Asset Model says : Stay out of Stocks !

Discussion in 'Trading' started by Digs, Feb 23, 2008.

  1. Digs


    View corporate bonds (red) spread to treasury bonds spreads.

    View 30yr T Bond ratio to SP500.

    Investors flight away from risk.

    Stocks are not preferred. Stay out of stocks.

    Kudlow says BUY, you got to be kidding nobody else is !!

    Worst credit market since 1930's....

    So a risk of major losses could be on the cards.

    Sp500 should be at 1000, if credit spreads are a prediction.
  2. poyayan


    You should also look at the saving and loan crisis at 91-92. That is a better reflection to what is happening now than the tech bubble.

  3. On the contrary, anybody with more than 6-7 years until retirement would be stupid to not buy stocks at these levels.

    It's all about risk management and diversity. If you're referring to investing, there are many, many methods for hedging your risk. Stocks are very attractive buys at these levels. Who cares if it goes down from here. Long-term, the lower it goes, even better. Hedge your risk, diversify and don't overleverage. Leave some wiggle room to invest at lower levels if neccessary.

    Don't let all the permabears brainwash you. :)
  4. btw...if one more person compares this credit crisis to 1930, I'm going to throw up. This credit crisis is NOTHING like the 1930's. During the great depression, there was no FDIC protection, there was no SEC and there was no government spending to stimulate a suffering economy.

    50% of the success in the markets is contributable to trust. Until the SEC came into existence, there was absolutely no governing body over companies that scammed people. Investors got a bad taste in their mouth and vowed to never buy stocks again. Then the SEC was created and that trust was built back in.

    Before the FDIC, there was no protection of people's savings. Consumers took their money and ran for the hills for fear of losing it, thus murdering the money supply.

    Trust matter what comparisons any talking head or loud mouthed "know it all" tries to tell you, the 1930's was a drastically different environment and not even close to the same type of variables of today's markets.


    Good points. Problem is look at the numbers of insured deposits and look at the total amount in the FDIC fund. The fund is something like $52.0 billion. I think insured deposits are something like $12.0 trillion. A failure of a few major banks, would decimate the FDIC insurance fund. Not saying that will happen. I don't know much about 1930. I am pretty good at big number simple arithmatic. But, the government like any other nation in history at some point has a limit in how much they can tax and how much they can borrow. May never happen - well at least for a long time. But, the US government has financial limits also. We haven't hit those limits yet and may not in our lifetime. But no nation is financial invulnerable.
  6. May I ask your basis for this conclusion?
  7. Digs


    Fund Managers are buy bonds, with less yield. So they are voting with there monies.

    Stocks have gone down 1966 to 1982 over long periods adjusted for inflation. Stocks even with dividends. Of course, If your a super duper stock picker, then you will win every time.

    If you buy indexs or etfs or other market leaders then stocks have way to much risk.

    If you are retiring in 7 sevens years then you a crazy to invest in stocks while the asset model says to be in bonds. Short term treasuries to avoid any risk.

    The stock market can still fall another 10% to 20% easy.
  8. Digs


    ..."btw...if one more person compares this credit crisis to 1930, I'm going to throw up. This credit crisis is NOTHING like the 1930's. During the great depression, there was no FDIC protection, there was no SEC and there was no government spending to stimulate a suffering economy."..

    1) .."FDIC protection"... The current fund is 1.4 billion, and not enough, also it could takes years before any claim was meet with a pay out. If any thing did happen.

    2) ..."there was no SEC".... Well some would argue they arnt doing much these days, consider sub prime and the way these were packages and sold, the SEC stood buy and watched. Toothless I am afraid.

    3) ..."no government spending to stimulate a suffering economy.".. This robbing of Mary in the future to pay Paul today never works, and never has done.

    But I will adjust my statement, this is the worst credit crises since WW2. A credit crash if you will. Saying anything else is just stupid.

    Why else would the major banks all be on Fed welfare from the TAF.
  9. PE's are low compared to historical averages.
    Now I'm not saying that we aren't in a bear market (I think we are). I'm not saying we aren't in a recession (I think we are) and I'm also not saying that we won't see a multi-year recession.

    What I am saying is that for longer term positions, right now is a great time to buy.
  10. If you are 7 seven years away from retirement, you also would be insane to be fully vested in stocks. You should hold about 30-40% of your portfolio in equities. Even if the market drops 20% "easily", that would only take a chunk of 8% of your portfolio. Hardly what I would call "risky". On the other hand, if you stay away from equities and the market increases 11% annually over the next 7 years, your risk is that inflation will eat away considerably at your "safe" investments.

    You have to look at the complete picture. Risk entails more than just market losses.
    #10     Feb 23, 2008