, there’s a lot of money to be made during this whole period of economic malaise. If you need an historical precedent, go back and look at a chart of the market during the Great Depression after the initial, monster selloff. What a great time to be an investor with actual cash!

All we have to do is have some cash left at the end of the monster selloff that we find ourselves in today.

In the last two paragraphs of my last post, I chastised “The Great Orator” (BHO) for being so down in the dumps and putting forth what I feel was an excessively pessimistic view as a part of an agenda to get his stimulus package passed.

This past weekend I was sitting with my Grandson, eating Cocoa Puffs together on the sofa and watching on the boob tube the kinds of stuff that appeals to your average five year old…. and that’s when I heard it… that fimiliar refrain… “Yes We Can”

That’s where BHO got it! That’s where he got it all, the chant and the building stuff about putting the American people back to work in construction jobs! This has to be the genesis, the root, the seed of the Great Economic Recovery and Ego Act: “Yes We Can!”

On a serious note: I was, in fact, a little less distraught at last night’s speech. It seemed more hopeful and “Rooseveltian” now that he’s gotten the package passed. I think the hopeful message that he put out there is a bit of the salve that Americans need at the moment.

As usual, I just wasn’t finding much substance to the whole thing. The FDR flashback is a very popular faddish image at the moment for “pseudo-economists” to grab a hold of, but the problem is that most serious students of economic history concede that FDR’s plan didn’t really work.

The market’s action since early January when the plan started to come to light seems to be saying that BHO’s plan may not work any better. Back in Roosevelt’s day, the whole world at war finally snapped us out of it. Although it worked, nobody wants that kind of a stimulus plan.