The
D
ropping
ow
Riding the Tube
As I watched the Democrats battle it out in their YouTube debate last night,
Look to your left and say one good thing and one criticism about your fellow running mate.
"The good thing is, he is running so hard to the left that he is jeopardizing his chance in the election.The bad thing is, she will probably try to learn to play the saxophone next."
I estimate that if anyone of them wins the presidency, the loser will be the American economy.
For example, John Edwards, continuing the Democratic populist demagoguery, signaled that they are coming after "big oil, big insurance, and big drug companies." He forgot trial lawyers, I wonder why?
The February "Crash"
Anyway, the last time I spoke to you about the stock market was in February, right after the scare caused by the Chinese bubble. Well, our market, and the Chinese market, continued onward and upward from then.
So, with China again being talked about as a bubble, and the U.S. stock market too, and after today's dramatic drop, I think it's appropriate once again to address the market.
Disclaimer
I inform you that I am a former stockbroker with Merrill Lynch, Dean Witter and Charles Schwab. I also tell you, though, that I am presently not a professional in the financial field, and that nothing I say here shall be construed as investment advice. You must do your own homework, and make up your own minds. I am not liable for your decisions. In fact, I'll add, do not follow any advice I give. Need that be any clearer?Bragging Rights
Still, I want to gloat. In February, after that dramatic fall, I said the market would rise again, and it did.Tomorrow's Stock Market Today
What do I say this time, after a 226-point drop in the DJIA today?
First. Tomorrow, Wednesday, July 25, 2007, the market will be up. Some segments may still be hurting, like the financials and the homebuilders, but other stock sectors will rise. Techs will climb tomorrow for sure.
Predicting tomorrow is the easy part. What about the next three months, and the rest of the year?
Subprime and Mortgage Woes
The subprime fiasco and mortgage problems will weigh down some banks and much housing. This will hurt consumers, who will have to pay rising interest rates, and who will lose the cash benefit of refinancing their homes. People selling their homes will find the market soft. On the other side, buyers of homes will find bargains.Globalization
Contrary to this, though, is our favorite bugaboo, globalization, which will turn out to be the world's savior this time. For you see, the economy is no longer national; it is global. This is why Amazon (a bellwether tech stock) can be up 14% at this very moment in after-hours trading, even on a day when the rest of the market was down, down, down. The reason? Tech will not be hurt by subprime or mortgage woes, and tech is a global enterprise. Everyone buys from Amazon, even the "communist capitalists" in China. So? Tech will survive.Most sectors that are global in nature, such as energy, tech, infrastructure, and others like those restaurant chains that reach overseas, as McDonald's does, will be fine. The sectors, though, that depend on localized, American-only profits, especially those related to mortgages and homebuilding here, might face a headwind.
Overall? Global liquidity (& see liquidity info) might just be enough to overcome any and all American subprime and mortgage woes, even within continental America. There's a lot of money out there looking for bargains, and the American stock market is still undervalued in several areas.
I'd bet on a continued rise, but with some sectors hurting. Don't quote me on it. I'm just not as panicked as some.
A Bush in Hand is Worth More Than Ten Communist Cuckoo Birds on a YouTube
I believe that Bush has helped us soar to a great economy, and that the Dems might destroy it. In fact, the only thing that can ruin my scenario of a continued rise in the market, will be President Edwards, Obama, or Clinton.Rock
(*Wikipedia is always my source unless indicated.)
Click here to get a button link to this blog:
Join me in the war on error, in the fight for truth, justice, and the American way! Support this site!
Subscribe to my feed
Join or Surf Rock's Political Blog Ring. Both Liberals and Conservatives are Welcome.
Technorati Tags for this post: stock market, stock market crash, YouTube Debates, Democratic candidates for president, communism, capitalism, globalization, liquidity
Regular Technorati Tags for this blog: politics, political, politically incorrect, no spin, conservative, Republican, right wing, liberal, Democrat, left wing, leftist, democracy, election, peace, war, George W. Bush, editorial, opinion, news, current affairs, media, television, television, Hollywood, books, culture, society, religion, God, fundamentalism, Christian, Catholic, Muslim, Jew, Israel, Palestine, blog, truth
A Rising Market
The clever investor buys aggressive stocks on the way up. Then, when the market has been rising and rising, begins to buy less aggressive stocks, switching eventually to defensive stocks, and starts selling the aggressive stocks he/she has already bought. On the way up, he/she eventually shifts more and more to a cash position, choosing bonds instead of stocks.A Falling Market
On the way down from a top, the clever investor starts converting cash and bonds into shares in the stock market. Initially, he/she begins by buying defensive stocks. As the downturn in the market progresses, he/she starts buying aggressive stocks again.The Secret
What is the secret? Being contrary. Whatever the "little people" are doing, do the opposite. This makes sense, since the "little people" rush to buy at market tops, and rush to sell at market bottoms. The "little people" lose all the time during market swings.
So, resist your impulses. Don't jump in and try to guess market tops and market bottoms. No one can do this. Instead, average in and average out. As the market rises, begin taking some money out and putting it into bonds, as well as start selling aggressive stocks and replacing them with defensive stocks. Vice versa when the market is falling. Begin taking bond money out and buying defensive stocks, and later aggressive stocks.
You want to be buying heavily the further the market falls, and selling heavily the further the market rises.
If You're Stuck in Positions and Run Out of Money
If you run out of money on the way down, don't panic and sell. Just wait. Park your money and don't look. Only sell then if the fundamentals in your stocks have changed—as when one of the companies whose stock you own is going bankrupt. Then, get out, preferably on days when the market is up, and accept your losses. Otherwise, accept your paper losses and don't look at the market until it hits bottom and begins to rise again.
Investing Wisely
This is a difficult course to take. But it is highly profitable. You wind up buying low and selling high. This is gold. The market professional dreams of market bottoms. It is the only opportunity to make obscene riches. He/she is grateful for market tops too, because this is when he/she can take the profits he/she has made from earlier buying when the market was low.
What to Do Now
What does that mean for today's miserable situation? If you have discretionary funds you can spare to put into the market now, you are very lucky. Start now buying quality companies on their way down. The more the market falls, the more you will buy. Don't count on any quick turnaround—if this is a true bear market, the market might not turn for years. If you can afford to lose some money, buy aggressive stocks. If you want to be more conservative, start buying defensive stocks. If you are stuck in positions, don't panic. Ride out the market drop and don't even look at it. Just make sure that the companies whose stock you have bought are quality companies. If they aren't any more, then sell them when you get a chance on up days in the market.