Monday, October 13, 2008

Bear market up days

The general markets were up 10-11% today - a whole year's gain in one day! This is a hallmark of bear markets. However, volume was weak and so was breadth. We may get another 1-2 day rally out of this, but I think we'll head right back down for the bottom and we could even get a reversal tomorrow by the end of the day. We're not at the bottom yet for this leg and I think gold stocks will fall a little more, too. Patience is key.

Bear markets are all about volatility, which means wild fluctuations. Traders love bear markets, because if they guess right, they can make a lot of money fast. Don't be fooled into thinking that government bailouts are going to change things. Specifically, the government cannot save the economy.

Unemployment will continue to increase as fast as government promises do. Housing will continue to sink, even if the government starts to buy up houses. Banks will continue to hemorrhage money even if the government doesn't allow them to fail. These things guarantee a horrible recession and potential (probable?) depression. I am not a gloom and doomer, I am a realist. The more government interferes and prevents the people who screwed up from failing, the longer and more painful the recession will be. The government didn't stop the Depression, but they did manage to deepen and prolong it.

For God's sake, we NEED a recession. We need to clean out the rampant excess and greed that plagues our country. The bull market from 1982-2000 was the greatest in the country's history and there needs to be a correspondingly severe bear market to correct the excesses and over-the-top speculation. That's the way cycles work. It's not a bad thing if you're prepared for it!

If you know stocks are a shitty investment until at least 2015, then you can just invest in something else or stay out of the markets completely. Why we aren't taught that in school (I got an MBA, and believe me, they didn't mention it in any of my classes) is beyond me.

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