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Oct 10, 2008 12:08 am

Tomorrow might be very, very bad.  Futures down 2.3-3.25%, Friday's have been bad lately, Bush will be speaking.


A couple days ago, I had heard that if the sell off continues at this pace, the markets will hit 0 in 19 days...so the good news is that we're only 17 days from that!


Something to take note of is that for the last few days, the majority of selling has come in the last half hour of trading.  Oddly enough, that's when hedge funds and mutual funds do their day's trades.


It makes me wonder, since many people only invest in their 401k's, how much impact has been made by them moving their 401k's to cash?

Oct 10, 2008 12:16 am

I'm going to start hocking my stuff and buying a double up leveraged large cap ETF if we have many more days like this. Early retirement is becoming a distinct possibility.

Oct 10, 2008 12:25 am
walking9:

I'm going to start hocking my stuff and buying a double up leveraged large cap ETF if we have many more days like this. Early retirement is becoming a distinct possibility.

 
I agree there has to be a bounce.  I don't know how big or how long.  I've been having a few discussions with folks in mutual funds and if I just ask if they would pay for a guarantee in a VA while they are still invested in funds, they want the guarantee.  I'm trying to get as many of them in there before this turns around so we can lock in those gains. 
Oct 10, 2008 12:38 am
snaggletooth:

Something to take note of is that for the last few days, the majority of selling has come in the last half hour of trading.  Oddly enough, that's when hedge funds and mutual funds do their day's trades.



You're kidding right?

You are going to try to tell us that you know for a fact that all those armies of traders on the trading desks at hedge funds and mutual fund companies just sit around all morning and afternoon, and then get all their trades done in between 3:30 and 4:00?

Ahem.....excuse me but your ignorance is showing.

Oct 10, 2008 12:52 am
HymanRoth:
snaggletooth:

Something to take note of is that for the last few days, the majority of selling has come in the last half hour of trading.  Oddly enough, that's when hedge funds and mutual funds do their day's trades.



You're kidding right?

You are going to try to tell us that you know for a fact that all those armies of traders on the trading desks at hedge funds and mutual fund companies just sit around all morning and afternoon, and then get all their trades done in between 3:30 and 4:00?

Ahem.....excuse me but your ignorance is showing.

 
Do you know exactly how mutual funds work?  I don't claim to know for a fact.  I do think during these times of massive redemptions, there is extra selling by the mutual funds towards the end of the day. 
 
By the way, I was a little distracted watching TV and posting.  I didn't mean to make it sound like that was when all the trading takes place.
 
 
Oct 10, 2008 1:05 am

Added another million today, but I did have a client bail at the bottom (first one out of 500 households).  Hammered this guy so hard, he started tearing up, so I backed off.  This was one of only 3 clients that sold out at almost the exact bottom in 2002, so I should have known.  Sad part was he is only down around 20%.  I've drawn a line in the sand.  If this market dips another thousand points, I'm taking 10%-15% out of fixed income for all my clients and adding to equities.  Time to back the truck up on muni's, double short long treasury (TBT), and equities.  For my more aggressive clients, I like walking9's idea of double long ETF's. 

Oct 10, 2008 2:55 am

Well, right on bro.

 
Rank, sitting here watching Singapore and London markets on BBC  late at night. Steeping in history- created, real time Singapore (where I once lived for a few years)  TV anchor talking about hitting ten year trailing lows for computer model traders, and concern about lack of coordination among governments to lower interest rates. But what a load of crap, Asian technical traders will start dumping more stock at certain trigger points. Just goes to show, thinking for yourself is a profoundly simple proposition. I wish I had more cash, that is the cruel irony.
 
I remember watching the meltdown in Tian An Men Square from Singapore. Another kind of (tragic) market activity.
 
And oh yes, the Brits flip over to a rigorous discussion about "football" league strategies in virtually the same breath!
 
I like your ideas, I'm just kind of a buy and hold fellow, with a little of the above what you mention, I expect you are largely of the same mind, of the above, for sizzle.
Oct 10, 2008 9:21 am

BURP! I have never suffered from headaches or migraines but geezuz I must admit at times the continuing news and drops starts to wear on you. Keep calm and move forward. I watched the movie Stripes the other night just to move in to the " smooth zone ".

Oct 10, 2008 10:44 am

FEAR

Oct 10, 2008 11:26 am

Talked to a bond fund manager yesterday. He gave a good example of what's happening in the muni markets(it's either a metaphor or analogy but i get confused between the two)

 
A month ago it's like sitting in a theater and you notice some people moving towards the exits. Not a lot of people but enough to take notice. Now, all of a sudden there is a stampede for the exits, yet there is no smoke and there is no fire.
 
What we have is a liquidity crisis in what has become a thinly traded market. Yet there is no credit crisis within that market. The bonds are fine. People are paying their taxes, the phone line to city hall still works and the coupons are being paid in full and on time. In cases where people don't pay their taxes the tax free bond holders stand first in line, ahead of the 1st mortgage holders, to get paid their money. A reason why tax free bonds are such a strong investment.
 
A couple of other issues:
 
Airport facility bonds: These are backed by airlines and would be thought to be a dangerous investment. Not so. The bonds serve as a 1st mortgage on airport terminals. Even as every legacy carrier outside of AMR went bankrupt or flirted with it, they paid their airport facility bonds. These are valuble and vitale assets.
 
Dirt bonds: Dirt bonds are bonds issued for infrastructure developement and backed by land developers. Not a great place to be these days. However, the bonds sit first in line for payment if a developer goes bust. Again, ahead of the first mortgage holder. It's fun being the tax man! In order to save the land from sheriffs sale usually the bank backing the developer will pay the taxes or pay the bonds off. If that doesn't happen we get the land which is then sold to another developer who pays off the bonds or puts back on accrual basis.
 
 
Oct 10, 2008 12:24 pm

BG,

I like the movie theater analogy (metaphor?).  It's hard to articulate to clients sometimes why the market is moving the way it is.  I was selling some muni's this morning, and a client asks - "well, if they're such a great deal, and everyone should be buying them, then how come the prices are so low and the yields so high?" 
I wish I had that analogy to feed him.  Still sold him the bonds, but it wasn't quite as pretty as I would have liked....
 
Thanks for the line.
Oct 10, 2008 12:38 pm

The federally tax-free yield on ORNAX is about 7.5%. Continuous being ahead of your time, to your own  detriment, though, that's priceless.

Oct 10, 2008 12:46 pm
B24:

BG,

I like the movie theater analogy (metaphor?).  It's hard to articulate to clients sometimes why the market is moving the way it is.  I was selling some muni's this morning, and a client asks - "well, if they're such a great deal, and everyone should be buying them, then how come the prices are so low and the yields so high?" 
I wish I had that analogy to feed him.  Still sold him the bonds, but it wasn't quite as pretty as I would have liked....
 
Thanks for the line.
 
Here you go B24, from an IVY conference call I'm on:
 
If you needs to raise money and there aren't any buyers, would you sell the worst thing you have, or would you sell the best thing you have where there might actually be a buyer?
Oct 10, 2008 1:19 pm

Back around 2000, many companies were overvalued - no way the money they were making, the dividends they were paying, justified the stock price.

 
The good quality large company stocks we own today, as far as coming into a recession, with those companies earning less because the economy is slowing, we have the problem of the market value of those large companies going down, like in any recession.
 
But what is really going on, Wall Street is burning down, again, reminding us of 9/11, for different reasons - a wrecking ball destroying a house of cards of securities that we are mainly not invested in - the stocks and bonds we hold are paying nice dividends through all of this, the yield on your entire portfolio of good stocks and bonds is something like 3%, so we are getting about three times the yield of cash right now, while waiting for all the bad investments to burn, and what will be left is the good quality stocks, bonds, cash and certificates that are in your portfolio.
 
So if you really believe this, what is happening is almost comical. Imagine many of your neighbors running out into the streets, and loading up rental trucks and moving out of their houses, not because they can't pay their mortgage, but because the perceived value of their house (if there are no buyers, like around here, right now) is zero.
 
What is the "yield" of a house that is worth zero? You get to have a place to eat and sleep, and maybe work, if you work at home. So we focus on the yield of our houses right now, and that is why I am telling you, the "yield" of your stocks and bonds, right now, is about 3%. In fact, as the value of your portfolio goes down, the yield goes up, because we own dividend paying stocks and interest paying bonds.
 
Of course, what matters is what you paid for the house, or the stocks and bonds, so the real amount of interest, or dividends you are getting, is not going up when the price goes down - but bottom line, we have to wait for the bad investments to burn down - around the good ones we own - that's why we have a cash reserve.
 
We won't be selling one penny of stocks (or bonds right now) into this downturn in order to generate what you need for spending.
 
And that's what we need to think about right now - and let's think about that yield that is piling up a little cash, while things go "sideways". The forces of greed will take us into panic buying in the market at some point, and we'll hold steady.
 
All of this pain and suffering, riding on this terrifying roller coaster, to try to get a return on our money that can keep up with or beat inflation - which is also terrifying - remember?
 
If we can get four times in stocks what you would get in cash, or maybe twice the return rate of bonds over time -it will have been worth the ride. Of course, owners generally get paid about twice what lenders get paid, over time, through history, basically because of inflation.
 
We're trying to protect and grow your money, and overcome the effiects of inflation, by being owners, and collecting dividends and interest.  
Oct 10, 2008 2:46 pm

Today has been a nice day to me in terms of clients having an optimistic mind set. We've been buying buying buying today. I'm relieved to know I have very level headed clients, I really am. This is a good friday for me simply because my clients believe this is a good time for them. It's a good way to get paid.

Oct 10, 2008 2:58 pm

It hasn't been too bad here either.  Had a few clients who cashed out weeks ago move into annuities, to get back into the market.  Had a few buy into munis.  Others who just want to talk are acknowledging that this is fear, pure and simple, they'd rather not sell out now.  

Oct 10, 2008 3:32 pm

Are you guys watching this?  We're GREEN!

Oct 10, 2008 3:37 pm

Quick, SELL!

Oct 10, 2008 3:58 pm



Man, I hope everyone has a good weekend. I made a little over $2100 in commissions today so I know I will. Let's do some more quality buying next week.
Oct 10, 2008 4:01 pm

"Dudes", that was fun. It's party time.