The whole buy because everybody hates it argument.

Discussion in 'Trading' started by pathus21, Feb 28, 2009.

  1. pathus21


    I am generally bearish the markets, the world, and life in general for the foreseeable future. Everybody I know is either bearish or scared and starting to see the impact of the recession on their lives.

    Pretty much every fundamental thing I look at makes me want to get short the DOW and buy gold with half my money, and take the other half of my money and buy lots of guns and canned food and hide in a hole somewhere.

    Isn't this supposed to be when you start buying?
  2. tardes


    That is an intelligent observation.
  3. Perhaps, but it doesnt hurt to have a few guns and start stockpiling a bit of canned food.

  4. Pathus,

    Ask yourself- am I an investor or a trader? What timeframe are you holding for? It is true that valuations are being pounded to unheard of lows, but keep in mind that Buffett said that is was time to buy, and he has had his head handed to him the past few weeks.

    f you are a value investor then you might start buying on the way down. If a trader (and you need to understand your timeframes and strategies), then trade the trend and counter trend moves.

  5. pathus21


    I am in energy trading so I primarily focus on trading my product. Since buy and hold is garbage I am trying to figure out what to do with my personal money. I am primarily an investor with it though I thought about perhaps trying to hold several month to several year long positions in various ETFs to try and capture some value.

    I do not have much interest nor inclination in trading my personal account although that would be fun.
  6. pathus21


    My main issue is that the last thing I want to do is try and call a bottom. I was thinking about scaling in over a few years time.
  7. I think its wise to go with what has worked in the past. In the past, it has taken at least 2 full years for a bear market to shake itself out. Bottoms usually are put in after 3-6 quarters of lurking in an obvious range.

    This bear market can only be comparable to the largest bears which were the Great Depression era market, the Nikkei bear or the Nasdaq-100 bear. The Depression and the Nasdaq took 2.5-3 years to fully shake out. The Nikkei has never truly shaken out.

    I wouldnt consider a bottom is in until at the very least 2 full years after the top in 2007. We have several months until I would consider a bottom is put in. However, that may not be the bottom or the market might continue in a tight range for many years.

    The below chart demonstrates P/E using two schemes. The Shiller P/E seems to have been a great indicator in the past for the bottom of big bears. The Shiller chart shows that there is still more room to go on the downside.

    My target, as I have stated before on this website countless times, is 650. I have seen others state 400-450 which is the support level in 1996.

    Using simple proportions, I have deducted that at a Shiller P/E of 7 the S&P would have to be at 400.

    *Do not invest any money now. In fact, walling it up in your house seems to be like the best solution with each trading day.*

  8. pathus21


    Thank you for your post. What is your DOW target?
  9. I'm short everything until 2012.
  10. i am new, and have stuck to a couple of questions only, but i do want to make one comment on this thread, and see the feedback.

    the media and my lack of experience "bamboozled" me into going long around NYE. of course i was up 3k in the first two days and now down $30k since (lucky i scaled out with a 12K loss only).

    i believed all the bailout/super cheap valuation hype. of course in hindsight this is wronger than wrong. if they did not hype that nonsense to death of course it was clear that it was going down and going down until the economy turns around.

    so, after all that info, my comment/question is:

    when will all the government intervention cause the market to go up? one thing that had me on the bandwagon was, if u look at the chart for 2008, the mortgage crisis started in the early part of the year. bush gave away his $300 in april, and the maket propped up (like a bunch of fish at feeding time) it was the weekest play i have ever seen and it worked. until sept when it finally took the dive.

    is all this government help not gonna kick in. common sense to me says yes, even though i see with my own eyes the market is resisting it.

    any thoughts??

    if no government intervention, i would expect 400 on the S&P by years end, with the government fooling around, i can not fathom a prediction.
    #10     Mar 1, 2009